AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 17, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICAN MEDICAL PROVIDERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8099 76-0530185
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
ORGANIZATION)
</TABLE>
8043
(SECONDARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER)
------------------------
JACK N. MCCRARY
AMERICAN MEDICAL PROVIDERS, INC. AMERICAN MEDICAL PROVIDERS, INC.
3555 TIMMONS LANE, SUITE 1550 3555 TIMMONS LANE, SUITE 1550
HOUSTON, TEXAS 77027 HOUSTON, TEXAS 77027
(713) 621-5500 (713) 621-5500
(ADDRESS, INCLUDING ZIP CODE, AND (NAME AND ADDRESS, INCLUDING ZIP CODE
TELEPHONE NUMBER, AND TELEPHONE NUMBER, INCLUDING AREA
INCLUDING AREA CODE, OF REGISTRANT'S CODE, OF AGENT FOR SERVICE)
PRINCIPAL EXECUTIVE OFFICES)
------------------------
COPIES TO:
IVAN WOOD DAVID RINGELMAN
BAKER & HOSTETLER LLP BAKER & HOSTETLER LLP
1000 LOUISIANA, 303 EAST 17TH AVENUE,
SUITE 2000 SUITE 1100
HOUSTON, TEXAS 77002 DENVER, COLORADO 80203
(713) 751-1600 (303) 861-0600
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
------------------------
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) FEE
- --------------------------- ---------- -------- -------- ---
<S> <C> <C> <C> <C>
Class A Common Stock ....... 2,000,000 $ 12.00 $24,000,000 $7,273
- --------------------------------------------------------------------------------------------------------
Total ...................... 2,000,000 $ 12.00 $24,000,000 $7,273
========================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
FORM S-4 ITEM HEADING OR LOCATION IN
NUMBER AND CAPTION INFORMATION STATEMENT -- PROSPECTUS
- --------------------------------------------------------------------------
A. Information about the Transaction
1. Forepart of Registration Outside Front Cover Page of
Statement and Outside Front Prospectus
Cover Page of Prospectus....
2. Inside Front and Outside Back
Cover Pages of Prospectus... Inside Front Cover Page of
Prospectus; Available
Information; Table of Contents
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other Prospectus Summary; Selected
Information................. Financial Information; Risk Factors
4. Terms of the Transaction....... Prospectus Summary; Description of
Capital Stock
5. Pro Forma Financial *
Information.................
6. Material Contracts with Company *
Being Acquired..............
7. Additional Information Required *
for Reoffering by Persons
and Parties Deemed to be
Underwriters................
8. Interests of Named Experts and Legal Matters
Counsel.....................
9. Disclosure of Commission *
Position on Indemnification
for Securities Act
Liabilities.................
B. Information about the Registrant
10. Information with Respect to S-3 *
Registrants.................
11. Incorporation of Certain *
Information by Reference....
12. Information with Respect to S-2 *
or S-3 Registrants..........
13. Incorporation of Certain *
Information by Reference....
14. Information With Respect to
Registrants Other than
S-2 or S-3
Registrants................. Outside and Inside Front Cover Pages;
Available Information; Prospectus
Summary; Risk Factors; Dividend Policy;
Capitalization; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business; Selected
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Management;
Certain Transactions; Principal
Stockholders; Description of Capital
Stock to Financial Statements
C. Information About Company Being
Acquired
15. Information With Respect to S-3 *
Companies...................
16. Information With Respect to S-2 *
or S-3 Companies............
17. Information With Respect to *
Companies Other Than S-2 or
S-3 Companies...............
D. Voting and Management Information
18. Information if Proxies, *
Consents or Authorizations
are to be Solicited.........
19. Information if Proxies,
Consents or Authorizations
are not to be Solicited in
an Exchange Order........... Outside Front Cover Page of
Prospectus;
Prospectus Summary
- ------------
* Answer is negative or item is not applicable.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THE SECURITIES OFFERED HEREBY MAY NOT BE
SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE
SECURITIES OFFERED HEREBY IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED FEBRUARY 17, 1998
2,000,000 SHARES
AMERICAN MEDICAL PROVIDERS, INC.
CLASS A COMMON STOCK
------------------------
This Prospectus covers the offer and sale of up to 2,000,000 shares of
Class A Common Stock, par value $.001 per share ("Common Stock"), of American
Medical Providers, Inc. (the "Company"), which the Company may issue from time
to time in connection with the future direct and indirect acquisitions of other
businesses, properties or securities in business combination transactions in
accordance with Rule 415(a)(1)(viii) of Regulation C under the Securities Act of
1933, as amended (the "Securities Act"), or as otherwise permitted under the
Securities Act.
The Company expects that the terms upon which it may issue the shares in
business combination transactions will be determined through negotiations with
the securityholders or principal owners of the businesses whose securities or
assets are to be acquired. The Company expects that the shares issued will be
valued at prices reasonably related to market prices for the Common Stock
prevailing either at the time an acquisition agreement is executed or at the
time an acquisition is consummated.
This Prospectus will be furnished to securityholders of the businesses,
properties or securities to be acquired. This Prospectus will only be used in
connection with the acquisition of businesses, properties or securities in
business combination transactions that would be exempt from registration but for
the possibility of integration with other transactions. If an acquisition of a
business or properties or securities in a business combination transaction is
not exempt from registration even if integration is not taken into account, then
the offerees of Common Stock in such acquisition will be furnished with copies
of this Prospectus as amended by a post-effective amendment to the Registration
Statement on Form S-4 of which this Prospectus is a part.
Persons receiving Common Stock in connection with such acquisitions may be
contractually required to hold all or some portion of the Common Stock for some
period of time. In addition, pursuant to the provisions of Rule 145 under the
Securities Act, the volume limitations and certain other requirements of Rule
144 under the Securities Act will apply to resales of those shares by affiliates
of the businesses the Company acquires for a period of two years. See "Plan of
Distribution."
If an acquisition has a material financial effect upon the Company, the
Company will file a current report on Form 8-K, or if it is not eligible to
incorporate such a report by reference, a post-effective amendment to the
Registration Statement of which this Prospectus forms a part, after the
acquisition and prior to the consummation of additional acquisitions utilizing
this Prospectus, containing financial and other information about the
acquisition that would be material to subsequent acquirors of Common Stock
offered hereby, including pro forma information for the Company and historical
financial information about the acquired company. The Company will also file a
current report on Form 8-K, or if it is not eligible to incorporate such a
report by reference, a post-effective amendment to the Registration Statement of
which this Prospectus forms a part, if an acquisition does not by itself have a
material effect upon the Company, but when aggregated with other acquisitions
(for which such information has not been filed) since the date of the Company's
most recent audited financial statements, would have such a material effect.
As of February 17, 1998, 650,000 shares of Class B Common Stock were issued
and outstanding. In addition, the Company filed a Registration Statement on Form
S-1 (Registration No. 333-39441) on November 4, 1997, and Pre-Effective
Amendment No. 1 to Registration Statement on Form S-1 on December 31, 1997,
Pre-Effective Amendment No. 2 to Registration Statement on Form S-1 on January
22, 1998 and Pre-Effective Amendment No. 3 to the Registration Statement on Form
S-1 dated February 17, 1998 (the "IPO Registration Statement"), with the
Securities and Exchange Commission (the "Commission") with respect to an
initial public offering of Common Stock (the "IPO"). The IPO Registration
Statement has not yet been declared effective. The Company will make application
for the Common Stock to be listed for trading on The Nasdaq Stock Market's
National Market (the "Nasdaq National Market") under the symbol "AMPZ." As a
contingency, pending the receipt of certain waivers to the Nasdaq Stock Market
listing requirements, the Company has also applied to have the shares of Common
Stock approved for quotation on the American Stock Exchange under the symbol
"AMPZ."
All expenses of this offering (this "Offering") will be paid by the
Company. No underwriting discounts or commissions will be paid in connection
with the issuance of shares by the Company in business combination transactions,
although finder's fees may be paid with respect to specific acquisitions. Any
person receiving a finder's fee may be deemed to be an Underwriter within the
meaning of the Securities Act.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998
<PAGE>
46 AFFILIATED PRACTICES SERVING 57 CITIES THROUGH 89 OFFICES
[MAP OF LOCATIONS OF AFFILIATED PRACTICES' OFFICES]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, OTHER STABILIZING AND SHORT- COVERING TRANSACTIONS AND
THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE
IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS
PROSPECTUS (I) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION,
(II) ASSUMES THE MID-POINT OF THE INITIAL PUBLIC OFFERING PRICE RANGE, (III)
ASSUMES NO EXERCISE OF ANY OUTSTANDING OPTIONS TO PURCHASE COMMON STOCK, (IV)
ASSUMES THAT THE TRANSFERS (THE "TRANSFERS") TO THE COMPANY OF THE OPERATING
ASSETS AND RECEIVABLES OR STOCK OF 46 SEPARATE PODIATRIC PRACTICES (THESE
INITIAL PRACTICES AND ANY ADDITIONAL PRACTICES TRANSFERRED ARE COLLECTIVELY
REFERRED TO AS THE "AFFILIATED PRACTICES") IN EXCHANGE FOR SHARES OF THE
COMPANY'S COMMON STOCK, CASH AND/OR THE ASSUMPTION OF CERTAIN INDEBTEDNESS HAS
OCCURRED, (V) ASSUMES THAT THE ANESTHECARE ACQUISITION (AS DEFINED BELOW) HAS
OCCURRED, AND (VI) GIVES EFFECT TO CONVERSION OF AMP'S EXISTING COMMON STOCK,
WITHOUT CLASS, INTO CLASS B COMMON STOCK (THE "SHARE CONVERSION") AND A STOCK
SPLIT OF THE OUTSTANDING SHARES OF CLASS B COMMON STOCK EFFECTED IN CONNECTION
WITH THE OFFERING (THE "STOCK SPLIT"). THIS PROSPECTUS CONTAINS SUMMARIES WITH
RESPECT TO SELECTED TERMS OF CERTAIN DOCUMENTS. PROSPECTIVE INVESTORS SHOULD
REFER TO THE ACTUAL DOCUMENTS SUMMARIZED THAT ARE EXHIBITS TO THE COMPANY'S
REGISTRATION STATEMENT FOR COMPLETE INFORMATION CONCERNING THE DOCUMENTS. ALL
SUMMARIES HEREIN ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE COMPLETE
DOCUMENTS.
THE COMPANY
AMP was founded in August 1996 to provide practice management services and
comprehensive foot care delivery systems to podiatric practices throughout the
United States. AMP will generate revenue by providing to the Affiliated
Practices professional management, marketing expertise, equipment and facilities
often unavailable to podiatrists with small practices. The initial 46 Affiliated
Practices consist of 66 doctors of podiatric medicine ("DPMs") operating 89
offices located in 7 states serving 57 cities. The Company intends to grow
rapidly by affiliating with additional podiatric practices and by making
available to the Affiliated Practices services that are ancillary and directly
related to the Affiliated Practices' existing podiatric care.
The Company has entered into definitive agreements to transfer cash and
Common Stock and assume certain liabilities in exchange for stock or certain
operating assets and receivables of the Affiliated Practices simultaneous with
and as a condition to the closing of the IPO. The DPMs will join regional group
practices organized by geographic location (the "Regional Group Practices") and
will enter into physician engagement agreements with the Regional Group
Practices. AMP will enter into a long-term management agreement with each
Regional Group Practice under which AMP will receive fees for its services. The
Company will own the operating assets and receivables of the Affiliated
Practices, hire the non-physician employees, and otherwise assume the management
of each practice. The initial Affiliated Practices were selected based upon
their location, size, historical profitability and growth and reputation for
high quality care. Based on management's knowledge of the U.S. podiatric
industry gained from conversations with DPMs, surveys of the size of other
podiatric practice management companies, affiliations and groups, and general
industry research, management believes that the initial Affiliated Practices are
leading podiatric practices in their respective markets and that, following the
Transactions (as defined herein), AMP will be the largest provider of
comprehensive podiatric practice management services in the United States.
A key element of the Company's strategy is to provide ancillary services
and facilities to the Affiliated Practices. These ancillary services and
facilities are expected to include, among other things, ambulatory surgical
centers, anesthesiology, pathology, radiology, MRIs, EKGs, laboratory work,
pharmacy, physical history and exams, physical therapy, orthotics, pain
management, home care, diabetic wound care, specialty shoes and other retail
products. The Company intends to make available some or all of these ancillary
services on a regional basis. The Affiliated Practices in each region will
primarily or exclusively use AMP's ancillary services, enabling the Company to
control the cost, quality and other important aspects of these services.
Pursuant to this strategy, AMP has entered into a definitive agreement to
purchase certain assets (including the name "AnestheCare, Inc.") of Pyramid
Anesthesiology Group, Inc. (the "AnestheCare
3
<PAGE>
Acquisition"), an anesthesiology management services organization currently
servicing 15 locations in metropolitan Atlanta, Georgia ("AnestheCare").
AnestheCare's current operations and ongoing business relationships will
continue after the AnestheCare Acquisition. In addition, after the acquisition,
AnestheCare will provide anesthesiology management services to certain of the
Regional Group Practices. The Company is also acquiring Bellaire Surgicare, Inc.
and Clayton Outpatient Surgical Center, Inc. (the "Ambulatory Surgery Center
Acquisitions"), which own surgical centers.
Podiatry is the practice of medicine whereby DPMs provide preventative,
diagnostic, surgical and other foot care to patients. Podiatric care ranges from
relatively simple procedures, such as treating foot infections, to complex
surgeries, such as reconstructing the bones in the foot. Today, there are
approximately 10,700 active DPMs throughout the United States handling 55
million patient visits per year. According to the American Podiatric Medical
Association, billing receipts of all DPMs in the United States increased to
approximately $2.3 billion in 1995 from approximately $1.3 billion in 1987, a
compound annual growth rate of 7.7%.
AMP's objective is to be the nation's leading provider of management
services and comprehensive foot care delivery systems to podiatric practices. To
achieve its objective, AMP will employ the following operating strategies: (i)
enhance quality of DPM patient care, (ii) achieve operational efficiencies,
(iii) develop Regional Group Practice structure, (iv) provide effective
marketing, and (v) implement comprehensive foot care delivery systems. AMP
intends to grow rapidly by: (i) growing Affiliated Practices, (ii) developing
ancillary provider networks, and (iii) affiliating with new practices.
THE TRANSACTIONS
Of the 46 Transfers of the initial Affiliated Practices, 45 will be
accounted for by the Company under SEC Staff Accounting Bulletin No. 48,
"Transfers of Non-Monetary Assets by Promoters or Shareholders" ("SAB 48"), such
that the non-monetary assets of these initial Affiliated Practices will be
received by the Company at the transferor's historical cost basis for accounting
purposes. Following the SAB 48 transactions and the consummation of the
offering, AMP will consummate the AnestheCare Acquisition and AMP or a
subsidiary will acquire the stock of Dr. Jerald N. Kramer, D.P.M., P.C., one of
its Affiliated Practices (the "Kramer Transfer", and together with the other
Transfers and the AnestheCare Acquisition, the "Transactions"). Dr. Kramer will
receive cash in exchange for stock acquired by the Company in the Kramer
Transfer, but Dr. Kramer will not enter into a management services agreement or
a physician engagement agreement with a Regional Group Practice. The Ambulatory
Surgery Center Acquisitions included in the Transfers, the AnestheCare
Acquisition and the Kramer Transfer will not be accounted for under SAB 48.
Instead, these and all future individual practice affiliations will be accounted
for as purchases at fair market value and are expected to result in purchase
prices in excess of net assets acquired (goodwill) which will require subsequent
noncash amortization charges for intangible assets in the Company's statements
of operations. The aggregate consideration to be paid by the Company in the
Transfers is approximately $34.5 million, consisting of (i) approximately $18.3
million payable in shares of Common Stock at the initial public offering price
attributed to the net non-monetary assets, (ii) approximately $4.7 million in
cash and approximately $156,000 of assumed indebtedness attributed to the net
non-monetary assets of the SAB 48 Transfers, (iii) $4.3 million in cash
attributed to the net monetary assets of the SAB 48 Transfers, (iv)
approximately $4.1 million payable in shares of Common Stock at the initial
public offering price, approximately $1.0 million in cash, and approximately
$500,000 of assumed indebtedness attributed to the Ambulatory Surgery Center
Acquisitions which are included in the Transfers but not accounted for under SAB
48, and (v) approximately $1.4 million in cash attributed to the Kramer
Transfer. The consideration to be paid by the Company to AnestheCare is
approximately $4.5 million in cash. Additional consideration of up to $1.5
million in cash and a number of shares of Common Stock equal to $500,000 valued
at the initial public offering price will be held in escrow and may be paid to
the owners of AnestheCare pending AnestheCare's achievement of certain
performance targets over a three-year period beginning January 1, 1998. Proceeds
from the IPO will be used to pay the cash portion of the consideration.
The Company's principal executive offices are at 3555 Timmons Lane, Suite
1550, Houston, Texas 77027, and its telephone number is (713) 621-5500.
4
<PAGE>
THE OFFERING
Common Stock offered by the
Company.............................. 2,000,000 shares of Common Stock to
be issued by the Company in
connection with the acquisition of
businesses, properties or securities
in business combination
transactions.
Common Stock to be outstanding
after the Offering.................... 7,778,322 shares(1)
Class B Common Stock to be outstanding
after the Offering.................... 650,000 shares
Voting rights........................... Holders of Common Stock of the
Company are entitled to one vote per
share and the holders of Class B
Common Stock of the Company are
entitled to two-thirds ( 2/3) of a
vote per share. The Company's Board
of Directors consists of seven
directors. Holders of Common Stock
are entitled to elect as a class six
members of the Board of Directors
and the holders of the Class B
Common Stock are entitled to elect
as a class the remaining member of
the Board of Directors; provided
however, that if 65% or more of the
Class B Common Stock outstanding on
the date of the Prospectus included
in the IPO Registration Statement
(the "IPO Prospectus") has been
converted into Common Stock, the
Class B Common Stock shall no longer
have the ability to elect a director
as a class. The Common Stock and
Class B Common Stock possess
ordinary voting rights and vote
together as a single class in
respect of all other corporate
matters. See "Description of Capital
Stock.". The Common Stock and Class
B Common Stock possess ordinary
voting rights and vote together as a
single class in respect of all other
corporate matters. See "Description
of Capital Stock."
Conversion of the Class B Common
Stock................................. CONVERSION RATIO. The Class B Common
Stock is convertible into Common
Stock, at the option of the holder
thereof, upon the occurrence of a
Conversion Event (as defined below).
The maximum number of shares of
Common Stock that may be issued upon
conversion of the Class B Common
Stock is 1,950,000. The Class B
Common Stock converts into Class A
Common Stock on a share-for-share
basis, provided however, that if the
Common Stock reaches certain average
closing prices over 15 consecutive
trading days during the next six
years on the Nasdaq National Market,
other over-the-counter market or an
exchange, as then applicable (the
"Trading Market") then, as set forth
below, the conversion ratio with
respect to a certain number of
shares of Class B Common Stock will
immediately change so that such
shares will thereafter be
convertible into Common Stock at the
ratio of three shares of Common
Stock for each share of Class B
Common Stock (each such share an
"Adjusted Conversion Share").
CONVERSION ADJUSTMENT. On the date
that the average closing price on
the Trading Market for the preceding
15 consecutive trading days (the
"Average Price") exceeds 150% of the
price to the public in the IPO,
5
<PAGE>
130,000 of the issued shares of
Class B Common Stock will
immediately become Adjusted
Conversion Shares (and subject to
the new 3-for-1 conversion ratio).
Thereafter, the remaining 520,000
shares of Class B Common Stock will
become Adjusted Conversion Shares in
four remaining increments of 130,000
shares of Class B Common Stock each
(20% of the total number of shares
of Class B Common Stock issued) upon
the attainment of new Average
Prices. The Average Prices
applicable to each new 20% increment
will equal 120% of each immediately
preceding Average Price applicable
to the preceding 20% increment.
Therefore, the five Average Prices
at which each of the five total
increments shall automatically
become Adjusted Conversion Shares
are $16.50, $19.80, $23.76, $28.51
and $34.21, respectively. Upon a
Conversion Event, each holder of
Class B Common Stock will have the
right to have each share of Class B
Common Stock converted into that
number of shares of Common Stock as
each such share is entitled to based
upon the Average Prices achieved, if
any. Any additional Average Price
attained after the occurrence of a
Conversion Event will continue to
act to create Adjusted Conversion
Shares, as applicable. If any shares
of Class B Common Stock are
outstanding on the sixth anniversary
of the IPO, such shares will
automatically convert into a number
of shares of Common Stock based upon
the conversion ratio then applicable
for such shares. Shares of Class B
Common Stock held by a holder shall
automatically convert into Common
Stock immediately prior to the
disposition of such shares of Class
B Common Stock by such holder.
CONVERSION EVENTS. A Conversion
Event shall be deemed to have
occurred (i) in the event of a
disposition of such share of Class B
Common Stock by the holder thereof
(excluding dispositions to such
holder's affiliates), (ii) in the
event any person not affiliated with
the Company acquires beneficial
ownership of 15% or more of the
outstanding shares of capital stock
of the Company, (iii) in the event
any person not affiliated with the
Company offers to acquire 15% or
more of the outstanding shares of
capital stock of the Company, (iv)
in the event the holder of such
shares elects to so convert at any
time after the second anniversary of
the date of the IPO, (v) on the
sixth anniversary of the date of the
IPO, or (vi) in the event the
holders of a majority of the
outstanding shares of Common Stock
approve such conversion. In
addition, the Company may elect to
convert any outstanding shares of
Class B Common Stock into shares of
Common Stock in the event 95% or
more of the outstanding shares of
Class B Common Stock as of the date
of the IPO have previously been
converted into shares of Common
Stock.
Proposed Nasdaq National Market
symbol(3)............................. "AMPZ"
- ------------
(1) Includes 3,700,000 shares of Common Stock issued in connection with the
Company's IPO, 2,078,332 shares of Common Stock issued in connection with
the Transactions, but excludes 464,500 shares of Common Stock issuable upon
exercise of outstanding options issued pursuant to the Company's 1997
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
6
<PAGE>
Incentive and Non-Qualified Stock Option Plan to purchase Common Stock at
the initial public offering price, and 555,000 shares of Common Stock
issuable upon exercise of the Underwriters' over-allotment option. The
actual number of shares issued in connection with the Transactions will be
determined by dividing $22,861,652 by the initial public offering price. In
the event the price to the public is higher than the mid-point of the
estimated initial public offering price range, the aggregate number of
shares will be reduced accordingly, and in the event the price to the public
is lower, the aggregate number of shares will be increased accordingly. See
"Management -- Incentive and Non-Qualified Stock Option Plan" and "Certain
Transactions -- Affiliated Practices."
(2) The Class B Common Stock may be convertible into an aggregate of 1,950,000
shares of Common Stock. See "The Offering -- Conversion of Class B Common
Stock".
(3) As a contingency, pending the receipt of certain waivers to the Nasdaq Stock
Market listing requirements, the Company has also applied to have the shares
of Common Stock approved for quotation on the American Stock Exchange under
the symbol "AMPZ".
FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS PROSPECTUS, INCLUDING STATEMENTS
CONTAINING THE WORDS "BELIEVES," "ANTICIPATES," "INTENDS," "EXPECTS" AND WORDS
OF SIMILAR IMPORT, CONSTITUTE "FORWARD-LOOKING STATEMENTS." THESE
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF
THE COMPANY OR ITS INDUSTRY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING
STATEMENTS.
THESE RISK FACTORS INCLUDE, AMONG OTHERS, THE LIMITED COMPANY AND COMBINED
OPERATING HISTORY, DEPENDENCE ON CERTAIN OPERATIVE AGREEMENTS, DEPENDENCE ON
REGIONAL GROUP PRACTICES, DEPENDENCE ON IMPLEMENTATION AND INTEGRATION OF
INFORMATION SYSTEMS, DEPENDENCE UPON KEY PERSONNEL, DEPENDENCE ON IMPLEMENTATION
OF GROWTH STRATEGY, MOVEMENT TOWARD MANAGED CARE, CHANGES IN PAYMENT FOR MEDICAL
SERVICES, POTENTIAL ADVERSE CONSEQUENCES OF GOVERNMENT REGULATION, FUTURE HEALTH
CARE REFORM, COMPETITION, NEED FOR ADDITIONAL FUNDS, LIABILITY AND INSURANCE
RISKS ASSOCIATED WITH PODIATRIC PRACTICES, NO PRIOR PUBLIC MARKET FOR THE COMMON
STOCK, THE NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE, SUBSTANTIAL PROCEEDS OF
THE OFFERING PAYABLE TO AFFILIATED PRACTICES AND AFFILIATES, CONTROL BY EXISTING
MANAGEMENT AND STOCKHOLDERS, CERTAIN ANTI-TAKEOVER PROVISIONS IN THE COMPANY'S
ARTICLES AND BYLAWS, IMMEDIATE AND SUBSTANTIAL DILUTION TO INVESTORS IN THE
COMMON STOCK, NO INTENT TO PAY DIVIDENDS, AND OTHER FACTORS REFERENCED IN THIS
PROSPECTUS. CERTAIN OF THESE FACTORS ARE DISCUSSED IN MORE DETAIL ELSEWHERE IN
THIS PROSPECTUS, INCLUDING UNDER THE CAPTIONS "PROSPECTUS SUMMARY" AND "RISK
FACTORS." GIVEN THESE UNCERTAINTIES, POTENTIAL INVESTORS ARE CAUTIONED NOT TO
PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS. THE COMPANY DISCLAIMS
ANY OBLIGATION TO UPDATE ANY OF THESE FACTORS OR TO PUBLICLY ANNOUNCE THE RESULT
OF ANY REVISIONS TO ANY OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN TO
REFLECT FUTURE EVENTS OR DEVELOPMENTS.
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SUMMARY FINANCIAL DATA
THE FOLLOWING INFORMATION IS DERIVED FROM THE FINANCIAL STATEMENTS OF THE
COMPANY INCLUDED ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS INDICATED, THIS
INFORMATION DOES NOT REFLECT THE EFFECTS OF THE TRANSACTIONS OR THE IPO. FOR
CERTAIN INFORMATION CONCERNING THE TRANSACTIONS, SEE NOTE 4 OF NOTES TO
FINANCIAL STATEMENTS OF THE COMPANY AND UNAUDITED PRO FORMA COMBINED BALANCE
SHEET AND THE NOTES THERETO.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION FOR THE NINE
(AUGUST 9, 1996) TO MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ------------------
(UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Revenues ......................................................... $ -- $ --
Expenses ......................................................... 1,436,441 1,688,388
----------- ------------
Net loss ......................................................... $(1,436,441) $ (1,688,388)
=========== ============
SEPTEMBER 30, 1997
--------------------------
HISTORICAL AS ADJUSTED(2)
----------- ------------
(UNAUDITED)
BALANCE SHEET DATA:
Cash and cash equivalents ........................................ $ -- $ 14,054,000
Working capital (deficit)(3) ..................................... (2,120,333) 17,037,000
Total assets(4) .................................................. 2,026,316 30,870,000
Long-term debt ................................................... -- 656,000
Stockholders' equity (deficit) ................................... (1,911,119) 29,248,000
- ------------
</TABLE>
(1) The Company has conducted no significant on-going, non-developmental
business operations to date and will not conduct significant business
operations until the affiliation of the Company with the initial Affiliated
Practices and the IPO are completed. Pursuant to a reimbursement and
assumption agreement (the "Reimbursement and Assumption Agreement") dated
January 20, 1998 between the Company and AFC, the Company will reimburse the
affiliation-related expenses incurred by AFC since May 1996, including AFC's
payroll, travel and entertainment, office equipment and professional fees.
AFC currently holds 365,625 shares of Class B Common Stock which management
plans to distribute to AFC members upon consummation of the IPO.
(2) As adjusted gives effect to the Transactions, the sale of 3,700,000 shares
of Common Stock offered by the Company in the IPO, and the application of
the estimated net proceeds therefrom.
(3) The historical balance includes $2.4 million due to AFC as of September 30,
1997, which will be repaid upon consummation of the IPO.
(4) The Company will record the non-monetary assets transferred to the Company
in connection with the Transfers, excluding the Ambulatory Surgery Center
Acquisitions and the Kramer Transfer, at the historical cost basis of the
transferors. Monetary assets transferred as well as the AnestheCare
Acquisition, the Kramer Transfer and the Ambulatory Surgery Center
Acquisitions will be accounted for in a method similar to purchase
accounting.
8
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RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. A PROSPECTIVE INVESTOR SHOULD CAREFULLY CONSIDER ALL OF THE
INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE DECIDING WHETHER TO PURCHASE THE
COMMON STOCK OFFERED HEREBY AND, IN PARTICULAR, THE FOLLOWING FACTORS:
LIMITED COMPANY AND COMBINED OPERATING HISTORY. The Company was
incorporated in August 1996 and has no history of operations or earnings.
Certain members of the Company's management group have been assembled recently.
As a result of the Transfers, certain members of AMP expect to be responsible
for the management of all non-medical aspects of the operations and all
non-physician employees of the initial Affiliated Practices. There can be no
assurance that such persons will be able to effectively manage the initial
Affiliated Practices or oversee the implementation of the Company's operating,
growth and business strategies. Further, there can be no assurance that
management will be able to operate the Company successfully, manage the initial
Affiliated Practices' operations, achieve any cost savings as a result of the
Transactions or institute the necessary systems and procedures to manage the
Company on a profitable basis. The inability of the Company to successfully
integrate or operate the Affiliated Practices could have a material adverse
effect on the Company's business, financial condition and results of operations
and make it unlikely that the Company's affiliations with the Affiliated
Practices will be successful.
Prior to the IPO, the initial Affiliated Practices were not under common
control or management and have operated as separate, independent entities. As a
result, the financial results of the respective initial Affiliated Practices
prior to the IPO will not necessarily be similar to the results of the initial
Affiliated Practices after the IPO. The Company may experience delays,
complications and expenses in implementing, integrating and operating such
initial Affiliated Practices, any of which could have a material adverse effect
on the Company's business, financial condition and results of operations.
DEPENDENCE ON OPERATIVE AGREEMENTS. To effect AMP's affiliation with the
Affiliated Practices, the following agreements have been entered into or will be
entered into (collectively, the "Operative Agreements"): (i) Business Purchase
Agreements and/or Stock Purchase Agreements by and between the Affiliated
Practices and the Company; (ii) Management Agreements by and between the
Regional Group Practices and the Company; (iii) Physician Engagement Agreements
by and between the Regional Group Practices and each owner of an Affiliated
Practice; and (iv) employment agreements between the Regional Group Practices
and each non-owner DPM. The consummation of the affiliations with the Affiliated
Practices and the subsequent viability of the Company are dependent on the
initial and continuing enforceability of the Operative Agreements. While the
Company has attempted to structure the Operative Agreements in accordance with
applicable law, there can be no assurance that the enforceability of certain
non-compete and other provisions contained in the Operative Agreements will not
be successfully challenged. Further, because each of the Physician Engagement
Agreements is between a Regional Group Practice and an owner of the Affiliated
Practices, there can be no assurance that the parties thereto will not terminate
or amend the terms and conditions of such agreements. See "Business -- Purchase
Agreements," " -- Management Agreements" and " -- Physician Engagement
Agreements."
DEPENDENCE ON REGIONAL GROUP PRACTICES. The Company's operations will be
entirely dependent upon its continued ability to negotiate and enter into
management services agreements (the "Management Agreements") with Regional Group
Practices and upon the success of such practices. The Company expects to receive
management fees for services provided to Regional Group Practices under the
Management Agreements, but will not employ podiatrists or control or own the
medical practice of Regional Group Practices. The Management Agreements have
40-year terms but are subject to prior termination by the Regional Group
Practice or the Company for, among other things, a default in the performance of
a material duty or obligation. There can be no assurance that the initial
Regional Group Practices will maintain successful practices, that Management
Agreements will not be terminated or that any of the key DPMs in a particular
Regional Group Practice will continue affiliation with any Regional Group
Practice. In addition, if the service fee varies by more than 5% over or under
the adjusted service fee, then the service fee may be adjusted quarterly upon
the mutual agreement of the Regional Group Practice and the Company, on a
9
<PAGE>
prospective basis only, (without a floor or ceiling on the adjustment) to
reflect the fair value of the management services provided. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Overview." Any termination of such Management Agreements or affiliation, the
inability of the Regional Group Practices to generate sufficient patient
revenue, or the downward adjustment of management fees to reflect the fair value
of services provided by the Company could have a material adverse effect on the
Company's business, financial condition and results of operations.
Some of the initial Regional Group Practices will derive, and any
additional Regional Group Practices may derive, a significant portion of their
revenue from a limited number of DPMs. Particularly, because none of the DPMs in
the initial Regional Group Practices will have previously entered into
management arrangements similar to those embodied in the Company's Management
Agreements, there can be no assurance that the Company or the Regional Group
Practices will maintain cooperative relationships with these key DPMs. In
addition, there can be no assurance that key members of a Regional Group
Practice will not retire, become disabled or otherwise become unable or
unwilling to continue practicing their profession with a Regional Group
Practice. The loss by a Regional Group Practice of one or more key members would
have a material adverse effect on the revenue of such Regional Group Practice
and, thus, on the Company. The material loss of revenue by any Regional Group
Practice could have a material adverse effect on AMP.
Rates paid by private third party payors, including those that provide
Medicare supplemental insurance, are based on established health care provider
and hospital charges and are generally higher than Medicare payment rates. A
change in the patient mix of any Regional Group Practice that results in a
decrease in patients covered by private insurance could have a material adverse
effect on the Regional Group Practice and, as a result, on the Company.
DEPENDENCE ON IMPLEMENTATION AND INTEGRATION OF INFORMATION SYSTEMS. A key
element in the Company's business strategy is implementing new sophisticated
management information systems. The Company expects to have these systems
operating at the time of the Offering to perform billing and collection services
for all Affiliated Practices and to complete hardware and software deployment of
the systems to most Affiliated Practices within approximately 90 days after the
Offering. The Company's success is dependent upon its ability, within a
reasonable period of time, to implement its new management information systems
and to integrate these systems into the initial Regional Group Practices' and
the Affiliated Practices' existing operational, financial and clinical
information systems. In addition to their integral role in helping the Regional
Group Practices realize operating efficiencies, these systems are critical to
negotiating, pricing and managing managed care contracts. The Company will need
to continue to invest in and administer sophisticated management information
systems to support these activities. AMP may experience unanticipated delays,
complications and expenses in implementing, integrating and operating these
systems. Furthermore, these systems may require modifications, improvements or
replacements as the Company expands or if new technologies become available.
These modifications, improvements or replacements may require substantial
expenditures and may require interruptions in operations during periods of
implementation. The Company's failure to successfully implement and maintain
operational, financial and clinical information systems on a timely basis would
have a material adverse effect on the Company's business, financial condition
and results of operations.
DEPENDENCE UPON KEY PERSONNEL. The Company is highly dependent upon its
three executive officers, Jack McCrary, Wayne Bertsch, and Randy Johnson, and
other key personnel, for the management of the Company, the Affiliated Practices
and the implementation of its business strategy. The Company has entered into
employment contracts and non-compete agreements with these executive officers
and others. Due to the likely difficulty in finding suitable replacements for
these individuals, the loss of the services of any of these persons or the
Company's inability in the future to attract and retain management or other key
personnel could have a material adverse effect on the Company. AMP does not have
key man insurance for any of its executive officers or other key personnel.
DEPENDENCE ON IMPLEMENTATION OF GROWTH STRATEGY. One of the Company's
principal strategies is to acquire the operating assets and receivables or stock
of certain Affiliated Practices in targeted markets which meet its affiliation
criteria and to enter into management services contracts with the Regional Group
10
<PAGE>
Practices. The Company's growth strategy also involves expanding the Affiliated
Practices and, to the extent permitted by applicable law, contracting with or
acquiring ancillary facilities and providers, to provide services such as
ambulatory surgical centers, anesthesiology, pathology, radiology, MRIs, EKGs,
laboratory work, pharmacy, physical history and exams, physical therapy,
orthotics, pain management, home care, diabetic wound care, specialty shoes and
other related retail products. The process of (i) identifying appropriate DPM
group practices, DPMs and ancillary providers and facilities and (ii) proposing,
negotiating and implementing economically attractive affiliations with them is
lengthy, complex and costly. The failure of the Company to identify and effect
additional practice affiliations would have a material adverse effect on the
Company. Moreover, there can be no assurance that future practice affiliations,
if any, will contribute to the Company's profitability. Further, such
arrangements involve a number of risks, including diversion of management's
attention, dependence on hiring, training and retaining key personnel, and risks
associated with the assumption of certain contingent legal liabilities, some or
all of which could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, there can be no
assurance that the Affiliated Practices will achieve anticipated revenues and
earnings or that suitable additional practice affiliations can be accomplished
on terms favorable to the Company or that financing, if necessary, can be
obtained for such affiliations.
The Company's ability to implement its growth strategy is also dependent
upon the Company's and the Regional Group Practices' ability to (i) adapt the
Company's arrangements with the Regional Group Practices to comply with current
and future legal requirements, including state prohibitions on (a)
fee-splitting, (b) corporate practice of medicine, (c) referrals to facilities
in which physicians have a financial interest, and (d) kickbacks, (ii) obtain
regulatory approvals and certificates of need, where necessary, and (iii) comply
with licensing requirements applicable to physicians and to facilities operated,
and services offered, by physicians. There can be no assurance that application
of current laws or changes in legal requirements will not adversely affect the
Company or that the Company or its Regional Group Practices will be able to
obtain and maintain all necessary regulatory approvals and comply with
applicable laws, regulations and licensing requirements.
AMP is highly dependent upon the revenue stream, in the form of management
fees, that it expects to receive under the Management Agreements. In addition,
AMP will pay the liabilities of certain Affiliated Practices in connection with
the Transfers. Failure by the Regional Group Practices to generate sufficient
management fees to permit AMP to pay such liabilities could have a material
adverse effect on AMP's business, financial condition and results of operations.
In addition, failure by the Regional Group Practices to calculate or pay the
management fees required, whether by mistake, fraud or otherwise, would have a
material adverse effect on AMP.
In addition, AMP expects to make loans to the Regional Group Practices to
enable them to make loans to certain DPM owners in Affiliated Practices after
the date of the IPO in order to assist them in temporarily replacing any
earnings reductions incurred as a result of the Transfers. Such loans will not
affect the calculation and payment of the management fee and all rights and
claims by the Company with respect to its management fees and loans made by the
Company to the Regional Group Practices and/or owner DPMs on behalf of the
Regional Group Practices are secured by a perfected first lien security interest
in the accounts receivable of the Regional Group Practices. The loans to each of
the owner DPMs will be limited to an amount equal to (i) an advance on the first
monthly draw of such DPM, (ii) the difference between 90% of the average monthly
compensation of such DPM in the year prior to the IPO and the current period's
levels of distributions from the practice for the first three months after the
IPO and (iii) the difference between 80% of the average monthly compensation of
such DPM in the year prior to the IPO and the current period's level of
distributions for the second three months after the IPO. The loans will only be
available to owner DPMs for the first six months of the DPM's engagement by the
Regional Group Practice. Funds advanced by the Company to the Regional Group
Practices to make such loans are required to be repaid to the Company by the
Regional Group Practice although there can be no assurance such owner DPMs will
repay any such loans or that the Regional Group Practices will be able to repay
funds advanced by the
11
<PAGE>
Company. See Unaudited Pro Forma Combined Balance Sheet and the Notes thereto,
"Certain Transactions," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Management."
MOVEMENT TOWARD MANAGED CARE. An increasing percentage of patients have
entered into health care coverage arrangements with managed care payors in
recent years. AMP believes that its success will be dependent upon its ability
to negotiate contracts on behalf of the Regional Group Practices with HMOs,
employer groups and other private third party payors. Many such managed care or
other third party payors already have existing provider structures in place and
may not be able or willing to change their provider networks. Managed care and
third party payors have established primary care providers who often have
considerable discretion over who delivers various medical services, including
the provision of podiatric services. Many such third party payors do not
recognize DPMs as primary care providers. Therefore, many non-DPM physicians,
acting as primary care providers, may elect to (i) perform podiatric services
themselves, (ii) contract with other podiatrists or podiatric practices which
are not Affiliated Practices, or (iii) contract with other providers, such as
orthopedists. The inability of AMP to establish or maintain arrangements on
behalf of the Regional Group Practices with third party providers could have a
material adverse effect on the Company.
CHANGES IN PAYMENT FOR MEDICAL SERVICES. The Company anticipates that the
Regional Group Practices will be licensed under applicable state law and
certified as providers under the federal Medicare program and state Medicaid
programs. These programs are highly regulated and subject to frequent and
substantial changes. In recent years, basic changes in Medicare reimbursement
programs have resulted, and are expected to continue to result, in reduced
levels of reimbursement for individuals covered by these programs. Changes in
Medicare and Medicaid reimbursement rates, policies or practices could adversely
affect the Company.
In certain instances, AMP may seek to negotiate special fee arrangements
with respect to third party payors on behalf of regional podiatric care networks
consisting of Regional Group Practices affiliated with the Company and other
physicians or group practices willing to permit the Company to negotiate on
their behalf. In these instances, the Company expects that future payor
contracts entered into on behalf of the Regional Group Practices and any related
physician networks may include capitated fee arrangements. Under these types of
contracts, a health care provider agrees either to accept a predetermined dollar
amount per member per month in exchange for undertaking to provide all covered
services to patients or to provide treatment on an episode-of-care basis. These
health care providers bear the risk, generally subject to certain loss limits,
that the aggregate costs of providing medical services will exceed the premiums
received. In these instances, agreements may also contain "shared risk"
provisions under which affiliated physicians may earn additional compensation
based on utilization control of institutional, ancillary and other services by
patients, and the Regional Group Practices may be required to bear a portion of
any loss in connection with these "shared risk" provisions. To the extent that
patients or enrollees covered by these contracts require more frequent or more
extensive care than anticipated, there could be a material adverse effect on a
Regional Group Practice and, therefore, on the Company. Any material reduction
or elimination of earnings to the Regional Group Practices could have a material
adverse effect on the Company.
If, as a result of special fee arrangements that the Company may negotiate
on behalf of the Regional Group Practices or may enter into in the future with
third-party payors, the Company is deemed to assume certain risks related to the
cost of services provided in connection with capitated fee arrangements,
episode-of-care treatment, shared risk agreements or the like, the Company could
be viewed by federal or state regulatory authorities to be engaged in the
business of insurance. If so, the Company might be required to obtain a license
to act as an insurer in certain states and to restructure some or all of its
operations to comply with the insurance laws of certain states.
POTENTIAL ADVERSE CONSEQUENCES OF GOVERNMENT REGULATION. The delivery of
podiatric care services and health care generally are subject to extensive
federal and state regulation. The Company believes that its operations are and
will be conducted in material compliance with applicable laws. However, the
Company has not received or applied for an opinion from any federal or state
judicial or
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regulatory authority to this effect, and many aspects of the Company's business
operations to date have not been the subject of state or federal regulatory
interpretation. There can be no assurance that a review of AMP's operations by
federal or state judicial or regulatory authorities will not result in a
determination that AMP or one or more of its Regional Group Practices have
violated one or more provisions of federal or state law. Any such determination
could have a material adverse effect on the Company.
The fraud and abuse provisions of the Social Security Act and anti-kickback
laws and regulations adopted by many states prohibit the solicitation, payment,
receipt or offering of any direct or indirect remuneration in return for, or as
an inducement to, certain referrals of patients, items or services. Provisions
of the Social Security Act impose significant penalties for false or improper
billings for services reimbursable by Medicare, Medicaid or other
federally-funded programs. In addition, the Stark amendments to the Social
Security Act impose specific restrictions on physicians' referrals for
designated health services reimbursable by Medicare, Medicaid or other
federally-funded programs to entities with which the physicians have financial
relationships. The federal government has also recently extended its statutory
prohibitions to include the relationship between health care providers and any
health care benefit programs, including non-governmental health care programs
(such as HMOs, PPOs or standard indemnity insurance).
Violations of any of these laws may result in substantial civil or criminal
penalties, including large civil monetary penalties and, in the case of
violations of certain federal laws, exclusion from participation in the
Medicare, Medicaid or other federally-funded programs. Such exclusion and
penalties, if applied to the Company or the Regional Group Practices, would have
a material adverse effect on the Company.
The laws of many states prohibit business corporations, such as the
Company, from practicing medicine or exercising control over the medical
judgments or decisions of physicians and from engaging in certain financial
arrangements, such as splitting fees with physicians. These laws and their
interpretations vary from state to state and are enforced by both the courts and
regulatory authorities, each with broad discretion. Violations of these laws
could result in censure or the revocation of the license of affiliated
physicians, civil or criminal penalties, including large civil monetary
penalties, or other sanctions. In addition, a determination in any state that
AMP is engaged in the corporate practice of medicine or any unlawful
fee-splitting arrangement could render any Management Agreement between AMP and
a Regional Group Practice located in such state unenforceable or subject to
modification, which could have a material adverse effect on AMP.
Expansion of the Company's operations into certain jurisdictions may
require modification of the Company's form of relationship with its Regional
Group Practices, which could have a material adverse effect on the Company.
Furthermore, the Company's ability to expand into, or to continue to operate
within, certain jurisdictions may depend on the Company's ability to modify its
operational structure to conform to such jurisdictions' regulatory framework or
to obtain necessary approvals, licenses and permits. Any such limitation on the
Company's ability to expand could have a material adverse effect on the Company.
See "Business -- Government Regulations."
FUTURE HEALTH CARE REFORM. In addition to extensive existing government
health care regulation, there are numerous initiatives on the federal and state
levels for comprehensive reforms affecting the payment for and availability of
health care services. These initiatives include reductions in Medicare and
Medicaid payments, trends in adopting managed care for Medicare and Medicaid
patients, regulation of entities that provide managed care and additional
prohibitions on ownership by health care providers, directly or indirectly, of
facilities to which they refer patients. It is uncertain what legislative
proposals will be adopted in the future or what actions federal or state
legislators or third party payors may take in anticipation of or in response to
any health care reform proposals or legislation. Aspects of certain of these
health care proposals, if adopted, could have a material adverse effect on the
Company.
COMPETITION. The business of providing podiatric services is highly
competitive in each of the Company's markets. The Company believes that changes
in governmental and private reimbursement policies, among other factors, have
resulted in increased competition among providers of medical services to
patients. Each of the Regional Group Practices faces competition from other
podiatrists in the communities served, some of which have more established
practices in the market. There can be no assurance that the
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Regional Group Practices will be able to compete effectively in the markets they
serve. In addition, there is significant competition for the affiliation with
podiatric practices and such competition may limit the availability of suitable
practices with which the Company may be able to affiliate. Generally, there are
no significant barriers to potential competitors entering the industry or
pursuing a business strategy similar to the Company's. Several companies with
established operating histories and greater resources than the Company,
including physician practice management companies and some hospitals, clinics
and HMOs, are pursuing activities similar to those of the Company. There can be
no assurance that the Company will be able to compete effectively with these
companies, that additional competitors will not enter the market or that this
competition will not make it more difficult and costly to acquire the assets of,
and provide management services to, podiatric practices on terms beneficial to
the Company. See "Business -- Competition."
NEED FOR ADDITIONAL FUNDS. The Company expects funds available to it from
the proceeds of the IPO, cash from operations and its expected credit line to
fund its operations for approximately twelve months, although this cannot be
assured. The Company has received from a major international financial
institution a commitment for a $30.0 million, three-year revolving credit
facility to help fund its working capital needs, capital expenditures and
practice affiliations. There can be no assurance that a definitive credit
agreement will be entered into, that funds will be immediately available to be
drawn under the credit agreement or that amounts available under the credit line
will be adequate to meet the Company's needs for funds. The failure of the
Company to enter into the credit line or a similar credit line or to be able to
draw funds immediately thereunder could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company's
growth strategy will require substantial capital. The Company intends to finance
future affiliations with cash, the issuance of debt or equity securities, or any
combination thereof. In the event that the Common Stock does not maintain a
sufficient market value, or potential affiliation candidates are unwilling to
accept debt or equity securities as partial consideration for their practices,
the Company may be required to use its cash resources, if available, to initiate
and maintain its affiliation program. As a result, the Company anticipates that
it will, in the future, seek to raise additional funds through debt financing or
the issuance of equity or debt securities. There can be no assurance that
sufficient funds will be available on terms acceptable to AMP, if at all. The
inability to obtain such financing could have a material adverse effect on the
Company's business, financial condition and results of operations. Furthermore,
issuing shares of Common Stock as consideration for (or in order to provide
financing for) future affiliations could result in significant dilution to
existing stockholders. If additional funds are raised through the incurrence of
debt, the Company may become subject to restrictions on its operations and
finances, including the ability to pay dividends on its capital stock. These
conditions may have an adverse effect on, among other things, the Company's
ability to pursue its affiliation strategy. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Business -- Strategy -- Growth Strategy."
RESCISSION OFFER. The Company and AFC have determined that it is
appropriate to make a rescission offer to the holders of units ("AFC Units"),
consisting of an aggregate of $1,425,000 in principal amount of promissory notes
in AFC ("AFC Promissory Notes") and 25,000 of membership interests in AFC (the
"Units Rescission Offer"). See "Units Rescission Offer." There can be no
assurance that a substantial number of investors in such AFC financing will
reject the Units Rescission Offer, if any. Should the Units Rescission Offer be
accepted in total, the Company would be required to pay from the proceeds of the
IPO a total of $1.5 million, plus interest at a statutory rate accruing from
various issuance dates between October 1997 and February 1998. See "Use of
Proceeds." There can be no assurance that the liability of the Company based
upon any possible failure of the Company or AFC to comply with federal or state
securities laws in connection with the offering of the AFC Units will be
eliminated. See "Units Rescission Offer."
LIABILITY AND INSURANCE RISKS ASSOCIATED WITH PODIATRIC PRACTICES.
Providing health care services involves potential claims of medical malpractice
and similar claims. The Company does not, itself, engage in the practice of
medicine or have responsibility for compliance with regulatory requirements
directly applicable to physicians and requires affiliated physicians performing
medical services to maintain medical malpractice insurance. Nonetheless,
malpractice claims may be asserted against the Company if services or
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procedures performed at one of the Affiliated Practices are alleged to have
resulted in injury or other adverse effects. Although the Company has obtained
liability insurance that will be effective concurrent with the closing of the
Offering that it believes will be adequate as to both risk and amounts,
successful malpractice claims could exceed the limits of the Company's insurance
and could have a material adverse effect on the Company's business, financial
condition or operating results. Moreover, a malpractice claim asserted against
the Company could be costly to defend, could consume management resources and
could adversely affect the Company's reputation and business, regardless of the
merit or eventual outcome of the claim. In addition, there can be no assurance
that the Company will be able to obtain insurance on commercially reasonable
terms in the future or that any insurance will provide adequate coverage against
potential claims. AMP requires each Regional Group Practice and Affiliated
Practice to obtain and maintain professional liability insurance. This insurance
is expected to provide insurance coverage, subject to policy limits, if the
Company is held liable as a co-defendant in a lawsuit for professional
malpractice. In addition, the Company is indemnified by the Regional Group
Practices for liabilities resulting from the Regional Group Practices' providing
medical services.
NO PRIOR PUBLIC MARKET. Prior to the IPO, there has been no public market
for the Company's Common Stock. There can be no assurance that a public market
for the Common Stock will develop or continue after the IPO. The Company has
filed an application for the Common Stock to be approved for quotation on the
Nasdaq National Market, however, there can be no assurance that, following the
Offering, a regular trading market for the Common Stock will develop or be
sustained. The initial public offering price has been determined by negotiation
among the Company and the Underwriters and may bear no relationship to the
market price of the Common Stock after the IPO. See "Underwriting."
If a public market for the Company's Common Stock develops, from time to
time, there may be significant volatility in the market price of the Common
Stock. Quarterly operating results of the Company, deviations in results of
operations from estimates of securities analysts, changes in general conditions
in the economy or the health care industry or other developments affecting the
Company or its competitors could cause the market price of the Common Stock to
fluctuate substantially. The equity markets have, on occasion, experienced
significant price and volume fluctuations that have altered the market prices
for many companies'securities and that have often been unrelated to the
operating performance of these companies. Concern about the potential effects of
health care reform measures has contributed to the volatility of stock prices of
companies in health care and related industries and may similarly affect the
price of the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE. The market price of the Common Stock of
the Company could be adversely affected by the sale of substantial amounts of
the Common Stock in the public market following the Offering. After giving
effect to the sale of the shares of Common Stock offered hereby, the Company
will have 7,778,322 shares of Common Stock issued and outstanding (8,328,322
shares of the Underwriters' over-allotment option is exercised in full)
(assuming an initial offering price of $11.00 per share). Of these shares,
5,700,000 shares (6,255,000 shares if the Underwriters' over-allotment option is
exercised in full) of Common Stock sold in this Offering and the IPO will be
freely tradable without restriction under the Securities Act of 1933, as amended
(the "Securities Act"), except for any shares exchanged by "affiliates" of the
Company as that term is defined under the Securities Act. None of the 2,078,322
remaining shares of Common Stock were acquired in a transaction registered under
the Securities Act. Such shares may not be sold except in transactions
registered under the Securities Act or pursuant to an exemption from
registration. All such 2,078,322 shares of Common Stock will be eligible for
sale pursuant to Rule 144 promulgated under the Securities Act in March 1999. In
addition, 598,807 shares of Class B Common Stock (as the same may be converted)
will be eligible for sale pursuant to Rule 144 promulgated under the Securities
Act and the balance of these shares will be eligible for sale at various times
from June of 1998 through October 1998. See "Shares Eligible For Future Sale."
In addition, AMP, its officers, directors and certain other stockholders of
the Company and DPM Owners have agreed that they will not offer, sell, contract
to sell, announce their intention to sell, pledge or otherwise dispose of,
directly or indirectly, or file with the Commission a registration statement
under the Securities Act relating to any additional shares of Common Stock or
securities convertible or exchangeable
15
<PAGE>
or exercisable for any shares of Common Stock, without the prior written consent
of the representative of the Underwriters for a period of 180 days after the
date of the IPO (the "lock-up period"), except (i) subsequent sales of Common
Stock offered in the IPO, (ii) issuances of unregistered Common Stock by the
Company in connection with affiliation with additional practices, DPMs and
ancillary providers (although persons receiving such shares would be subject to
such restrictions for the remainder of the lock-up period) or (iii) issuances of
Common Stock by the Company pursuant to the exercise of employee stock options
outstanding on the date of this Prospectus.
The holders of certain shares of Common Stock outstanding on the date of
this Prospectus have certain registration rights with respect to such shares and
additional shares that may be issued to such persons upon exercise of options
(subject to certain limitations on the number of shares such holders are
entitled to have registered under any registration statement), although the
holders of at least 2,078,322 of these shares of Class A Common Stock and all
holders of Class B Common Stock (including all AFC members to whom shares of
Class B Common Stock will be distributed) have agreed to refrain from selling
their shares during the lock-up period. Pursuant to certain registration rights
agreements with the DPMs (the "Registration Rights Agreements"), the Company has
granted certain registration rights to the DPMs permitting them to include their
shares of the Company's Common Stock on a registration statement filed by the
Company within one year of the date of such agreements. See "Description of
Capital Stock." AMP also intends to register an additional 1,157,098 shares of
Common Stock reserved for issuance under the Company's 1997 Incentive and
Non-Qualified Stock Option Plan as soon as practicable thereafter. See
"Management" and "Underwriting." The shares of Common Stock issuable pursuant to
this Offering will be freely tradable after their issuance by persons not
affiliated with the Company unless the Company contractually restricts their
sale. These shares generally will be freely tradable upon issuance to persons
not deemed to be affiliates of the Company, unless the Company contractually
restricts the sale or other transfer of such shares. Initially, the Company will
issue such shares subject to a lock-up period of up to 180 days from the date of
the completion of the IPO.
CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS. Following the completion
of the IPO, officers, directors and employees of the Company and investors in
AFC (which financed the Company's initial organizational costs and working
capital) will beneficially own 100% of the outstanding shares of the Class B
Common Stock and the owners of the initial Affiliated Practices will
beneficially own approximately 35% of the outstanding shares of the Company's
Common Stock. Although, following the IPO, no arrangements or understandings
among such persons with respect to the voting of the shares of Common Stock
beneficially owned by such persons will remain in effect, such persons may
nevertheless effectively be able to control the affairs of the Company. See
"Principal Stockholders."
ANTI-TAKEOVER PROVISIONS. Certain provisions of Delaware law, the Company's
Amended and Restated Certificate of Incorporation and the Company's Amended and
Restated Bylaws, including the terms of conversion of the Class B Common Stock,
could delay or impede the removal of incumbent directors and could make it more
difficult for a third party to acquire, or could discourage a third party from
attempting to acquire, control of the Company. These provisions could limit the
price that investors might be willing to pay in the future for shares of Common
Stock. In addition, shares of preferred stock may be issued by AMP's Board of
Directors without stockholder approval on such terms and conditions, and having
such rights, privileges and preferences, as the Board of Directors may
determine. The rights of the holders of Common Stock will be subject to, and may
be adversely affected by, the rights of the holders of any preferred stock that
may be issued in the future. Under certain circumstances, the Company may issue
Series A Junior Participating Preferred Stock which may have an anti-takeover
effect. The Company has no other current plans to issue any shares of preferred
stock. See "Description of Capital Stock."
NO INTENT TO PAY DIVIDENDS. The Company has never paid or declared any cash
dividends and does not anticipate paying any cash dividends after completion of
the IPO and the Transactions. In addition, the Company has entered into a
commitment for a credit facility that will restrict the Company's ability to pay
dividends. See "Dividend Policy "and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
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<PAGE>
DIVIDEND POLICY
The Company does not anticipate paying any cash dividends after completion
of the IPO and the Transactions. In addition, the Company has entered into a
commitment for a credit facility that will restrict the Company's ability to pay
dividends. The Company currently intends to retain any future earnings for use
in its business. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
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<PAGE>
CAPITALIZATION
The following table sets forth the short-term obligations, long-term debt
and the total capitalization of the Company (i) as of September 30, 1997, (ii)
on a pro forma basis to reflect the Transactions, and (iii) on a pro forma as
adjusted basis to reflect the Transactions, the Stock Split, the Share
Conversion, the sale by the Company of 3,700,000 shares of Common Stock offered
hereby and the application of the estimated net proceeds therefrom. See "Use of
Proceeds." This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
Company's Financial Statements and Notes thereto and the Unaudited Pro Forma
Combined Balance Sheet appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
-------------------------------------------
PRO FORMA
HISTORICAL PRO FORMA(1) AS ADJUSTED(1)(2)
---------- ------------ -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt ............................................ $ -- $ 656 $ 656
Due to stockholder(3) ........................................................ 2,426 2,426 --
Distribution liability(4) .................................................... -- 8,989 --
Acquisition liability(5) ..................................................... -- 6,900 --
------- -------- --------
Total short-term
obligations ...................................................... $ 2,426 $ 18,971 $ 656
======= ======== ========
Long-term debt, less current
portion .................................................................... $ -- $ -- $--
------- -------- --------
Stockholders' deficit:
Preferred Stock, $.001 par value;
20,000,000 shares authorized; no
shares issued and outstanding,
pro forma or pro forma as
adjusted ................................................................ -- -- --
Class A Common Stock, $.001 par
value; 20,000,000 shares authorized(6); 2,078,322 shares issued and
outstanding, pro forma, 5,778,322 shares issued and outstanding pro forma
as adjusted(7) .......................................................... -- 2 6
Class B Common Stock, $.001 par value; 1,000,000 shares authorized(6);
650,000 shares issued and outstanding(7) ................................ 1 1 1
Additional paid-in capital ................................................. 1,213 5,164 38,711
Accumulated deficit ........................................................ (3,125) (9,470) (9,470)
------- -------- --------
Total stockholders' equity
(deficit) ........................................................ (1,911) (4,303) 29,248
------- -------- --------
Total capitalization ......................................................... $(1,911) $ (4,303) $ 29,248
======= ======== ========
</TABLE>
- ------------
(1) See Unaudited Pro Forma Combined Balance Sheet and the Notes thereto
included elsewhere in this Prospectus for a discussion of the assumptions
made and adjustments applied in preparation of this information.
(2) Gives effect to the Stock Split, the Share Conversion and the sale of
3,700,000 shares of Common Stock offered by the Company at an assumed
initial public offering price of $11.00 per share and the application of the
estimated net proceeds therefrom.
(3) Represents the expenses, debt and interest incurred by AFC to finance the
Company's organizational and affiliation costs and initial working capital.
Such amount plus any additional amounts incurred by AFC subsequent to
September 30, 1997 (which is expected to total $5.3 million) will be
reimbursed by the Company from the proceeds of the IPO.
(4) Represents the cash distribution to promoters in connection with the
Transfers (excluding the Ambulatory Surgery Center Acquisitions and the
Kramer Transfer), including the liability attributed to monetary assets
acquired of $4.3 million.
(5) Includes the $4.5 million payable in connection with the AnestheCare
Acquisition, $1.4 million payable in connection with the Kramer Transfer,
and $1.0 million payable in connection with the Ambulatory Surgery Center
Acquisitions.
(6) Reflects an amendment to the Company's Certificate of Incorporation filed
subsequent to September 30, 1997 to increase the authorized capital stock,
revise the par value to $.001 per share, and to designate classes of common
stock.
(7) Does not include 464,500 shares of Common Stock issuable upon the exercise
of outstanding options for the purchase of Common Stock pursuant to the
Company's stock option plans.
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<PAGE>
SELECTED FINANCIAL DATA
THE FOLLOWING INFORMATION IS DERIVED FROM THE FINANCIAL STATEMENTS OF THE
COMPANY INCLUDED ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS INDICATED, THIS
INFORMATION DOES NOT REFLECT THE EFFECTS OF THE TRANSACTIONS OR THE OFFERING.
FOR CERTAIN INFORMATION CONCERNING THE TRANSACTIONS, SEE NOTE 4 OF NOTES TO
FINANCIAL STATEMENTS OF THE COMPANY AND UNAUDITED PRO FORMA COMBINED BALANCE
SHEET AND THE NOTES THERETO.
PERIOD FROM
INCEPTION
(AUGUST 9, 1996) FOR THE NINE
TO MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------- ------------------
(UNAUDITED)
STATEMENT OF OPERATIONS DATA(1):
Revenues .............................. $ -- $ --
Expenses .............................. 1,436,441 1,688,388
----------- ------------
Net loss .............................. $(1,436,441) $ (1,688,388)
=========== ============
SEPTEMBER 30, 1997
-------------------------------
HISTORICAL AS ADJUSTED(2)
----------- --------------
(UNAUDITED)
BALANCE SHEET DATA:
Cash and cash equivalents ............. $ -- $ 14,054,000
Working capital (deficit)(3) .......... (2,120,333) 17,037,000
Total assets(4) ....................... 2,026,316 30,870,000
Long-term debt ........................ -- 656,000
Stockholders' equity (deficit) ........ (1,911,119) 29,248,000
- ------------
(1) The Company has conducted no significant on-going, non-developmental
business operations to date and will not conduct significant business
operations until the affiliation of the Company with the initial Affiliated
Practices and the IPO are completed. Pursuant to the Reimbursement and
Assumption Agreement, the Company will reimburse the affiliation-related
expenses incurred by AFC since May 1996, including AFC's payroll, travel and
entertainment, office equipment and professional fees. AFC currently holds
365,625 shares of Class B Common Stock which management plans to distribute
to AFC members upon consummation of the Offering.
(2) As adjusted gives effect to the Transactions, the sale of 3,700,000 shares
of Common Stock offered by the Company in the IPO, and the application of
the estimated net proceeds therefrom.
(3) The historical balance includes $2.4 million due to AFC as of September 30,
1997 which will be repaid upon consummation of the IPO.
(4) The Company will record the non-monetary assets transferred to the Company
in connection with the Transfers at the historical cost basis of the
transferors, excluding the Ambulatory Surgery Center Acquisitions and the
Kramer Transfer. Monetary assets transferred as well as the AnestheCare
Acquisition, the Kramer Transfer and the Ambulatory Surgery Center
Acquisitions will be accounted for in a method similiar to purchase
accounting.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS CONTAINS CERTAIN STATEMENTS OF A
FORWARD-LOOKING NATURE RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL
PERFORMANCE OF THE COMPANY. SUCH STATEMENTS ARE ONLY FORECASTS, AND THE ACTUAL
EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS,"
AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS. THE HISTORICAL RESULTS
SET FORTH IN THIS DISCUSSION AND ANALYSIS ARE NOT INDICATIVE OF TRENDS WITH
RESPECT TO ANY ACTUAL OR PROJECTED FUTURE FINANCIAL PERFORMANCE OF THE COMPANY.
THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND
RELATED NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
The Company's business operations since its incorporation in August 1996
have consisted solely of arranging the Transactions and preparing to implement
its related business plan described herein. At the time of the anticipated
initial Affiliated Practice affiliations, the predecessors of the initial
Affiliated Practices will have been separate businesses engaged in podiatric
care. In connection with the Transactions, the Company will receive certain
operating assets or receivables and stock and assume certain liabilities of the
Affiliated Practices, AnestheCare and the Ambulatory Surgery Center Acquisitions
and enter into long-term management agreements with the Regional Group
Practices. Pursuant to the Management Agreements, the Company will provide,
among other things, facilities, management, administrative and development
services to the Regional Group Practices and employ non-physician personnel, in
each case in exchange for management fees, the Company's principal anticipated
source of revenues.
Management fees will be paid monthly to the Company by each Regional Group
Practice based upon the Regional Group Practice's adjusted patient revenues (the
Regional Group Practice's billings less contractual adjustments, including
adjustments for special third-party payor and private pay arrangements, and
adjustments for bad debts). The Company will be responsible for collecting the
billings of the Regional Group Practices. The Company will retain a service fee
ranging from 9% to 25% of the Regional Group Practice adjusted patient revenues
and an amount equal to the expenses of the Regional Group Practice advanced by
AMP pursuant to the Management Agreements. The expenses expected to be incurred
by AMP in fulfilling its obligations under the Management Agreements will be the
salaries, wages and benefits of personnel (other than DPM owners and certain
employed DPMs), supplies, expenses involved in administering the clinical
practices of the Regional Group Practices and general and administrative
expenses, including billing and collections services, as well as depreciation,
amortization and interest incurred in the acquisition of assets by the Company
in connection with the Transactions. The Company will seek to reduce these
operating expenses through purchase discounts, economies of scale,
standardization of best practices, and other operating efficiencies. If the
service fee varies by more than 5% over or under the adjusted service fee, then
the service fee may be adjusted quarterly by the Joint Planning Committee of the
Regional Group Practice (composed of Company and Affiliated Practice
representatives) on a prospective basis only (without a floor or ceiling on the
adjustment) upon the request of either party to the Management Agreement in
order to reflect the fair value of the management services provided, based upon
the nature and volume of services required, the risks assumed by the Company and
the total revenues of the Regional Group Practice. Accordingly, the Company will
maintain a net revenue interest and not a net profits interest. The compensation
of each DPM in each Regional Group Practice will be determined solely by the
Joint Planning Committee of the Regional Group Practice and will not include any
guaranteed component. The amount of the management service fees paid by the
Regional Group Practices to AMP and the compensation of each Regional Group
Practice's DPMs will be directly affected by the amount of patient revenue
generated by each Regional Group Practice. The inability of the Regional Group
Practices to generate sufficient patient revenue could have a material adverse
effect on the Company's business, financial condition and results of operations.
The Company will also generally be entitled to a fee of approximately 70%
of the adjusted ancillary revenues, net of related ancillary expenses, of each
Regional Group Practice. Ancillary revenues will be generated from services
provided by the Regional Group Practice to its patients that are ancillary to
DPM podiatric care (such as orthotics, ambulatory care, physical therapy and the
like). Ancillary expenses to be netted against ancillary revenues will generally
include, but not be limited to, costs for items such as personnel, facilities,
equipment, supplies and other such expenses directly attributable to the
generation of ancillary revenues. In connection with the AnestheCare
Acquisition, the Company will retain the existing financial and fee arrangements
of AnestheCare with its clients. Currently, AnestheCare generates revenue
20
<PAGE>
through both the provision of management and billing services as well through
various cost-sharing agreements with its clients. In exchange for these
services, AnestheCare typically is entitled to a fee equivalent to specified
percentages of gross revenues and collections it receives on behalf of its
clients. After the AnestheCare Acquisition, AnestheCare will provide services to
certain of the Regional Group Practices on a discounted basis. See "Business --
Operative Agreements -- Management Agreements" for a complete description of
other material terms of the Management Agreements.
In addition to the expenses AMP will incur in fulfilling its obligations
under the Management Agreements and the ancillary expenses described above, AMP
will also incur personnel, rental and other typical expenses in connection with
its corporate management, which will provide management, administrative,
marketing, development, acquisition and other services to the Regional Group
Practices.
The Company may in the future negotiate on behalf of Regional Group
Practices and others capitated, episode-of-care and shared risk fee arrangements
with third-party payors. These arrangements could result in patient care in
which the Regional Group Practices' costs of delivering care exceed the amounts
reimbursed by the applicable third-party payor. The Company intends to help the
Regional Group Practices manage these risks by establishing loss limits with the
third-party payors who are party to these arrangements and helping the Regional
Group Practices anticipate with reasonable accuracy the course of care and
related costs for specific conditions and diseases covered by the arrangements
with third-party payors.
RESULTS OF OPERATIONS
The Company has not conducted on-going, non-developmental business
operations and will not until the Transactions and the IPO are complete.
Consequently, AMP has generated no revenues. For a historical presentation of
the results of operations of the Affiliated Practices and AnestheCare, see Note
4 of the Notes to the Company's Financial Statements and the Financial
Statements of Pyramid Anesthesiology Group, Inc., respectively, appearing
elsewhere in this Prospectus.
The Company's principal stockholder, AFC, incurred a loss for the period
from the date of its organization in 1996 through September 30, 1997 of
approximately $3.1 million, reflecting principally salaries of AFC personnel
(including non-cash charges of $1.2 million) and office expenses since its
inception. The Company has agreed to reimburse AFC for these expenses upon
completion of the IPO.
LIQUIDITY AND CAPITAL RESOURCES
AFC, on the Company's behalf, has financed the Company's operations to date
from the proceeds of AFC's private placements of debt and equity. As of February
14, AFC has received net proceeds from private placements of debt and equity in
an aggregate amount of approximately $4.0 million. AMP has agreed to assume
AFC's obligations under such debt at and after the IPO and the existing common
stock, without class, will be converted into Class B Common Stock.
The Company intends to fund its future operations from the proceeds of the
IPO, cash generated from operations, monies drawn under the revolving credit
facility discussed below and, if necessary, the proceeds of future public or
private financings. The Company intends to use the proceeds of the IPO to
consummate the Transactions, repay indebtedness of the Company and AFC, pay
certain deferred expenses, complete the purchase of the Company's management
information system and fund general corporate operations. In addition, the
Company may advance funds from the IPO to the Regional Group Practices in order
for them to make loans to the owner DPMs. See "Use of Proceeds."
If the Transactions had occurred on September 30, 1997, the Company would
have had a pro forma working capital deficit of approximately $15.0 million,
including the accrual of $15.9 million for cash consideration payable in the
Transactions.
In connection with certain of the Transactions, the Company will record
aggregate federal and state deferred tax liabilities of approximately $966,000.
These liabilities generally will become payable over an approximate three-year
period commencing on the date of the consummation of such Transfers.
AMP anticipates that its capital expenditures during 1998 will relate
primarily to affiliations with additional Affiliated Practices, if any,
development of the ancillary services network, and expenditures related to
expansion and purchase of equipment for the Affiliated Practices. The Company
anticipates that funding for these expenditures will be derived from the
proceeds of the IPO, funds borrowed under the Company's anticipated credit
facility and cash flow from operations. Management believes that these sources
will be sufficient to fund the Company's capital needs for a period of
approximately twelve months following completion of the IPO. Thereafter, if
necessary, the Company will seek to raise additional funds for capital
expenditures through borrowings or the issuance of debt or equity securities.
There can be no
21
<PAGE>
assurance that sufficient funds will be available from sources other than the
IPO on terms acceptable to the Company, if at all.
The Company has received a commitment for a $30.0 million three-year
revolving credit facility with a major international financial institution which
is intended to be available to assist in funding the Company's working capital
needs, capital expenditures and anticipated future affiliations. The credit
facility will contain customary affirmative and negative covenants (including
prohibitions on the payment of dividends and capital expenditures) and events of
default customary to transactions of this type. The credit facility will bear
interest at a rate equal to the London Inter-Bank Offered Rate plus an
applicable margin of between 100-250 basis points based upon the Company's ratio
of Senior Debt (as defined) to EBITDA, or, at the Company's option, at such
financial institution's Base Rate plus a margin based on the ratio of the
Company's senior debt to earnings before interest, taxes, depreciation and
amortization. There can be no assurance that the Company will ultimately close
on the credit facility. In addition, the Company is, registering 2,000,000
additional shares of Common Stock hereunder, which, when combined with the
Company's cash resources, will be used to fund the Company's planned practice
affiliation program.
The success of AMP is directly dependent upon, among other things, the
ability of AMP to obtain funds by providing services to Regional Group
Practices. If funds from this principal source are unavailable or insufficient,
the Company will need to obtain financing from other sources, such as the
issuance of additional debt or equity securities or borrowings. There can be no
assurance that those alternative sources would be available, available on
favorable terms or sufficient to meet the Company's capital requirements.
ACCOUNTING
Of the 46 Transfers of the initial Affiliated Practices, 45 will be
accounted for by the Company under SEC Staff Accounting Bulletin No. 48 ("SAB
48"), "Transfers of Non-Monetary Assets by Promoters or Shareholders," so that
the non-monetary assets and liabilities of these initial Affiliated Practices
will be received by the Company at the transferor's historical cost basis for
accounting purposes. The AnestheCare Acquisition, the Kramer Transfer and the
Ambulatory Surgery Center Acquisitions which are made following the SAB 48
transactions and the IPO, will not be accounted for under SAB 48. Instead, these
and all future individual practice affiliations will be accounted for as
purchases at fair market value and are expected to result in purchase prices in
excess of net assets acquired (goodwill) which will require subsequent noncash
amortization charges in the Company's statements of operations. Monetary assets
and liabilities of the initial Affiliated Practices including cash, billed and
unbilled receivables and credit balances, payables and certain miscellaneous
accruals will either be acquired by AMP at their fair market value or retained
by the Affiliated Practices, as agreed among the parties.
The aggregate consideration to be paid by the Company in the Transfers is
approximately $34.5 million, consisting of approximately $18.3 million payable
in shares of Common Stock at the initial public offering price attributed to the
net non-monetary assets, approximately $4.7 million in cash and $156,000 of
assumed indebtedness attributed to the net non-monetary assets of the SAB 48
Transfers, $4.3 million in cash attributed to the net monetary assets of the SAB
48 Transfers, $4.1 million payable in shares of Common Stock at the initial
public offering price, $1.0 million in cash and $500,000 of assumed indebtedness
attributed to the Ambulatory Surgery Center Acquisitions which are included in
the Transfers but not accounted for under SAB 48, and $1.4 million in cash
attributed to the Kramer Transfer. Of the total consideration attributed to the
non-monetary assets for each SAB 48 transfer, the Affiliated Practices could
elect to receive up to 25% in cash and the balance in shares of Common Stock.
The net non-monetary assets and liabilities of these Affiliated Practices will
carry over at their historical costs to AMP. The net non-monetary assets to be
transferred include billed and unbilled receivables, supplies inventory, other
receivables, prepaid expenses, net equipment and certain other current and
noncurrent assets. The liabilities to be transferred include credit balances of
accounts receivable, certain miscellaneous accruals and debt assumed. The cash
of approximately $4.7 million paid to the Affiliated Practices for the
non-monetary assets in the SAB 48 Transfers will be recorded as a dividend by
the Company. Consideration in the AnestheCare Acquisition will consist of
approximately $4.5 million in cash. Additional consideration of up to $1.5
million in cash and a number of Common Shares equal to $500,000 valued at the
initial public offering price will be held in escrow and may be paid to the
owners of AnestheCare pending AnestheCare's achievement of certain performance
targets over the three-year period beginning January 1, 1998.
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BUSINESS
THE COMPANY
AMP was founded in August 1996 to provide practice management services and
comprehensive foot care delivery systems to podiatric practices throughout the
United States. AMP will generate revenue by providing to the Affiliated
Practices professional management, marketing, expertise, equipment and
facilities often unavailable to podiatrists with small practices. The initial 46
Affiliated Practices consist of 66 doctors of podiatric medicine ("DPMs")
operating 89 offices located in 7 states serving 57 cities. The Company intends
to grow rapidly by affiliating with additional podiatric practices and by making
available to the Affiliated Practices services that are ancillary and directly
related to the Affiliated Practices' existing podiatric care.
The Company has entered into definitive agreements to transfer cash and
Common Stock and assume certain liabilities in exchange for stock or certain
operating assets and receivables of the Affiliated Practices simultaneous with
and as a condition to the closing of the IPO. The DPMs will join Regional Group
Practices organized by geographic location and will enter into physician
engagement agreements with the Regional Group Practices. AMP will enter into a
long-term management agreement with each Regional Group Practice under which AMP
will receive fees for its services. The Company will own the operating assets of
the Affiliated Practices, hire the non-physician employees, and otherwise assume
the management of each practice. The initial Affiliated Practices were selected
based upon their location, size, historical profitability and growth and
reputation for high quality care. Based on management's knowledge of the U.S.
podiatric industry gained from conversations with DPMs, surveys of the size of
other podiatric practice management companies, affiliations and groups, and
industry research, management believes that the initial Affiliated Practices are
leading podiatric practices in their respective markets and that, following the
Transactions, AMP will be the largest provider of comprehensive podiatric
practice management services in the United States.
A key element of the Company's strategy is to provide ancillary services
and facilities to the Affiliated Practices. These ancillary services and
facilities are expected to include, among other things, ambulatory surgical
centers, anesthesiology, pathology, radiology, MRIs, EKGs, laboratory work,
pharmacy, physical history and exams, physical therapy, orthotics, pain
management, home care, diabetic wound care, specialty shoes and other retail
products. The Company intends to make available some or all of these ancillary
services on a regional basis. The Affiliated Practices in each region will
primarily or exclusively use AMP's ancillary services, enabling the Company to
control the cost, quality and other important aspects of these services.
Pursuant to this strategy, AMP has entered into a definitive agreement to
purchase certain assets of AnestheCare, an anesthesiology management services
organization currently servicing 15 locations in metropolitan Atlanta, Georgia.
AnestheCare provides billing and management services to anesthesiologists and
other providers of health care related services to local hospitals and others.
AnestheCare's current operations and ongoing business relationships will
continue after the AnestheCare Acquisition. In addition, after the acquisition,
AnestheCare will provide anesthesiology management services to certain of the
Regional Group Practices. The Company is acquiring Bellaire Surgicare, Inc. and
Clayton Outpatient Surgical Center, Inc., which own surgical centers.
THE PODIATRIC INDUSTRY
Podiatry is the practice of medicine whereby DPMs provide preventative,
diagnostic, surgical and other foot care to patients. Podiatric care ranges from
relatively simple procedures, such as treating foot infections, to complex
surgeries, such as reconstructing the bones in the foot. According to the
American Podiatric Medical Association ("APMA"), 39% of all foot care is
provided by DPMs compared to 13% by orthopedic physicians, 37% by other
physicians and 11% by physical therapists and others. Today, there are
approximately 10,700 active DPMs throughout the United States handling 55
million patient visits per year. In 1995, active DPMs averaged 92 patient visits
per week and 80 bone surgeries for the year.
After finishing school at a College of Podiatric Medicine, DPMs are
required to pass rigorous state board examinations and complete at least one
year of residency before they are licensed to practice. Each
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state has somewhat different requirements for a DPM to become licensed although
there is reciprocity among many states. Most states also require continuing
educational programs for regular license renewal. In addition, DPMs may become
Board Certified by one of several national podiatric certification boards.
Generally, in order to become Board Certified a DPM must have completed three
years of practice and pass oral and written examinations. Many health
maintenance organizations require the DPMs in their provider network to be Board
Certified. According to the APMA, 99% of DPMs graduated from one of seven
Colleges of Podiatric Medicine, 87% completed residency programs, and 36% are
Board Certified. All of the owner DPMs at the Affiliated Practices have
completed residency programs and are licensed, approximately 94% are Board
Certified and the remaining non-Board Certifed owner DPMs are Board Eligible
(that is, having passed the Board's written exam and are awaiting the Board's
oral examination).
According to the APMA, billing receipts of all DPMs in the United States
increased to approximately $2.3 billion in 1995 from approximately $1.3 billion
in 1987, a compound annual growth rate of 7.7%. The Company believes that the
historical growth in DPM revenues is due to a number of factors including the
following:
o AGING POPULATION. The Bureau of Census forecasts that the resident
population of the United States will increase between 1997 and 2010 by an
average annual rate of 0.8%. However, the number of persons age 65 and over
will increase by an average annual rate of 1.1% over the same period.
People age 65 and over experience foot problems at approximately twice the
rate of persons under the age of 65, and based on Medicare program studies,
older persons utilize DPMs at a higher rate than the remainder of the
population.
o INCREASING MANAGED CARE. As recently as 1988, only an approximate 25% of
all privately insured individuals were covered by managed care. By 1996,
over three-quarters of active employees in the private sector were enrolled
in some type of managed care arrangement. The Company believes that primary
care physicians are more likely to refer foot care patients covered by
managed care to DPMs, as a result of the lower reimbursement rates
anticipated for foot care under managed care programs relative to foot care
covered on a fee-for-service basis.
o INCREASED MEDICARE ENROLLMENT. Managed care enrollment in Medicare has
doubled in the last three years and is growing at an annual rate of
approximately 30%. Enrollees are generally older than the average
population, and consequently, incur a higher incidence of foot problems. In
addition, the Company believes that enrollees are more likely to visit a
podiatrist than non-insured individuals.
The podiatric industry in the United States is highly fragmented, dominated
by solo and small group practices. According to the APMA, 69% of the
approximately 14,000 total DPMs in the United States are sole practitioners with
the majority of the remaining DPMs in small or medium-sized practices, generally
consisting of two to four DPMs. In addition, there is an oversupply of podiatric
service providers in the United States that could exceed demand by as much as
27% in 2010. Finally, as with other areas of health care, there is a pronounced
trend toward managed care in the podiatric industry.
The Company believes that due to (i) the highly fragmented structure of the
podiatric industry, (ii) the growing surplus of DPMs, and (iii) the trend toward
managed care, the industry is ripe for a provider of comprehensive podiatric
practice management services such as AMP. The Company intends to pool the
resources of, and provide professional management to, some of the nation's
leading podiatrists in order to allow them to compete more effectively in the
current and anticipated podiatric industry environment. Management expects its
operating and growth strategies to attract third party payors, provide a strong
incentive for DPMs to affiliate with the Company, and allow practices affiliated
with the Company to be more successful than their primarily small practice
competitors in an environment of increased competition and over-supply.
OPERATING STRATEGY
The Company's objective is to be the nation's leading provider of
management services and comprehensive foot care delivery systems to podiatric
practices. To achieve this objective, the Company will employ the following
operating strategies:
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ENHANCING QUALITY OF DPM PATIENT CARE. Management believes that the
services and support it will provide the Affiliated Practices will positively
impact DPM patient care. The Company, through its Affiliated DPMs and its
Medical Policy Board is developing uniform standards of care for the Affiliated
Practices to ensure quality control and provide the opportunity to implement the
most current and effective podiatric treatments and techniques. The Company
believes that one of its most valuable practice management services will be its
ability to identify practice-level strategies that have proven successful for
individual Affiliated Practices and share these best practices with other
Affiliated Practices. The quality of patient care is also expected to improve as
a result of (i) treatment protocols and other important information being made
available to each Affiliated Practice by the Company's sophisticated management
information system, (ii) the peer review that will result from being affiliated
with other podiatrists, the Company's Medical Advisory Board and the respective
Boards of the Regional Group Practices, (iii) more time being made available to
DPMs for patient care rather than administrative duties, and (iv) the continuity
of care, including early disease detection and treatment, that will be afforded
by the Affiliated Practices and the Company's ancillary services.
ACHIEVING OPERATIONAL EFFICIENCIES. The Company intends to implement a
variety of operating procedures and systems to improve the productivity and
profitability of each Affiliated Practice. The Company is developing and
implementing a centralized management information system, uniform inventory
control procedures and national group purchasing contracts. In addition, the
Company is installing a patient billing and collections system that is expected
to improve collections as a result of its ease of use, billing frequency and
standardized procedures. Management also believes that physical improvements in
design to certain Affiliated Practices' facilities should result in an increase
in the volume of patients seen and an increase in employee and DPM productivity.
DEVELOPING REGIONAL GROUP PRACTICE STRUCTURE. AMP will use the Regional
Group Practices as an important mechanism to pool the Affiliated Practices'
resources and implement its other strategies. The Regional Group Practices, and
in particular the Boards thereof, will (i) collect from and disseminate to its
Affiliated Practice members best practices and standards of care, (ii) provide
the mechanism for peer review and quality control of the Affiliated Practices,
(iii) develop regional marketing and advertising programs, (iv) identify,
recruit, and integrate additional practice affiliations and ancillary services
acquisitions, and (v) coordinate the sharing of specialists' resources in each
region.
PROVIDING EFFECTIVE MARKETING. The Company intends to develop and implement
aggressive and innovative marketing and advertising plans to augment each
Affiliated Practice's existing referral and other marketing efforts. Management
believes that the podiatric industry has not taken advantage of the gains that
can be achieved through strategic direct and target marketing. In particular,
AMP plans to (i) target market to specific underserved market segments, (ii)
market and advertise in a manner designed to attract walk-in patients for whom
the DPMs would be the primary care provider for foot care, (iii) market directly
to payors in the managed care system, and (iv) develop and market to payors
disease-specific treatment programs for the early detection of certain types of
foot problems.
IMPLEMENTING COMPREHENSIVE FOOT CARE DELIVERY SYSTEMS. The Company plans to
make available ancillary care providers and their resources to work with DPMs in
individual practices within each Regional Group Practice. By making these
specialists and resources available to each Regional Group Practice, the Company
plans to create an integrated, comprehensive system of podiatric services that
management believes will exceed the capabilities of most traditional podiatric
practices operating on their own. The Company expects that making available
ancillary services and facilities, including, among others, ambulatory surgical
centers, anesthesiology, pathology, radiology, MRIs, EKGs, laboratory work,
pharmacy, physical history and exams, physical therapy, orthotics, pain
management, home care, diabetic wound care, specialty shoes and other retail
products, to its Affiliated Practices will promote better patient care and
provide patients with one-stop foot care services.
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GROWTH STRATEGY
Management believes the growth of the initial Affiliated Practices and the
development of new Affiliated Practices are key components of the future success
of the Company. Key elements of the Company's growth strategy include:
GROWING AFFILIATED PRACTICES. The Company will assist Affiliated Practices
in expansion through regionally-focused marketing and advertising and
improvements in operating efficiencies. The Company believes that such an
approach will increase the Affiliated Practices' market share and revenues. The
Company also intends to make available capital for practice expansion through
market research, site selection, office design and marketing.
DEVELOPING ANCILLARY PROVIDER NETWORK. The Company intends to augment its
growth by adding a network of providers of ancillary products and services that
will complement the services provided by the Affiliated Practices. The Company
believes that, by acquiring or contracting with providers of ancillary services
on behalf of the Regional Group Practices, the Company will create a new
approach to the delivery of podiatric services and provide a menu of services
that is more comprehensive than that traditionally offered by individual
podiatric practices.
AFFILIATING WITH NEW PRACTICES. A core business strategy of the Company is
to affiliate with additional podiatric practices. Management believes that an
ample supply of candidates for podiatric practice affiliations exist among the
approximately 10,700 active podiatrists in the United States. The Company plans
to select additional practice affiliations from this pool based upon each
practice's location, size, historical profitability and growth, and reputation
for high quality care. Management believes that affiliation will be an
attractive option for many of these podiatrists because the Company intends to
(i) provide capital to open and integrate new offices into existing Affiliated
Practices, (ii) identify and recruit qualified DPMs for the Affiliated
Practices, (iii) design and offer business and operational, financial and
clinical systems for each Affiliated Practice, (iv) hire the necessary
administrative and non-physician personnel for each new Affiliated Practice, (v)
implement effective marketing and advertising strategies designed to help
increase each Affiliated Practice's market share and the number of new patients,
and (vi) reduce the time Affiliated Practices spend on administrative duties,
allowing them to focus on delivering quality patient care.
PRACTICE AFFILIATIONS
The Company has entered into definitive agreements, to be consummated
simultaneously with the closing of this Offering, to obtain certain operating
assets and receivables of or the stock of certain entities holding the assets of
the initial Affiliated Practices, which include 66 DPMs operating 89 offices
located in 7 states serving 57 cities. Management believes that the Affiliated
Practices are leading practices in their markets. The Affiliated Practices were
selected based upon a variety of factors, including location, size, historical
profitability and growth and reputation for high quality care among local
consumers of podiatric services and within the podiatric services industry.
Management intends to capitalize on the reputations and relationships of the
Affiliated Practices and their DPMs to assist the Company in affiliating with
additional podiatric practices.
The aggregate consideration that will be paid by the Company to acquire the
operating assets, receivables or stock of the initial Affiliated Practices
consists of approximately (i) $11.5 million in cash (of which $4.7 million
represents payment for accounts receivable) and (ii) $18.3 million payable in
shares of Common Stock at the initial public offering price. The purchase prices
for the initial Affiliated Practices were determined by the practice's gross
revenue, growth potential, quality of patients, service delivery and depth of
presence in its local market. The Company will also assume certain indebtedness
of the initial Affiliated Practices and pursuant to the Ambulatory Surgery
Center Acquisitions totaling approximately $656,000. For a more detailed
discussion of amounts to be paid to and indebtedness assumed of each of the
initial Affiliated Practices, see "Certain Transactions."
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Upon consummation of the Transfers, the Company will provide management
services to the following Regional Group Practices:
<TABLE>
<CAPTION>
REGIONAL NUMBER OF NUMBER OF NUMBER OF
GROUP PRACTICE MARKET STATE PRACTICES PODIATRISTS OFFICES
- ------------------------------------- -------------- ---------------- ---------- ---------- ----------
<S> <C> <C> <C>
Atlanta.............................. Atlanta Georgia 2 5 7
Houston.............................. Houston Texas 16 22 33
Maryland............................. Hagerstown Maryland 4 8 3
Pennsylvania* -- -- 3
West Virginia* -- -- 1
Miami................................ Miami Florida 8 10 11
Middle Georgia....................... Macon Georgia 1 2 5
North Texas.......................... Amarillo Texas 1 1 1
Dallas Texas 5 7 8
Fort Worth Texas 4 4 3
South Texas.......................... San Antonio Texas 3 4 8
Brownsville Texas 1 1 1
St. Louis............................ St. Louis Missouri 1 2 5
-- -- --
Total........................... 46 66 89
== == ==
- ------------
</TABLE>
* One of the Affiliated Practices in Maryland has 3 offices in Pennsylvania and
another has an office in West Virginia.
The Company has also entered into a definitive agreement to acquire certain
assets of AnestheCare for approximately $4.5 million in cash. Additional
consideration of up to $1.5 million in cash and $500,000 payable in shares of
Common Stock valued at the initial public offering price will be held in escrow
and may be paid to the owners of AnestheCare pending AnestheCare's achievement
of certain performance targets over a three-year period beginning January 1,
1998. AnestheCare provides billing and management services to providers of
health care-related services to local hospitals and others.
SERVICES AND OPERATIONS
MANAGEMENT SERVICES
Simultaneous with the IPO, each Affiliated Practice will join a Regional
Group Practice which will, in turn, enter into a long-term Management Agreement
with the Company. Under the Management Agreement, the Company will employ the
Affiliated Practice's non-physician personnel, assume and enter into leases for
their facilities and provide services such as practice management, information
systems, marketing and negotiation of payor contracts.
The Company believes that its integrated care delivery network will give
the Regional Group Practices the ability to, among other things, reduce
overhead, engage in regional contracting with managed care payors and expand
service offerings. Pursuant to the Management Agreements, the Company will
assist the Regional Group Practices in strategic planning, preparation of
operating budgets, and capital project analysis. The Company intends to
coordinate group purchasing of supplies, inventory, and insurance for the
practices. In addition, the Company will assist the Regional Group Practices in
physician recruitment by introducing physician candidates to the Regional Group
Practices and advising the Regional Group Practices in structuring employment
arrangements.
The Company also will provide or arrange for a variety of additional
services relating to the day-to-day non-medical operations of the practices,
including (i) management and monitoring each practice's patient billings,
invoicing and accounts receivable collection by payor type, (ii) accounting,
payroll, legal services and records, and (iii) cash management and centralized
disbursements. These services are designed to reduce the amount of time
physicians must spend on administrative duties, thereby enabling the physicians
to dedicate more of their efforts to the delivery of health care. The Company's
anticipated capital resources and assistance in budgeting and capital project
analysis are designed to assist the Regional Group Practices in establishing
facilities to provide ancillary footcare services.
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As a result of the Transfers, the Company will employ the Affiliated
Practices' non-physician personnel. These non-physician personnel, along with
additional personnel at the Company's headquarters, will manage the day-to-day
non-medical operations of each of the Regional Group Practices by, among other
things, providing secretarial, bookkeeping, scheduling and other routine
services. Under the Management Agreements, the Company will provide facilities
and equipment to the Regional Group Practices, and, to this end, the Company
intends to enter into new lease agreements or assume existing lease agreements
for the facilities and assets utilized by each of the Regional Group Practices.
REGIONAL GROUP PRACTICES
At the closing of the Transactions, the DPM owners of Affiliated Practices
in a geographic area will become members of a Regional Group Practice. Each
Regional Group Practice will be a professional limited liability company
composed only of physician members who also enter into Physician Engagement
Agreements with the Regional Group Practice. Each Regional Group Practice will
be under one provider number for Medicare/Medicaid purposes. The Regional Group
Practices serve two principal purposes. First, they are designed to allow the
Company and the Affiliated Practices to work together in compliance with the
"group practice" exemption under the Stark amendments to the Social Security
Act. Second, the Regional Group Practice structure is an important mechanism
that allows the Company to achieve its business plan, as the Regional Group
Practices act as focal points for best practices, peer review, regional
marketing, practice expansions and additions, and resource exchanges.
Within the Regional Group Practices, individual DPMs will retain the
integrity of their practice revenues and expenses within that Regional Group
Practice. In addition, Regional Group Practices will separately determine
certain budget and personnel matters and each will have its own board of
managers elected by a majority of its members. Members will be subject to
certain standards for admission and may also be expelled in certain
circumstances. The member interests in the Regional Group Practice will be
subject to restrictions on transferability. The DPMs are subject to certain
restrictions on their ability to compete with the Regional Group Practices and
must pay certain liquidated damages upon their breach and/or termination of
their Physician Engagement Agreement. See "-- Operative Agreements -- Physician
Engagement Agreements."
The Company will enter into a 40-year Management Agreement with each
Regional Group Practice and, together, will establish a Joint Planning Committee
to develop long-term strategic objectives and management policies for the
operation of the Regional Group Practice and to facilitate communication and
interaction.
MANAGEMENT INFORMATION SYSTEMS
A key element in AMP's business strategy is implementing and using
sophisticated management information systems. The Company has developed a
comprehensive information systems plan that integrates a financial information
system (Lawson Software) and a physician practice management system (Medic
Vision). The Company expects to have both systems operating at the time of the
Offering to perform billing and collection services for all Affiliated
Practices. The Company's hardware platform will consist of two IBM RS 6000
minicomputers, running the financial and practice management software. If one
system fails, the other is expected to be used for both software applications.
Complete hardware and software deployment of the systems to most of the
Company's Affiliated Practices is expected to be completed within approximately
90 days after the IPO.
Billing and collections for the Regional Group Practices' services,
including financial accounting, accounts payable, other cash disbursements and
cash management will be performed centrally at the Company's headquarters in
Houston. Most of the Affiliated Practices will be networked to a central site
for billing, collections, and scheduling, assuring continuous communication,
through dedicated communication lines, among the Affiliated Practices and the
Company.
Most of the Affiliated Practices will have real time data access in order
to analyze on-going operations. Monthly financial data will also be available
through the network for most of Affiliated Practices. In addition, the Company
intends to develop a data repository that will consolidate operational,
clinical,
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financial and outcomes data that will be used to develop pricing strategies and
to better report to and negotiate with managed care payors.
MANAGED CARE
The Company believes that podiatry, like many other medical specialties,
has been slow to achieve the integration and consolidation needed for survival
in the era of managed care. The rise of managed care and its emphasis on cost
containment and risk-sharing has placed podiatry's practitioners and small to
medium-size physician groups at a significant disadvantage. These practices
typically lack the capital to expand, develop or acquire information systems and
purchase new technologies, which often improve quality of care, reduce costs and
increase profitability. These individual practices also tend to lack the cost
accounting and quality management systems necessary to allow physicians to enter
into sophisticated risk-sharing contracts with private and third-party payors.
Additionally, small to medium-size practices often do not have formal ties with
other providers, nor do they have the ability to offer a variety of medical
services, thus reducing their competitive position relative to larger provider
organizations. These smaller practices often have higher operating costs because
overhead must be spread over a relatively small revenue base and have minimal
purchasing power compared with suppliers.
A significant and increasing portion of the net revenues of podiatric
practices are expected to be derived from managed care payors. Although rates
paid by managed care payors are generally lower than commercial rates, managed
care payors provide access to large patient volumes. AMP intends to assist the
Affiliated Practices to compete effectively in the managed care framework and to
take advantage of the managed care payors' large patient volumes. To this end,
the Company plans to (i) perform analyses of the Regional Group Practices'
markets to develop managed care contracting strategies, (ii) meet with principal
payors in each market to enhance relationships between the Regional Group
Practices and the payors, (iii) negotiate attractive arrangements with managed
care payors leveraging the Affiliated Practices' combined size, and (iv) market
to managed care payors by emphasizing the Company's disease-specific treatment
programs, treatment protocols, ancillary services and information-sharing
capabilities.
GOVERNANCE
The Company's current governance structure promotes physician participation
in the management of the Company. Four physicians or medical experts will serve
on the Company's Board of Directors. In addition, each Regional Group Practice
will have a Joint Planning Committee whose membership will include an equal
number of representatives from the Regional Group Practice and the Company. The
Joint Planning Committee will have responsibilities that include developing
long-term strategic objectives, developing practice expansion and payor
contracting guidelines, promoting practice efficiencies, recommending
significant capital expenditures, and facilitating communication and information
exchange between the Company and each of the Regional Group Practices.
Concurrent with the IPO, the Company will create a Medical Policy Board
that will identify and communicate the best medical practices and protocols
through all the Regional Group Practices. This Medical Policy Board, which will
consist primarily of physicians from Regional Group Practices, will receive
managerial and information systems and administrative support from the Company
and develop patient outcome statistics. The Medical Policy Board will initially
consist of Stanley R. Kalish D.P.M., F.A.C.F.S., Chairman, Lawrence B. Harkless
D.P.M., Vice Chairman, Bernard J. Hersh, D.P.M., Vice Chairman, and Robert G.
Frykberg, D.P.M., M.P.H., Vice Chairman. See "Management -- Medical Policy
Board."
The Company will not exercise any responsibility on behalf of affiliated
physicians that could be construed as affecting the practice of medicine.
Accordingly, the Company believes that its operations do not violate applicable
state laws relating to the corporate practice of medicine. Such laws and legal
doctrines have been subjected to only limited judicial and regulatory
interpretation and there can be no assurance that, if challenged, the Company
would be considered in compliance with all such laws and doctrines. A
determination in any state that the Company is engaged in the corporate practice
of medicine could render
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<PAGE>
any Management Agreement between the Company and a Regional Group Practice
located in such state unenforceable or subject to modification in a manner
adverse to the Company.
OPERATIVE AGREEMENTS
PURCHASE AGREEMENTS
The Purchase Agreements provide that the Company will acquire, and each DPM
will transfer to AMP, certain operating assets and receivables or stock of each
of the Affiliated Practices and AnestheCare, as the case may be. If the
conditions to closing in the Purchase Agreements are satisfied, the Company's
affiliations with the Affiliated Practices and the acquisition of AnestheCare
are expected to be consummated simultaneously with the closing of the IPO.
SAB 48 TRANSACTIONS
The Purchase Agreements with respect to the initial Affiliated Practices
accounted for under SAB 48 have the terms set forth below.
CONSIDERATION. The consideration to be paid by the Company for each of
these initial Affiliated Practices is being determined by arms-length
negotiations between the Company and a representative of each Affiliated
Practice. The aggregate consideration to be paid by the Company for these
initial Affiliated Practices is approximately $27.5 million, including the
assumption of $156,000 in indebtedness. The consideration is based upon the
Affiliated Practice's gross revenue, growth potential, quality of patients and
service delivery and depth of presence in its local market.
The consideration to be paid for the initial Affiliated Practices will be
paid by a combination of cash, Common Stock of the Company, and the assumption
of certain debt.
COVENANTS. Each DPM agrees under their relevant Purchase Agreement that,
for a period of five years, he or she will not compete with the business of the
Affiliated Practice within 20 miles of any location of the Affiliated Practice's
Regional Group Practice at which the DPM has practiced podiatric medicine in the
prior year. Each DPM also will agree that during this time period, he or she
will not induce or attempt to induce any employee of the Regional Group Practice
or any of its affiliates to terminate his or her employment with the Regional
Practice Group. Additionally, the parties to the Purchase Agreement agree not to
disclose each other's confidential information.
INDEMNIFICATION. Under the Purchase Agreements, each DPM (to the extent of
their proportionate interest in the Affiliated Practice) and each Affiliated
Practice will be obligated to indemnify the Company and its subsidiaries for (i)
a breach of any representation, warranty or covenant of the Affiliated Practice
or any owner, (ii) any violation (or alleged violation) by the DPMs, the
Affiliated Practice or past or present affiliates of state or federal laws
governing healthcare fraud and abuse (including, but not limited to, fraud and
abuse in the Medicare and Medicaid programs) occurring on or before the Closing
or any overpayment or obligation (or alleged overpayment or obligation) arising
out of or resulting from claims submitted to any third party payor (including
the Medicare and Medicaid programs) on or before the Closing, or (iii) any
liability under any federal or state securities law or regulation arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact relating to any DPM, the Affiliated Practice (including its subsidiaries),
or their Regional Group Practice and provided to the Company or its counsel by
the Affiliated Practice or its DPMs.
The Company will be obligated under the Purchase Agreements to indemnify
DPMs and the Affiliated Practices for (i) a breach by the Company of any of its
representations, warranties or covenants in the Purchase Agreement and (ii) any
liability under any federal or state securities law or regulation arising out of
or based upon an untrue statement or alleged untrue statement of a material fact
relative to the Company contained in this Prospectus, any preliminary
prospectus, the Registration Statement or any amendment or supplement arising
out of or based upon any omission or alleged omission to state a material fact
necessary to make the statements not misleading.
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ACCOUNTING TREATMENT. As a result of the transactions contemplated by the
Purchase Agreements, the historical balance sheet information of the Affiliated
Practices, excluding the Kramer Transfer and the Ambulatory Surgery Center
Acquisitions acquired in the Transfers, will be combined on a historical cost
basis in accordance with generally accepted accounting principles as if the
Affiliated Practices had always been members of the same group. Cash payments
attributed to non-monetary assets made to DPMs of Affiliated Practices under the
Purchase Agreements will be accounted for as a cash dividend. The net monetary
assets will be acquired at their fair market value which is expected to be
approximately $4.3 million.
CONDITIONS TO CONSUMMATION. The Company's obligation to consummate the
Closing under the Purchase Agreements is subject to a variety of conditions,
including, but not limited to, the following: (i) the formation of the Regional
Group Practice; (ii) the execution by the Regional Group Practice of a
management services agreement; (iii) the delivery of documents of conveyance;
(iv) the acquisition by the Company of all licenses, consents and permits, and
the provision of all notices, necessary for the Company and the Affiliated
Practices to continue their operations; (v) the absence of any injunction or
other proceeding to prohibit the Closing; and (vi) the satisfactory completion
by the Company of its due diligence investigation of the Affiliated Practices
through the Closing.
CONDUCT OF BUSINESS PENDING CLOSING. Pursuant to each Purchase Agreement,
each Affiliated Practice and its DPMs will agree that, until the Closing, the
Affiliated Practice will operate its business only in the usual, regular and
ordinary course, consistent with past practices, and will restrict certain
activities except with the prior written consent of the Company.
TERMINATION. Each Purchase Agreement and the transactions contemplated
thereby may be terminated prior to the Closing by the DPM or the Company if the
acquisition has not been consummated due to the failure of the Offering made
hereby.
RESALES. The Company's Common Stock to be delivered to DPMs under the
Purchase Agreements will not be registered under the Securities Act or any state
securities act and will be offered and sold in reliance upon exemptions from the
registration requirements of the Securities Act and such laws. Thus, Common
Stock issued pursuant to the Purchase Agreements will not be readily
transferable immediately. See "Shares Eligible for Future Sale."
Pursuant to each Purchase Agreement, each DPM receiving Common Stock has
agreed not to sell or otherwise dispose of any Common Stock during a 180-day
period after the Closing without the prior written consent of the underwriters
of the Offering made hereby.
NON-SAB 48 TRANSACTIONS
The Transfers from the Affiliated Practices will include the Ambulatory
Surgery Center Acquisitions. The acquisition of these assets will not qualify
for treatment under SAB 48 and will be accounted for as purchases for
consideration of $4.1 million payable in shares of Common Stock at the initial
public offering price, $1.0 million in cash, and $500,000 of assumed
indebtedness. The Purchase Agreement with respect to the AnestheCare Acquisition
and the Kramer Transfer are substantially similar to the Purchase Agreements
with respect to the Affiliated Practices, except for the differences noted
below.
ANESTHECARE AGREEMENT
The aggregate consideration to be paid for AnestheCare's assets is $4.5
million in cash. Additional consideration of up to $1.5 million in cash and
$500,000 payable in shares of Common Stock valued at the initial public offering
price will be held in escrow and may be paid to the owners of AnestheCare
pending AnestheCare's achievement of certain performance targets over a
three-year period beginning January 1, 1998. Pursuant to employment agreements
with each of Roger Bigham and David LaGuardia (each of whom owns 50% of
AnestheCare), in the event of the termination of the employment of Mr. Bigham or
Mr. LaGuardia by the Company without "Cause" or by such person for "Good
Reason," his options will immediately vest and he will be entitled to receive an
amount equal to the greater of (i) his base salary and an annual target bonus
payable over the remainder of his contract term or (ii) two times his annual
salary
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plus an annual target bonus. In addition, such person would be entitled to
receive a lump sum payment equal to the total amount of any excise taxes to
which such person may become subject under Section 4999 of the Internal Revenue
Code.
KRAMER AGREEMENT
The aggregate consideration to be paid for Dr. Kramer's stock in the Kramer
Transfer is $1,404,000, all of which will be paid in cash. In addition, unlike
other Affiliated Practice Transfers, AMP will have no on-going relationship with
Dr. Kramer, including no post-closing Management Agreement or Physician
Engagement Agreement.
MANAGEMENT AGREEMENTS
The following summary of the Management Agreements is a general summary of
the form of Management Agreement. The Company expects to enter into similar
agreements with the other Affiliated Practices. The terms of the individual
Management Agreements into which the Company may enter in the future may vary
from the description below as a result of negotiations with individual practices
and the requirements of local regulations.
Pursuant to the Management Agreements, the Company, among other things,
will (i) act as the exclusive manager and administrator of non-physician
services relating to the operation of the Regional Group Practices, subject to
matters for which the Regional Group Practices maintain responsibility or which
are referred to the board of managers of the Regional Group Practices, (ii) bill
patients, insurance companies and other third party payors and collect, on
behalf of the Regional Group Practices, the fees for professional medical and
other services rendered, including goods and supplies sold by the Regional Group
Practices, (iii) provide or arrange for, as necessary, clerical, accounting,
purchasing, payroll, legal, bookkeeping and computer services and personnel,
information management, preparation of certain tax returns, printing, postage
and duplication services and medical transcribing services, (iv) maintain
custody of substantially all files and records relating to the operation of the
Regional Group Practices and supervise preparation of patient medical records
(medical records of the Regional Group Practices are confidential and remain the
property of the Regional Group Practices), (v) provide and maintain facilities
for the Regional Group Practices, and provide the Regional Group Practices with
the use of equipment, furniture, fixtures, furnishings and other personal
property, (vi) prepare, in consultation with the Joint Planning Committee and
the Regional Group Practices, all annual and capital operating budgets, (vii)
order and purchase inventory and supplies as reasonably requested by the
Regional Group Practices, (viii) implement, in consultation with the Joint
Planning Committee and the Regional Group Practices, national and local
marketing or advertising programs, (ix) employ or otherwise retain all necessary
management, administrative, clerical, secretarial, bookkeeping, accounting,
payroll, billing and collections, and other personnel, (x) provide financial and
business assistance in the negotiation, establishment, supervision and
maintenance of contracts and relationships with managed care and other similar
providers and payors, (xi) assist each Regional Group Practice in fulfilling its
obligations to its patients to maintain a high quality of medical and
professional services, and (xii) provide such consulting and other advisory
services as requested by each Regional Group Practice in all areas of the
respective Regional Group Practice's business functions, including, without
limitation, financial planning, acquisition and expansion strategies,
development of long-term business objectives and other related matters. The
Company expects that most employees of the Affiliated Practices will be retained
after the consummation of the IPO.
Under the Management Agreements, the Regional Group Practices will retain
the responsibility for, among other things, (i) hiring, compensating,
supervising, training, evaluating and terminating its physician employees and
certain other medical professionals, (ii) ensuring that physicians have the
required licenses, credentials, approvals and other certifications needed to
perform their duties, (iii) complying with certain federal and state laws and
regulations applicable to the practice of medicine, and (iv) matters involving
its corporate governance, employees and similar internal matters, including but
not limited to preparation and the contents of reports to regulatory authorities
and distribution of professional fee income. In addition, the
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Regional Group Practices will maintain exclusive control of all aspects of the
practice of medicine and the delivery of medical services.
The Management Agreement provides for the establishment of a Joint Planning
Committee which will consist of three members designated by the Company and
three members designated by the respective Regional Group Practice. The Joint
Planning Committee will be responsible for developing long-term strategic
planning objectives and management policies for the overall operation of each
Regional Group Practice and will have the authority to (i) develop and assist
each Regional Group Practice in implementing both long-term strategic objectives
and short-term operating plans, (ii) prepare proposals and make recommendations
to the Board of Directors of AMP regarding significant capital expenditures,
contractual arrangements, capital improvement and expansion projects on behalf
of each Regional Group Practice, (iii) with assistance of the Company, prepare
the annual capital and operating budgets of each Regional Group Practice, (iv)
consider and make recommendations regarding grievances pertaining to matters not
specifically addressed in the Management Ageeement if such matters are referred
to it by each Regional Group Practice or the Company, (v) make recommendations
to each Regional Group Practice regarding the performance, number and type of
physicians required for the efficient operation of each Regional Group Practice,
and (vi) make decisions and recommendations regarding the business plan of each
Regional Group Practice.
Management fees will be paid monthly to the Company by each Regional Group
Practice based upon the Regional Group Practice's adjusted patient revenues (the
Regional Group Practice's billings less contractual adjustments, including
adjustments for special third-party payor and private pay arrangements, and
adjustments for bad debts). The Company will be responsible for collecting the
billings of the Regional Group Practices. The Company will retain a service fee
ranging from 9% to 25% (with an initial average of approximately 18%) of the
Regional Group Practice adjusted patient revenues and an amount equal to the
expenses of the Regional Group Practice incurred by AMP pursuant to the
Management Agreements. The service fee may be adjusted (without a floor or
ceiling on the adjustment) by the Joint Planning Committee of the Regional Group
Practice (composed of Company and Affiliated Practice representatives) upon the
request of either party to the Management Agreement in order to reflect the fair
value of the management services provided, based upon the nature and volume of
services required, the risks assumed by the Company and the total revenues of
the Regional Group Practice. The amount of the management service fees paid by
the Regional Group Practices to AMP will be directly affected by the amount of
patient revenue generated by each Regional Group Practice.
The Company will also generally be entitled to a fee of approximately 70%
of the adjusted ancillary revenues, net of related ancillary expenses, of each
Regional Group Practice. Ancillary revenues will be generated from services
provided by the Regional Practice Group to its patients that are ancillary to
DPM podiatric care (such as orthopedics, ambulatory care, physical therapy and
the like). In connection with the AnestheCare Acquisition, the Company will
retain the existing financial and fee arrangements of AnestheCare with its
clients (other than the Regional Group Practices). After the AnestheCare
Acquisition, services provided by AnestheCare to the Regional Group Practices
will be delivered on a discounted basis, and AMP will receive a fee of
approximately 70% of AnestheCare's adjusted ancillary revenues net of related
ancillary expenses.
The Management Agreements will have initial terms of 40 years, with
automatic extensions (unless specified notice is given) of additional ten-year
terms. The Management Agreements may be terminated by either party if the other
party (i) files a petition in bankruptcy or other similar events occur or (ii)
defaults on the performance of a material duty or obligation, which default
continues for a specified term after notice, and, in the case of the Regional
Group Practice, has also been approved by 80% of the equity holders of the
Regional Group Practice. In addition, the Company may terminate the agreement if
the Regional Group Practice or any physician (i) engages in conduct or is
formally accused of conduct that would subject his or her license to practice
medicine to be revoked or (ii) is otherwise disciplined by any licensing,
regulatory or professional entity or institution, if the result of any event
described in clause (i) or (ii) reasonably would be expected to materially
adversely affect the Regional Group Practice.
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During the term of the Management Agreement and for a period of one year
thereafter, the Regional Group Practices agree not to compete with the Company
in providing services similar to those provided by the Company or by any
Regional Group Practice anywhere generally within 20 miles of any location at
which any physician of the Regional Group Practice has practiced medicine in the
last year. Each Regional Group Practice also agrees that any and all
confidential and proprietary information acquired by the Regional Group Practice
during the term of the Management Agreement is the property of the Company and
agrees to hold in strictest confidence such confidential and proprietary
information. In addition, the Physician Engagement Agreement makes the Company a
third party beneficiary of the Physician Engagement Agreement including
covenants not to compete with and not to divulge confidential and properietary
information of the Company and the Regional Group Practice and liquidated
damages provisions therein. The Physician Engagement Agreements generally
require the Regional Group Practices to pursue enforcement of these provisions
or to assign to the Company the right to pursue enforcement. Furthermore, the
Company may require the Group Practice to pay liquidated damages owed by a
departing physician before those damages are collected by the Regional Group
Practice.
The Regional Group Practices will be responsible for obtaining professional
liability and worker's compensation insurance for the physicians and other
medical employees of the Regional Group Practices, as well as general liability
umbrella coverage. The Company is responsible for obtaining professional
liability and worker's compensation insurance for employees of the Company and
arranging for general liability and property insurance for the Regional Group
Practices.
The Management Agreements contain indemnification provisions pursuant to
which the Company will indemnify the Regional Group Practices for damages
resulting from negligent acts or omissions by the Company and/or its
stockholders, employees and/or subcontractors (other than the Regional Group
Practice and its employees). In addition, the Regional Group Practices will
indemnify the Company for any damages resulting from any negligent act or
omissions by the Regional Group Practice and/or shareholders, employees and/or
subcontractors (other than the Company or its employees) of the Regional Group
Practices, resulting from claims arising from the performance of medical
services or other intentional or negligent acts or omissions to act. The Company
also agrees to indemnify the Regional Group Practices in connection with its
failure to perform its obligations under the Management Agreement.
PHYSICIAN ENGAGEMENT AGREEMENTS
In addition to becoming a member of a Regional Group Practice, each DPM
will enter into a Physician Engagement Agreement with that Regional Group
Practice. Pursuant to the Physician Engagement Agreements, the Regional Group
Practices will engage the DPMs to provide certain medical services to patients
at the Group Practices offices. During the term of engagement, the DPM will
practice medicine only as a participant in the Regional Group Practice, will
practice medicine on a full-time basis at the Regional Group Practice offices
and will perform such other duties as are reasonably assigned to and accepted by
the DPM including, among other things (i) providing "on duty" and "on call"
services on an equal rotating basis with other physician members of the Regional
Group Practice, (ii) keeping and maintaining on a timely basis appropriate
records relating to all professional services rendered and attending to all
billing reports, claims and correspondence required in connection with services
rendered, and (iii) complying with reasonable and necessary policies and
procedures adopted by the Regional Group Practice. In addition, the DPM will
continue to be licensed to practice medicine, will be or will become Board
certified, will participate in continuing medical education programs and
seminars, and will obtain and maintain an American Podiatric Medical Association
C.M.E. certificate, or its equivalent. The DPM will also take any action
reasonably required to obtain key man life insurance covering the DPM and naming
the Regional Group Practice and/or its management services provider as exclusive
beneficiaries.
Each Physician Engagement Agreement has an initial term of five years
(unless terminated as set forth below) and is automatically renewed for
successive two-year periods unless terminated in accordance the agreement terms
(the "Term"). Termination occurs upon (i) the death of the DPM, (ii) the
disability of the DPM, or (iii) at the Regional Group Practice's option for
"cause," which term includes (a) the failure of the DPM to perform the duties
required in a reasonably satisfactory manner, (b) material dishonesty, fraud
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or gross negligence by the DPM, (c) the conviction of the DPM of a felony or
other crime involving moral turpitude, (d) violation of the non-competition or
non-disclosure provisions of the Physician Engagement Agreement, (e) unlawful
use or other misuse of drugs or alcohol by the DPM, (f) failure by the DPM to
maintain DPM's license to practice, (g) failure to obtain and/or maintain Board
certification in podiatric medicine by an acceptable certifying organization
within two years, or (h) the termination, cancellation or revocation of the
medical malpractice insurance due to an act or omission by the DPM.
For a period beginning at the beginning of the Term and ending one year
after the end of the Term, the DPM may not, without consent of the Regional
Group Practice own an entity engaged in a business the same as or substantially
similar to the business of a Regional Group Practice or in a business that
competes in any manner with the business of the Regional Group Practice and that
is generally located or intended to be located within a radius of 20 miles of
the offices of the Regional Group Practice at which the DPM has practiced
podiatry in the last year. In addition, the DPM may not, during the same period,
disclose or use any confidential material relating to any aspect of the business
of the Regional Group Practice or any information regarding business methods,
policies, procedures, techniques or trade secrets of the Regional Group
Practice, its affiliates or entities in which the Regional Group Practices have
an interest. The DPM may not act for any person or entity which employs or
contracts with any person or entity employed by or an agent or consultant to the
Regional Group Practice. Finally, in the event that the DPM terminates the
Physician Engagement Agreement, the DPM must pay liquidated damages in an amount
approximately equal to the twelve months of the Affiliated Practice expenses
attributable to the DPM and agreed to by the Company at the time the Purchase
Agreement was executed.
In addition, the Company has agreed to make available to each DPM owner a
loan in an amount equal to (i) an advance on the first monthly draw of such DPM,
(ii) the difference between 90% of the prior year's level of distributions and
the current period's level of distributions from the practice for the first
three months and (iii) the difference between 80% of the prior year's level of
distribution and the current period's level of distribution for the second three
months following the Offering. The loan, if drawn, is repayable over two years
and bears a market rate of interest.
COMPETITION
The Company competes with many other entities to affiliate with podiatric
practices. Several companies that have established operating histories and
greater resources than the Company are pursuing the acquisition of the assets of
general and specialty practices and the management of such practices. Physician
practice management companies and some hospitals, clinics and HMOs engage in
activities similar to the activities of the Company. There can be no assurance
that the Company will be able to compete effectively with these competitors,
that additional competitors will not enter the market or that this competition
will not make it more difficult to affiliate with, and to enter into agreements
to provide management services to, practices on terms beneficial to the Company.
Regional Group Practices will compete with other local podiatric care
service providers, as well as some managed care organizations. The Company
believes that changes in government and private reimbursement policies and other
factors have resulted in increased competition for consumers of medical
services. The Company believes that the cost, accessibility and quality of
services provided are the principal factors that affect competition. There can
be no assurance that the Regional Group Practices will be able to compete
effectively in the markets that they serve. The inability of the Regional Group
Practices to compete effectively would materially adversely affect the Company.
Further, the Regional Group Practices compete with other providers for
managed care podiatric care contracts. The Company believes that trends toward
managed care have resulted in increased competition for these contracts. Other
practices and management service organizations may have more experience than the
Regional Group Practices and the Company in obtaining these contracts. There can
be no assurance that the Company or the Regional Group Practices will be able to
successfully acquire sufficient managed care contracts to compete effectively in
the markets they serve. The inability of the Regional Group Practices to compete
effectively for these contracts could materially adversely affect the Company.
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GOVERNMENT REGULATION
The delivery of health care services has become one of the most highly
regulated professional and business endeavors in the United States. Both the
federal government and the individual state governments are responsible for
overseeing the activities of individuals and businesses engaged in the delivery
of health care services. Federal law and regulations are based primarily upon
the Medicare program and the Medicaid program, each of which is financed, at
least in part, with federal funds. State jurisdiction is based upon the state's
interest in regulating the quality of health care in the state, regardless of
the source of payment.
The Company believes its operations will be in material compliance with
applicable laws; however, the Company has not received or applied for a ruling
from any federal or state judicial or regulatory authority to this effect, and
many aspects of the Company's business operations have not been the subject of
state or federal regulatory interpretation.
FEDERAL LAW
The federal health care laws apply in any case in which a Regional Group
Practice is providing an item or service that is reimbursable under Medicare or
Medicaid or other federal health care programs or in which the Company is
claiming reimbursement from Medicare, Medicaid other federal health care
programs or, in some instances, other third party payors on behalf of physicians
with whom the Company has a Management Agreement. The principal federal laws
include those that prohibit the filing of false or improper claims, those that
prohibit unlawful inducements for the referral of business reimbursable under
Medicare, Medicaid or other federal healthcare programs and those that prohibit
the provision of certain services by (a) a provider to a patient if the patient
was referred by a physician with which the provider has certain types of
financial relationships or (b) a provider who is excluded from Medicare,
Medicaid or other federal health care programs.
FALSE AND OTHER IMPROPER CLAIMS. The federal government is authorized to
impose criminal, civil and administrative penalties and/or exclusions on any
health care provider and its officers, directors, and in certain limited
circumstances, its owners that files a false claim or a pattern of claims based
on a code that the provider has reason to know will result in greater payments
than appropriate, claims for items or services not medically necessary, or for
the offer, solicitation, payment or receipt of anything of value (direct or
indirect, overt or covert, in cash or in kind), that is intended to induce the
referral of federal health care program patients or the ordering of items or
services reimbursable under those programs or the recommendation of, or the
arranging for, the provision of items or services reimbursable under Medicare
and Medicaid. Civil monetary penalties can also be imposed if a person "arranges
or contracts" with a person excluded from a federally funded health care
program, if they knew or should have known such person was excluded for
reimbursement from Medicare or Medicaid. Criminal penalties are also available
in the case of claims filed with private insurers if the government can show
that the claims constitute mail fraud, wire fraud, health care fraud, theft, or
embezzlement in connection with health care or false statements relating to
healthcare matters. While the criminal statutes are generally reserved for
instances evincing an obviously fraudulent intent, the criminal and
administrative penalty statutes are being applied by the government in an
increasingly broad range of circumstances. The government has taken the
position, for example, that a pattern of claiming reimbursement for unnecessary
services violates these statutes if the claimant should have known that the
services were unnecessary. The government has also taken the position that
claiming reimbursement for services that are substandard is a violation of these
statutes if the claimant should have known that the care was substandard. The
government, in cases of suspected fraud, can freeze the assets of a health care
provider and in the case of a federal health care offense can order the
forfeiture of assets that constitute or are derived from proceeds traceable to
the offense.
The Company believes that its billing activities on behalf of the Regional
Group Practices will be in material compliance with these laws, but there can be
no assurance that the Company's activities will not be challenged or scrutinized
by government authorities. A determination that the Company had violated these
laws could have a material adverse effect on the Company.
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ANTI-KICKBACK LAW. A federal law commonly known as the "Anti-Kickback Law"
prohibits the offer, solicitation, payment or receipt of anything of value
(direct or indirect, overt or covert, in cash or in kind), that is intended to
induce the referral of federal health care program patients or the ordering of
items or services reimbursable under those programs. The law also prohibits
remuneration that is intended to induce the recommendation of, or the arranging
for, the provision of items or services reimbursable under Medicare and
Medicaid. The law has been broadly interpreted by a number of courts to prohibit
remuneration that is offered or paid for otherwise legitimate purposes if the
circumstances show that one purpose of the arrangement is to induce referrals.
Even bona fide investment interests in a health care provider may be questioned
under the Anti-Kickback Law if the government concludes that the opportunity to
invest was offered as an inducement for referrals. The penalties for violations
of this law include criminal sanctions and exclusion from the federal health
care program.
In part to address concerns regarding the implementation of the
Anti-Kickback Law, the federal government in 1991 published regulations that
provide exceptions or "safe harbors" for certain transactions that will not be
deemed to violate the Anti-Kickback Law. Among the safe harbors included in the
regulations were provisions relating to the sale of physician practices,
management and personal services agreements and employee relationships.
Subsequently, regulations were published offering safe harbor protection to
additional activities, including referrals within group practices consisting of
active investors. Proposed amendments clarifying the existing safe harbor
regulations were published in 1994. If any of the proposed regulations are
ultimately adopted, they would result in substantive changes to existing
regulations. The failure of an activity to qualify under a safe harbor
provision, while potentially leading to greater regulatory scrutiny, does not
render the activity illegal.
There are several aspects of the Company's relationships with physicians to
which the Anti-Kickback Law may be relevant. In some instances, for example, the
government may construe some of the marketing and managed care contracting
activities of the Company as arranging for the referral of patients to the
physicians with whom the Company has a Management Agreement.
Although neither the investments in the Company by physicians nor the
Management Agreements between the Company and the Regional Group Practices
qualify for protection under the safe harbor regulations, the Company does not
believe that these activities fall within the type of activities the
Anti-Kickback Law was intended to prohibit. A determination that the Company had
violated the Anti-Kickback Law would have a material adverse effect on the
Company.
The Civil Monetary Penalties law also prohibits offering remuneration
prohibited under the anti-kickback laws and offering remuneration to an
individual eligible for Medicare or Medicaid benefits to induce that person to
order or receive any reimbursable item or service from a particular person.
Violations of the Civil Monetary Penalties law can result in the imposition of
significant civil penalties.
STARK SELF-REFERRAL LAW. The Stark Self-Referral Law (the "Stark Law")
prohibits a physician from referring a patient to a health care provider for
certain designated health services reimbursable by Medicare or Medicaid if the
physician has a direct or indirect financial relationship with that provider,
including an investment interest, a loan or debt relationship or a compensation
relationship. In addition to the conduct directly prohibited by the law, the
statute also prohibits schemes that are designed to obtain referrals indirectly
that cannot be made directly. The penalties for violating the law include (i) a
refund of any Medicare or Medicaid payments for services that resulted from an
unlawful referral, (ii) civil fines, and (iii) exclusion from the Medicare and
Medicaid programs.
The Company will provide or arrange for the provision of designated health
service under the Stark Law. Because the Company will provide management
services related to those designated health services provided by physicians
affiliated with the Regional Group Practices, the Company will likely be deemed
the provider of those services for purposes of the Stark Law and, accordingly,
the recipient of referrals from physicians affiliated with the Regional Group
Practices. In that event, such referrals will be permissible only if (i) the
financial arrangements under the Management Agreements with the Regional Group
Practices meet certain exceptions in the Stark Law and (ii) the ownership of
stock in the Company by the referring physicians meets certain investment
exceptions under the Stark Law. The Company believes that the
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financial arrangements under the Management Agreements qualify for applicable
exceptions under the Stark Law. However, there can be no assurance that a review
by courts or regulatory authorities would not result in a contrary
determination. In addition, the Company will not meet the Stark Law exception
related to investment interest until the Company's stockholders' equity exceeds
$75 million.
On January 9, 1998, HCFA published proposed Stark rules to incorporate the
provisions of the Stark Law into the Regulations with respect to designated
health services other than Clinical Laboratory Services. These regulations
provide, in the case of designated health services provided by a group practice,
that the overhead expenses of and the income from the practice must be
distributed according to methods that indicate that the practice is a unified
business and not based on each satellite office operating as if it were a
separate enterprise. While management believes that the overhead expenses of and
the income from each Regional Group Practice will be distributed according to
methods that indicate that the practice is a unified business, there can be no
assurance that the Regional Group Practices' distribution methodology will not
be challenged or scrutinized by governmental authorities. A determination that
the Regional Group Practices sharing of overhead expenses and income did not
comply with Stark would preclude referrals to certain designated health services
operated by the Company and could have a material adverse effect on the Company.
STATE LAW
STATE ANTI-KICKBACK LAWS. Many states have laws that prohibit payment of
kickbacks in return for the referral of patients. Some of these laws apply only
to services reimbursable under state Medicaid programs. However, a number of
these laws apply to all health care services in the state, regardless of the
source of payment for the service. Based on court and administrative
interpretation of federal anti-kickback laws, the Company believes that these
laws prohibit payments to referral sources where a purpose for payment is for
the referral. However, the laws in most states regarding kickbacks have been
subjected to limited judicial and regulatory interpretation. Therefore, no
assurances can be given that the Company's activities will be found to be in
compliance. Noncompliance with these laws could have an adverse effect upon the
Company and subject it and physicians affiliated with the Regional Group
Practices to penalties and sanctions.
STATE SELF-REFERRAL LAWS. A number of states have enacted self-referral
laws that are similar in purpose to the Stark Law but which impose different
restrictions. Some states, for example, only prohibit referrals when the
physician's financial relationship with a health care provider is based upon an
investment interest. Other state laws apply only to a limited number of
designated health services. Some states do not prohibit referrals but require
only that a patient be informed of the financial relationship before the
referral is made. The Company believes that its operations are in material
compliance with the self-referral law of the states in which the Regional Group
Practices are located.
FEE-SPLITTING LAWS. Many states prohibit a physician from splitting with a
referral source the fees generated from physician services. Other states have a
broader prohibition against any splitting of a physician's fees, regardless of
whether the other party is a referral source. In most states, it is not
considered to be fee-splitting when the payment made by the physician is
reasonable reimbursement for services rendered on the physician's behalf.
The Company will be reimbursed by physicians on whose behalf the Company
provides management services. The compensation provisions of the Management
Agreements have been designed to comply with applicable state laws relating to
fee-splitting. There can be no certainty, however, that if challenged, the
Company and its Regional Group Practices will be found to be in compliance with
each state's fee-splitting laws. A determination in any state that the Company
is engaged in any unlawful fee-splitting arrangement could render any service
Management Agreement between the Company and a Regional Group Practice located
in such state unenforceable or subject to modification in a manner adverse to
the Company.
A recent decision by the Florida State Medical Board held that payments by
a physician to a non-physician practice management company which were based on a
percentage of the physician's income constituted fee splitting. While the
Company's Management Agreements are not based upon a percentage of any
physician's net income, there can be no assurance that the compensation
methodology will not be
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challenged or scrutinized by governmental authorities. A determination that the
Company's compensation methodology did not comply with applicable fee splitting
could have a material adverse effect on the Company. It must, however, be noted
that the Florida decision is under appeal and no prediction can be made as to
the outcome of the appeal.
CORPORATE PRACTICE OF MEDICINE. Most states prohibit corporations from
engaging in the practice of medicine. Many of these state doctrines prohibit a
business corporation from employing a physician. States differ, however, with
respect to the extent to which a licensed physician can affiliate with corporate
entities for the delivery of medical services. Some states interpret the
"practice of medicine" broadly to include activities of corporations such as the
Company that can have an indirect impact on the practice of medicine, even where
the physician rendering the medical services is not an employee of the
corporation and the corporation exercises no discretion with respect to the
diagnosis or treatment of a particular patient.
INSURANCE LAWS. Laws in all states regulate the business of insurance and
the operation of HMOs. Many states also regulate the establishment and operation
of networks of health care providers. While these laws do not generally apply to
companies that provide management services to networks of physicians, there can
be no assurance that regulatory authorities of the states in which the Company
operates would not apply these laws to require licensure of the Company's
operations as an insurer, as an HMO or as a provider network. The Company
believes that its proposed operations are in compliance with these laws in the
states in which it currently does business, but there can be no assurance that
future interpretations of insurance and health care network laws by regulatory
authorities in these states or in the states into which the Company may expand
will not require licensure or a restructuring of some or all of the Company's
operations.
EMPLOYEES AND AFFILIATED PERSONS
Upon the consummation of the Offering, the Company expects to employ about
175 staff personnel of the initial Affiliated Practices and 25 people at the
corporate headquarters in Houston, Texas. AMP intends to provide benefits, to
include health, life, disability and 401(k) components, to the employees of the
Regional Group Practices and to make available, at the Regional Group Practices'
own expense, to the approximately 66 DPMs similar benefits. The Company intends
to outsource the personnel administration function as well as the benefits
component to a Professional Employer Organization and is currently in the
process of evaluating and selecting a provider. The Company feels this will
enable it to more efficiently manage human resource risks, implement the
management of a geographically diversified workforce more quickly, offer a more
comprehensive benefits packages, and realize overall cost efficiencies. As the
Company grows, it will continually reevaluate this decision, and may eventually
decide to hire additional employees to perform these functions. The Company
believes that its relationship with its employees is good. None of the Company's
employees have entered into a collective bargaining agreement.
LEGAL PROCEEDINGS AND INSURANCE
The Company is not party to any litigation. However, if the Regional Group
Practices become subject to litigation involving medical malpractice or any
other claims, the Company may become involved. The Company has acquired medical
malpractice insurance that will be effective upon consummation of the IPO. See
"Risk Factors -- Liability and Insurance Risks Associated with Podiatric
Practices." In addition, in connection with the purchase of the stock of certain
Affiliated Practices, the Company will assume certain liabilities of such
practices.
PROPERTIES
The Company leases approximately 16,000 square feet of office space at its
headquarters in Houston, Texas. In addition, in connection with the
Transactions, the Company will enter into leases for the facilities utilized by
the initial Affiliated Practices and AnestheCare, and will purchase certain real
estate from Dr. Kramer in Decatur, Georgia, as part of the Kramer Transfer.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The authorized number of directors on the Company's Board will be seven.
Immediately prior to the closing of the IPO, the Board will be divided into
three classes, as nearly equal in number as possible, with the initial term of
office of Class I directors to expire at the first annual meeting of
stockholders, the initial term of office of Class II directors to expire at the
second annual meeting of stockholders and the initial term of office of Class
III directors to expire at the third annual meeting of stockholders, each class
of directors to hold office until their successors have been duly elected and
qualified. The Class III Directors will be Mr. McCrary, Mr. Bertsch and Dr.
Kalish. The Class II Directors will be Dr. Hartley and Mr. Bace. The Class I
Directors will be Dr. Huge and another DPM to be elected by the holders of Class
B Common Stock.
The table below sets forth information with respect to those individuals
who are currently expected to serve as directors and executive officers of the
Company immediately following the IPO.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --- ---------------------------------------------------------------
<S> <C>
Jack N. McCrary......................... 60 Chairman of the Board of Directors, President and Chief
Executive Officer
Wayne A. Bertsch........................ 55 Senior Vice President, Chief Financial Officer,
Treasurer and Director
Randy E. Johnson........................ 43 Senior Vice President -- Regional Operations Officer
Kenneth Arrowood........................ 59 Vice President -- Development
Roger Bigham............................ 46 Vice President of the Company and Chief Operating Officer of
AnestheCare
Joseph D. Grau.......................... 43 Vice President -- Regional Operations Officer
David LaGuardia......................... 37 Vice President -- Ancillary Support Services
Cecil R. Pickens........................ 33 Vice President and Chief Accounting Officer
John S. Bace, CFA....................... 66 Director
S.F. "Charley" Hartley, D.P.M.,
F.A.C.F.S............................. 53 Director
Donald S. Huge, M.D..................... 67 Director
Stanley R. Kalish, D.P.M., F.A.C.F.S.... 51 Director and Chairman, Medical Policy Board
</TABLE>
These directors and executive officers are considered "promoters" of the
Company. See "Certain Transactions."
JACK N. MCCRARY has been Chairman, President and Chief Executive Officer of
the Company since March 1996 and is a founder and organizer of the Company. Mr.
McCrary has been active in the executive management of entities involved in the
U.S. health care industry since 1970. Most recently, beginning in April 1984 he
co-founded five Houston, Texas medical facilities and has served as Vice
Chairman of Doctors Hospital Airline since April 1984, Vice Chairman and
President of Doctors Hospital East Loop since February 1987, Vice Chairman and
President of Kingwood Plaza Hospital since May 1990, Vice Chairman and President
of Plaza Rehabilitation Hospital at Kingwood since July 1991, and Vice Chairman
and President of Kingwood Medical Plaza since May 1990. Since 1995, these
organizations have been in the process of winding down/selling their operations
to Columbia/HCA. Prior to this, Mr. McCrary was with Lifemark Corporation as its
Chief Financial Officer, which included corporate development responsibilities.
During his years at Lifemark, Mr. McCrary served in the capacities of Director,
Member of the Executive Committee, Member of the Finance Committee and President
of two of Lifemark's operating subsidiaries. Mr. McCrary has also been
responsible for developing 13 lithotripter centers, while serving as the
founding President of URO-Tech Corporation and has served as President of
Medi-Magnetics, Inc., a medical device company. Mr. McCrary also has served as
the Chairman of the Board of Trustees of the Texas A&M Research Foundation since
November 1989. Mr. McCrary received a B.S. in Mechanical Engineering from Texas
A&M University in 1959 and an M.B.A. from Harvard Graduate School of
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Business Administration in 1965 and completed the Executive Advanced Management
Program at the University of Texas in 1968.
WAYNE A. BERTSCH has been Senior Vice President, Chief Financial Officer
and Treasurer since October 1997. Mr. Bertsch was previously Vice
President -- Regional Operations Officer of the Company from August 1996 to
August 1997. From September 1995 to August 1996, Mr. Bertsch served as Business
Manager of Hermann Hospital Home Health, an agency based in a large,
not-for-profit, university-affiliated medical center. Mr. Bertsch was associated
with Medical Innovations, Inc. as a Director of its Hospital Home Care Division
from January 1993 to August 1995. He also served as Vice President-Finance for
Preferred Homecare, Inc. and a related entity, Preferred Pharmacy, Inc., from
April 1991 to December 1992. Mr. Bertsch has been active in the U.S. health care
industry in various capacities since 1970, including 14 years with Lifemark
Corporation where he had increasing roles of responsibility in the financial and
operational performance of Lifemark. He has been responsible for cash management
billing and collection of professional and management fees, and audited
financial and operational reporting, for partnerships and corporations. Mr.
Bertsch received a B.A. in Economics and Business Administration in 1965, and a
B.S. in Accounting in 1966 from Rice University and is a Certified Public
Accountant.
RANDY E. JOHNSON has been Senior Vice President-Regional Operations Officer
for the Regional Group Practices of Atlanta, Houston, Miami and South Texas
since October 1997 and was Vice President -- Regional Operations Officer of AMP
from August 1996 to August 1997. From February 1991 to August 1996, Mr. Johnson
held various senior operating management positions with Mid-America Health Care
Group and some of its affiliated hospital organizations, including serving as
the organizing and founding Administrator at Kingwood Plaza Rehabilitation
Hospital. He has held various senior management positions over entities involved
in the U.S. health care market since September 1979. Mr. Johnson received an
B.B.A. in Finance from the University of Texas in 1979 and an M.S. in Health
Service Administration from the University of Houston at Clear Lake in 1981.
KENNETH R. ARROWOOD joined the Company as Vice President-Development on
September 9, 1997. Prior to that he had been a consultant for the Company since
April 1997. Before joining the Company, Mr. Arrowood served for two years as the
Chief Executive Officer & Founder of Management Service Organization, Inc., a
physician practice management company. Prior to Management Services
Organization, Inc., Mr. Arrowood has served as the Chief Executive Officer &
Founder of Provider Management Services, Inc., an orthopedic, imaging and
physical therapy practice management company since 1989. Prior to 1989, Mr.
Arrowood served as the Chief Executive Officer & Founder for The Gains Group,
Inc., a physician recruiting and turn-key medical practice installation
consultant for hospitals from 1988 to 1989, and as Chief Executive Officer &
Founder for the Allenwood Group, Inc., a national executive recruitment and
Human Resource consulting firm from 1979 to 1986.
ROGER BIGHAM will serve as the Company's Vice President and as the Chief
Operating Officer of AnestheCare, Inc., which will become a wholly-owned
subsidiary of the Company upon its acquisition by the Company in connection with
the Offering. Mr. Bigham has been the President and CEO of Pyramid
Anesthesiology Group, Inc. and AnestheCare (collectively "AnestheCare") since
1984. In addition to serving as a certified registered nurse anesthetist, Mr.
Bigham has served as a clinical instructor at Mission Memorial Hospital from
1977-1982, and as a head of the Anesthetist Department for Humana Hospitals from
1984-1987. Mr. Bigham earned his Registered Nurse Associate Degree from Pima
College in Tucson, Arizona and in 1982 his B.S. in Nurse Anesthesiology at
Warren Wilson College in Swannanoa, North Carolina. Mr. Bigham is an active
member in the Anesthesia Administrators Assembly, the Ambulatory Surgery
Society, the Financial Management Society, the Healthcare Financial Management
Association, the American College of Healthcare Executives, and the American
Association of Nurse Anesthetists.
JOSEPH D. GRAU has served as the Vice President -- Regional Operations
Officer for the Regional Group Practices of North Texas, St. Louis, and Maryland
since October 1997. From February 1994 to the time of his joining the Company,
Mr. Grau was President, Southwest Region for Physician Management Group, Inc.
("Physician Management"). At Physician Management, Mr. Grau was responsible
for analyzing, evaluating, and providing creative solutions in connection with
his provision of practice management
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consultative services to numerous medical practices. From March 1989 to January
1994, Mr. Grau served as Vice President of Nix Healthcare System, a
multi-facility hospital management company. From April 1987 to February 1989,
Mr. Grau served as the Administrator of Willis-Knighton South Hospital, prior to
which Mr. Grau served from July 1985 to March 1987 as the Executive Director of
Riverside Community Hospital and Byrd Memorial Hospital both hospitals being
owned by American Medical International, Inc. From March 1984 to July 1985, Mr.
Grau was the Administrator of Littlefield Medical Center. Mr. Grau has been
involved in healthcare since 1978. Mr. Grau received his B.A. in accounting in
1976 and his M.B.A. in 1979, both from Auburn University.
DAVID LAGUARDIA will join the Company upon the Offering as its Vice
President--Ancillary Support Services. In 1984, Mr. LaGuardia co-founded
AnestheCare, and has served as its Vice President and Chief Financial Officer
since its inception. In 1987, Mr. LaGuardia co-formed Professional Therapy
Service Incorporated, now Georgia Rehabilitation Corporation, Inc. and has
served as its President and Chairman since then. Mr. LaGuardia is a board
certified registered nurse anesthetist, having received his nurse anesthetist
certificate from Montgomery School of Anesthesia in Philadelphia in 1980 and his
board certification in 1983.
CECIL R. PICKENS has been the Company's Vice President and Chief Accounting
Officer since October 1997. From November 1995 to February 1997, Mr. Pickens
served as the Corporate Controller for American Ophthalmic, Inc., a physician
practice management company specializing in ophthalmology. Mr. Pickens'
responsibilities at American Ophthalmic included internal and external financial
reporting, budgeting and analysis, and the establishment of accounting policies
and procedures. Prior to American Ophthalmic, from May 1992 to October 1995, Mr.
Pickens was with OccuSystems, Inc., a physician practice management company,
specializing in occupational medicine, where he held the positions of Director
of Managed Care Information and Corporate Controller. From July 1986 to February
1992, Mr. Pickens was employed by KPMG Peat Marwick in various accounting
capacities resulting in his becoming an Audit Manager in 1991. Mr. Pickens
graduated from the University of Texas at Austin with a B.B.A. in accounting in
May 1986 and is a Certified Public Accountant.
JOHN S. BACE, CFA, has agreed to serve as a Director of the Company upon
consummation of the Offering. Mr. Bace has been a private investor since October
1994 and currently serves in the capacity of Chairman or Trustee of several
charitable trusts and foundations. Since 1994, Mr. Bace has taught at the
University of Texas Graduate School of Business. From 1976 until October 1994,
Mr. Bace served as Executive Vice President, Principal, and Director of Eagle
Management and Trust Company, an investment management firm with assets in
excess of $1 billion. Mr. Bace received his Masters of Business Administration
in 1959 from the University of Texas where he has for the last three years
served as Investment Counselor to the MBA Investment Fund, University of Texas
in Austin. Mr. Bace has been a member of the Association of Investment
Management and Research since 1970, and since 1974 has been a member of the
Institute of Chartered Financial Analysts.
S.F. "CHARLEY" HARTLEY, D.P.M., F.A.C.F.S. has agreed to become a
Director of the Company upon consummation of the Offering and has been a
practicing podiatrist in S.F. Hartley, D.P.M., P.C. since 1979. Dr. Hartley has
been a member of the Harris County Podiatry Association since 1979, having
served as its President in 1983-1984, has been a member of the Texas Podiatric
Medical Association since 1979, having served as its President in 1992-1993, has
been a member of the American Podiatry Medical Association since 1979, has
served as a Delegate of the American Podiatry Medical Association House of
Delegates since 1993 and, since 1987, has been a member of the Academy of
Podiatric Sports Medicine. Dr. Hartley graduated from the University of Houston
with a B.S. in Biology and from the Illinois College of Podiatric Medicine with
a Doctor of Podiatric Medicine. Dr. Hartley is Board Certified by the American
Board of Podiatric Surgery.
DONALD S. HUGE, M.D. has agreed to serve on the Board of Directors of AMP
upon consummation of the Offering. Dr. Huge has served as the National Medical
Director and Vice President of Chapman Schewe, Inc., a benefit consulting firm
since March 1997. From July 1995 to February 1997, he served as the Medical
Director for HMO Texas, where he was responsible for medical management,
utilization,
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<PAGE>
concurrent review and case management, quality assurance and quality
improvement. Dr. Huge served as Senior Medical Director for Sanus/NYL Care from
June 1993 to June 1995, and from March 1992 to May 1995 he worked with
MetLife/United where he served as both Network Director and Medical Director.
Prior to assuming his various medical directorship positions, Dr. Huge was a
practicing physician for 23 years. Dr. Huge has been a member of the American
College of Medical Quality since 1992 and served as its President from 1994 to
1996. Dr. Huge has served on the Board of Trustees of Park Plaza Hospital, and
the Visiting Nurses Association, and has served on the utilization committees of
Park Plaza Hospital, Hermann Hospital and Diagnostic Center Hospital. Dr. Huge
received his B.A. degree in 1953 from Southern Methodist University, Dallas,
Texas, and his Medical Degree from Baylor College of Medicine, Houston, Texas,
in 1957.
STANLEY R. KALISH, D.P.M., F.A.C.F.S. has agreed to become a Director of
the Company and the Chairman of the Medical Policy Board upon consummation of
the Offering. Dr. Kalish has been a practicing podiatrist in Atlanta Foot & Leg
Clinic, P.A. since 1974, is an accomplished author and lecturer and has designed
several surgical instruments. Dr. Kalish has been an active member and Diplomat
of the American Board of Podiatric Surgery since 1976, has been a Fellow of the
American College of Foot Surgery (F.A.C.F.S.) since 1976, has been a member of
the American College of Podiatrics and since 1980 has been a Fellow of the
American College of Podiatric Dermatology. Dr. Kalish graduated in 1967 with a
B.A. in Biology from Adelphi University and received his Doctor of Podiatric
Medicine in 1971 from the New York College of Podiatric Medicine.
MEDICAL POLICY BOARD
Concurrently with the Offering, the Company will create a Medical Policy
Board to identify and communicate the best medical practices and protocol. The
initial Medical Policy Board will consist of the following four members:
NAME AGE POSITION
- ---------------------------------------- --- ---------------
Stanley R. Kalish, D.P.M., F.A.C.F.S.... 51 Chairman
Lawrence B. Harkless, D.P.M............. 47 Vice Chairman
Bernard J. Hersh, D.P.M................. 62 Vice Chairman
Robert G. Frykberg, D.P.M., M.P.H....... 46 Vice Chairman
STANLEY R. KALISH, D.P.M., F.A.C.F.S. See "Management -- Directors and
Executive Officers."
LAWRENCE B. HARKLESS, D.P.M. will serve as a Vice Chairman on the Medical
Policy Board upon consummation of the Offering. Since September 1993, Dr.
Harkless has been a Professor in the Department of Orthopedics and a Director of
the Podiatry Residency Training Program (the "UT Program") at the University
of Texas Health Science Center at San Antonio. From September 1987 until
September 1993 he was a Clinical Professor and Director of the UT Program. Dr.
Harkless received his B.S. from California College of Podiatric Medicine in San
Francisco, California in 1973 and his D.P.M. from the same institution in 1975.
BERNARD J. HERSH, D.P.M. has agreed to serve as a Vice Chairman of the
Medical Policy Board upon consummation of the Offering. Dr. Hersh was National
President of the American Association of Hospital Podiatrists and has been
involved in the American Academy of Podiatric Sports Medicine and the Texas
Podiatric Medical Association, among other professional associations. Since
1959, Dr. Hersh has been in private practice in Bernard J. Hersh, D.P.M., a sole
proprietorship. Dr. Hersh received his D.P.M. in 1959 from Temple University
College of Podiatric Medicine.
ROBERT G. FRYKBERG, D.P.M., M.P.H. will serve as a Vice Chairman of the
Medical Policy Board upon consummation of the Offering. Since 1978, Dr. Frykberg
has been in private practice at Boston Foot Care Group. Since 1996, he has been
a Clinical Instructor in Surgery at Harvard Medical School. Dr. Frykberg
received his B.S. in Zoology from the University of Rhode Island in 1973, his
D.P.M. from the California College of Podiatric Medicine in 1976 and his M.P.H.
from Harvard University in 1994.
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BOARD OF DIRECTORS, MEDICAL POLICY BOARD AND COMMITTEES
DIRECTOR COMPENSATION
Following the closing of the IPO, it is anticipated that non-employee
directors of the Company will receive a fee of $2,000 for each meeting of the
Board attended in person and $500 for each Board meeting attended
telephonically. For each committee meeting not held in conjunction with a Board
meeting, each non-employee director will receive a fee of $1,000 for each such
meeting attended in person. All directors will be reimbursed for expenses
incurred in the performance of their duties. Each non-employee director will
receive a non-qualified option to purchase 5,000 shares of Common Stock
exercisable at the IPO price, upon being elected a director.
MEDICAL POLICY BOARD
Following the closing of the Offering, it is anticipated that those serving
in the capacity of Chairman or Vice Chairman of the Medical Policy Board will
receive a fee of $2,000 for each Medical Policy Board meeting attended in person
and $500 for each Medical Policy Board meeting attended telephonically. All
members of the Medical Policy Board will be reimbursed for expenses incurred in
the performance of their duties. Each member of the Medical Policy Board will
receive a non-qualified option to purchase 4,000 shares of Common Stock
exercisable at the IPO price, upon joining the Medical Policy Board.
EXECUTIVE COMMITTEE
Under the Company's Articles and Bylaws, the Board may by resolution
appoint from its membership, annually, an executive committee of two or more
directors, which shall include the Chief Executive Officer and the Chief
Financial Officer of the Company. The Board may designate in such resolution one
or more directors as alternate members of the Executive Committee, who may
replace any absent or disqualified member at any meeting of the committee. The
Executive Committee, during the intervals between meetings of the Board, will
have authority and power to act on behalf of the Board as provided in the
Bylaws. After the IPO, the initial members of the Executive Committee are
expected to be Messrs. McCrary and Bertsch.
OTHER COMMITTEES
The Board may, by resolution adopted by a majority of the authorized number
of directors, designate one or more other committees, each consisting of two or
more directors, to serve at the pleasure of the Board. The Board may designate
one or more directors as alternate members of any committee, who may replace any
absent member at any meeting of the committee. Any such committee shall have
authority to act in the manner and to the extent provided in the resolution of
the Board and may have all the authority of the Board, except with respect to
the limitations as set forth in the Bylaws.
Following the Closing, the Board is expected to have the following
committees, in addition to the Executive Committee, and the following respective
initial members (i) the Audit Committee (Mr. Bace and Dr. Huge), (ii) the
Finance and Strategic Planning Committee (Messrs. McCrary, Bertsch and one
independent director) and (iii) the Compensation Committee (Mr. McCrary, Mr.
Bace and Dr. Huge).
EXECUTIVE COMPENSATION
AMP has not conducted and will not conduct on-going non-developmental
business activities until the initial Affiliated Practice affiliations and the
IPO are complete. Until the IPO, AFC has paid the salaries of persons who are
executive officers and employees of AMP. Prior to the Offering, Jack N. McCrary,
Chairman, Chief Executive Officer and President of AMP, accrued salary of
$150,000 for each of the fiscal years ended December 31, 1996 and 1997. In
addition Wayne A. Bertsch, Senior Vice President, Chief Financial Officer,
Treasurer and Director and Randy E. Johnson, Senior Vice President-Regional
Operation Officer were each paid salaries of $120,000 for the fiscal year ended
December 31, 1997. These salaries were incurred by AFC in connection with the
affiliations and will be assumed by AMP under the Reimbursement and Assumption
Agreement. Mr. McCrary's accrued salary for 1996 and 1997 will be paid with a
portion of the proceeds of the IPO and, in addition, Mr. McCrary has received
52,500 membership
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<PAGE>
interests of AFC. Other than Mr. McCrary, Mr. Bertsch and Mr. Johnson there have
been no executive officers who have earned $100,000 in any single completed
fiscal year since the Company's inception.
The Company has entered into employment agreements with Mr. McCrary, Wayne
A. Bertsch, Randy E. Johnson, Roger Bigham and David LaGuardia pursuant to which
these officers will be paid annual salaries of $300,000, $180,000, $180,000,
$150,000 and $150,000, respectively.
INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
The Company has adopted the 1997 Incentive and Non-Qualified Stock Option
Plan (the "1997 Plan") to provide incentives to attract and retain directors,
officers, advisors, consultants and key employees. After the Offering, the 1997
Plan will be administered by the Company's Board of Directors or a committee
composed of members of the board (the "Plan Administrator"). Officers,
directors, employees of the Company, consultants and advisors to the Company are
eligible to receive awards under the 1997 Plan, at the Plan Administrator's
discretion.
Awards available under the 1997 Plan include: (i) Common Stock purchase
options; (ii) stock appreciation rights; (iii) restricted stock; (iv) deferred
stock; (v) performance shares and (vi) other stock-based awards. The Company has
reserved 1,157,098 of the shares of its Common Stock for granting of awards
under the 1997 Plan. Under the terms of the 1997 Plan, the Plan Administrator
retains discretion, subject to plan limits, to modify the terms of outstanding
awards and to reprice awards.
The Company has granted 464,500 options to purchase shares of Common Stock
upon consummation of the IPO at a purchase price equal to the IPO price.
Pursuant to their Employment Agreements (as defined below), the Company has
granted options to Messrs. McCrary, Bertsch, Johnson, Bigham and LaGuardia under
the 1997 Plan, representing the right to purchase 125,000, 65,000, 65,000,
15,000 and 15,000 shares of Common Stock, respectively.
PERFORMANCE BONUS PLAN
The Board has adopted the American Medical Providers, Inc. Executive
Officer Performance Bonus Plan (the "Performance Bonus Plan") covering eligible
officers of the Company. The Performance Bonus Plan will be administered by the
Compensation Committee, which each year, beginning on January 1, 1998 will
select the officers of the Company who will be eligible to receive awards under
the Performance Bonus Plan. Upon achievement by the Company of certain targeted
operating results or other performance goals, such as operating income, pre-tax
income or earnings per share, the Company will pay performance bonuses, the
aggregate amounts of which will be determined annually based upon an objective
formula. The Employment Agreements (as defined below) provide for the payment of
certain minimum bonuses upon the achievement of targeted performance criteria
under the Performance Bonus Plan. See " -- Employment Agreements."
EMPLOYMENT AGREEMENTS
In connection with the IPO, Messrs. McCrary, Bertsch, Johnson, Bigham and
LaGuardia's employment agreements with AFC will be terminated and replaced with
new employment agreements (the "Employment Agreements") with the Company
described below.
These officers' Employment Agreements provide that they will serve in the
following capacities: Mr. McCrary as President, Chief Executive Officer,
Chairman of the Board and Chairman of the Executive Committee; Mr. Bertsch as
Senior Vice President, Chief Financial Officer and a Director and, for as long
as he is a Director, a member of the Executive Committee; Mr. Johnson as Sr.
Vice President -- Regional Operations Officer; Mr. Bigham as Vice President of
the Company and Chief Operating Officer of AnestheCare, Inc.; and Mr. LaGuardia
as Vice President -- Ancillary Support Services.
The Employment Agreement of Mr. McCrary will have an initial term of five
years, and each of the Employment Agreements of Messrs. Bertsch, Johnson, Bigham
and LaGuardia will have an initial term of three years. The Employment Agreement
of Mr. McCrary will be renewed automatically upon expiration of its initial term
and any subsequent five year term, unless the Company or Mr. McCrary gives 12
months
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<PAGE>
prior notice that such Agreement will not be renewed. Upon expiration of their
initial terms, each of the Employment Agreements of Messrs. Bertsch, Johnson,
Bigham and LaGuardia will be renewed automatically one time only for two
additional years, unless the Company or any of Messrs. Bertsch, Johnson, Bigham
and LaGuardia as applicable, gives 12 months prior notice that such Agreement
will not be renewed.
Under the Employment Agreements, each officer will be entitled to receive a
base salary and an annual bonus to be determined by the AMP Board of Directors
and will be entitled to participate in the stock option plans of the Company
that are generally available to executives of the Company. The initial base
salaries for Messrs. McCrary, Bertsch, Johnson, Bigham and LaGuardia under their
respective Employment Agreements are $300,000, $180,000, $180,000, $150,000 and
$150,000, respectively. The total number of shares of Common Stock of the
Company that will be permitted to be distributed under the 1997 Plan will be
1,157,098 shares. Of this total, pursuant to the Employment Agreements, the
Company has granted to Messrs. McCrary, Bertsch, Johnson, Bigham and LaGuardia
options under the 1997 Plan to purchase 125,000, 65,000, 65,000, 15,000 and
15,000 shares of Common Stock, respectively.
Each of Messrs. McCrary, Bertsch, Johnson, Bigham and LaGuardia is
prohibited from competing with the Company while employed by the Company. In
certain circumstances, each of Messrs. McCrary, Bertsch, Johnson, Bigham and
LaGuardia will be prohibited from competing for two years following termination
of his Employment Agreement during the initial term of his Employment Agreement
and for one year following termination during successive terms.
The Employment Agreement of Mr. McCrary cannot be terminated by the Company
without the prior approval of two-thirds of the Board. If Mr. McCrary is
terminated by the Company without "Cause" or resigns for "Good Reason" (each as
defined in his Employment Agreement), his outstanding options will immediately
vest and become exercisable and he will be entitled to receive a lump sum
payment equal to the greater of (i) his current base salary and annual target
bonus payable over the remainder of his contract term or (ii) 3.0 times his
current annual salary plus annual target bonus. If Messrs. Bertsch, Johnson,
Bigham or LaGuardia is terminated by the Company without "Cause" or by such
officer for "Good Reason" (each as defined in their respective Employment
Agreement), his respective outstanding options will immediately vest and become
exercisable and he will be entitled to receive a lump sum payment equal to the
greater of (i) his current base salary and annual target bonus payable over the
remainder of his contract term or (ii) two times his current annual salary plus
annual target bonus.
Upon termination of the employment of any of Messrs. McCrary, Bertsch,
Johnson, Bigham or LaGuardia by the Company without "Cause" or by such officer
for "Good Reason," such officer would be entitled to receive a lump sum payment
equal to the total amount of any excise taxes to which such officer may become
subject under Section 4999 of the Internal Revenue Code.
CERTAIN TRANSACTIONS
AFFILIATED PRACTICES
The consideration paid by the Company for the initial Affiliated Practices
is based upon the practices' gross revenue, growth potential, quality of
patients, location and service delivery and depth of presence in its local
market. All of the Transfers of the initial Affiliated Practices, except for the
Kramer Transfer and the Ambulatory Surgery Center Acquisitions, will be
accounted for by the Company under SAB 48, such that the non-monetary assets and
liabilities of these initial Affiliated Practices will be received by the
Company at the transferor's historical cost basis for accounting purposes. The
Company's management coordinated the valuation of these Affiliated Practices.
The methodology for valuing the non-monetary assets was primarily based upon a
multiple of the projected earning's contribution to AMP utilizing adjusted
historical financial information of the respective Affiliated Practices. Once
the total consideration was determined, the Affiliated Practices could elect to
receive a maximum of 25% in cash and the balance in shares of Common Stock
valued at the initial public offering price. The balance of net assets acquired
or net liabilities assumed did not weigh significantly in the allocation.
Appraisals of the practices were not obtained and if received would have no
impact on the non-monetary transfers. Monetary assets and
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<PAGE>
liabilities, including billed and unbilled receivables and credit balances,
payables and certain miscellaneous accruals will either be acquired by AMP at
their fair market value or retained by the Affiliated Practices, as agreed among
the parties.
The AnestheCare Acquisition, the Kramer Transfer, the Ambulatory Surgery
Center Acquisitions, and all future practice affiliations will not be accounted
for under SAB 48. Instead these practice affiliations will be accounted for as
purchases at fair market value and are expected to result in purchase prices in
excess of net assets acquired (goodwill). Each owner DPM of the Affiliated
Practices and AnestheCare is considered a "promoter" of the Company. The
following table provides certain information concerning the Transfers:
CONSIDERATION TO BE RECEIVED
<TABLE>
<CAPTION>
CONSIDERATION TO BE RECEIVED
-----------------------------------------------------
ASSETS TO BE CASH VALUE NUMBER OF DEBT
SAB 48 TRANSACTIONS(1) CONTRIBUTED(2) OF SHARES SHARES(3) CASH PAID(4) ASSUMED(4)
- ------------------------------------- -------------- ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Louis M. Antahades, D.P.M............ $ 6,000 $ 41,324 3,757 $ 10,331 $ --
Stephan Bard, D.P.M.................. 28,218 122,919 11,174 53,572 --
Douglas M. Beek, D.P.M............... 21,600 299,735 27,249 141,716 --
David L. Blumfield, D.P.M.(5)........ 128,119 523,493 47,591 260,847 --
William B. Bradbury, D.P.M.(5)....... 62,318 122,645 11,150 82,539 --
Karen E. Brooks, D.P.M............... 119,469 336,862 30,624 154,140 --
David K. Cantor, D.P.M............... 91,345 375,946 34,177 173,981 --
Armida deBelvill, D.P.M.............. -- 80,652 7,332 20,163 --
Peter R. DeFrank, D.P.M.............. 17,108 206,115 18,738 93,200 --
Salvatore DeFrank, D.P.M............. 21,063 405,786 36,890 165,882 --
Kenrick J. Dennis, D.P.M............. 207,259 217,978 19,816 108,444 --
Stephen R. Densen, D.P.M............. 51,197 161,800 14,709 81,252 --
Laurence I. Dorman, D.P.M............ 6,323 145,102 13,191 72,277 --
Alan I. Ettinger, D.P.M.............. 24,554 172,956 15,723 77,174 --
Gerald I. Falke, D.P.M............... 177,929 724,420 65,856 306,806 --
Thomas S. Garrison, D.P.M............ 66,873 413,185 37,562 185,588 --
Norman W. Goldman, D.P.M............. 63,060 328,354 29,850 151,636 --
Anthony Halinski, D.P.M.............. 323,870 982,655 89,332 395,183 --
Todd Harrison, D.P.M................. 117,646 482,946 43,904 204,537 --
S.F. Hartley, D.P.M.................. 65,263 675,226 61,384 311,343 --
Dale S. Herman, D.P.M................ 227,228 309,197 28,109 150,429 --
Bernard J. Hersh, D.P.M.............. 225,605 501,275 45,570 224,125 --
Richard Hochman, D.P.M............... 22,717 98,095 8,918 52,906 --
Stanley R. Kalish, D.P.M.(6)......... 252,735 685,261 62,296 378,888 --
Michael W. Kendall, D.P.M............ 193,804 551,148 50,104 351,094 --
Kirk Koepsel, D.P.M.................. 66,872 413,185 37,562 185,588 --
Paul D. Leon, D.P.M.................. 21,465 250,558 22,778 106,806 --
Gregory L. Mangum, D.P.M.(5)......... 71,384 290,725 26,430 158,195 --
Bruce Miller, D.P.M.(5).............. 102,433 432,301 39,300 200,162 --
James E. Miller, D.P.M............... 74,770 93,260 8,478 53,940 --
Michael Mineo, D.P.M.(5)............. 128,119 523,493 47,591 260,847 --
Robert J. Morris, D.P.M.............. 63,447 121,539 11,049 120,385 --
Steven A. Moskowitz, D.P.M.(5)....... 127,402 484,944 44,086 234,417 --
Jeffrey R. Murray, D.P.M............. 28,566 519,187 47,199 267,882 --
Sherman Nagler, D.P.M.(5)............ 91,237 325,276 29,571 163,707 --
Robert G. Parker, D.P.M.(5).......... 181,471 324,522 29,502 169,290 56,000
Steven P. Richman, D.P.M............. 97,454 481,189 43,744 219,001 --
Donald E. Robinson, D.P.M............ 75,207 275,064 25,006 143,108 --
Mark R. Sands, D.P.M................. 163,897 822,300 74,755 367,588 --
Charles P. Sanicola, D.P.M........... 45,066 278,863 25,351 136,204 --
Jerry S. Silverman, D.P.M............ 180,865 394,267 35,842 106,422 100,000
Donald C. Stran, D.P.M............... 108,420 760,575 69,143 330,922 --
Barry M. Tuvel, D.P.M................ 62,037 471,119 42,829 211,706 --
George R. Vito, D.P.M................ 268,885 1,734,362 157,669 1,278,121 --
Richard A. Weissman, D.P.M........... 21,600 299,735 27,249 141,716 --
-------------- ---------- --------- ------------ ----------
Subtotal......................... $4,501,900 $18,261,539 1,660,140 $9,064,060 $156,000
NON SAB 48 TRANSACTIONS
- -------------------------------------
Jerald N. Kramer, D.P.M.(7).......... $ 63,365 $ -- -- $1,404,000 $ --
Bellaire Surgicare, Inc.(5).......... 724,980 3,840,000 349,091 960,000 500,000
Clayton Outpatient Surgical Center,
Inc.(6)............................ 227,000 260,000 23,636 65,000 --
-------------- ---------- --------- ------------ ----------
Subtotal......................... $1,015,345 $4,100,000 372,727 $2,429,000 $500,000
-------------- ---------- --------- ------------ ----------
Total............................ $5,517,245 $22,361,539 2,032,867 $11,493,060 $656,000
============== ========== ========= ============ ==========
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
47
<PAGE>
- ------------
(1) The DPMs who own the initial Affiliated Practices are considered "promoters"
for purposes of Rule 405 promulgated under the Securities Act of 1933, as
amended.
(2) Assets to be contributed include approximately $4.4 million of current
assets and $1.1 million of property and equipment.
(3) Assumes the midpoint of the range for the initial public offering price.
(4) Cash Paid includes consideration attributable to $4.3 million of monetary
assets acquired in the SAB 48 Transactions. Under SAB 48 the cash portion of
the purchase price attributable to the non-monetary assets of $4.7 million
will be treated as a cash dividend to the DPM owners of the Affiliated
Practices.
(5) As part of the transfers of the assets of certain promoters, AMP will
acquire a 100% interest in Bellaire Surgicare, Inc., a free-standing
ambulatory center. This component of the transfers does not qualify for the
accounting treatment pursuant to SAB 48 and accordingly will be recorded as
a purchase pursuant to the requirements of APB 16.
(6) Clayton Outpatient Surgical Center, Inc. is an ambulatory surgery center
being acquired as part of the transfers of Stanley R. Kalish, D.P.M. This
component of the transfers does not qualify for the accounting treatment
pursuant to SAB 48 and accordingly will be recorded as a purchase pursuant
to the requirements of APB 16.
(7) Although Dr. Kramer is considered a "promoter" under Rule 405 for purposes
of complying with certain SEC disclosure requirements, he is not considered
a "promoter" for purposes of SAB 48 and the Company's affiliation with Dr.
Kramer's practice will not be accounted for under SAB 48.
DISTRIBUTION OF CLASS B COMMON STOCK TO PROMOTERS PARTICIPATING IN AFC
FINANCINGS
Certain promoters of the Company have participated in financings of Ankle &
Foot Centers of America, LLC ("AFC") and own membership interests of AFC
directly or indirectly which were purchased in connection with such financings.
In addition, certain promoter members of management were issued membership
interests in AFC as founders of AFC or in consideration of contributions to AFC
as members of AFC's management. AFC issued membership interests to each of these
individuals in connection with AFC's ongoing efforts to fund the organization
and development of AMP.
Shares of AMP Class B Common Stock were issued to AFC as part of AFC's
formation efforts on behalf of AMP. About the time of the consummation of the
IPO, AFC will distribute these shares of Class B Common Stock to its members.
The number of shares distributable to each member will be based upon the number
of membership interests such member holds. Such AFC investors invested in AFC in
order to ultimately obtain an ownership interest in AMP. Upon consummation of
the IPO, there will be no business purpose to AFC continuing to hold shares of
AMP and so such shares will be distributed to members of AFC. The following
lists the approximate number of shares distributable to these promoters:
DISTRIBUTABLE SHARES
OF CASH VALUE
PROMOTERS CLASS B COMMON STOCK OF CLASS B
- ------------------------- --------------------- ----------
Jack N. McCrary.......... 45,354 $ 498,894
John S. Bace (1)......... 11,964 131,604
Wayne A. Bertsch......... 2,991 32,901
S. F. Hartley, D.P.M..... 15,443 169,873
Randy Johnson............ 598 6,578
Stanley R. Kalish
D.P.M.................. 21,426 235,686
David LaGuardia.......... 29,909 328,999
Sherman Nagler, D.P.M.... 5,982 65,802
Robert G. Parker, D.P.M.. 11,964 131,604
Steven P. Richman, D.P.M 5,982 65,802
Jerry S. Silverman,
D.P.M. ................ 5,982 65,802
Texas Podiatry
Group-Houston (2)...... 11,964 131,604
George R. Vito, D.P.M.... 5,982 65,802
Bellaire Surgicare, IPA
(3)...................... 11,964 131,604
Bay Area Podiatry (4).... 8,973 98,703
Thomas S. Garrison....... 2,991 32,901
(FOOTNOTES ON FOLLOWING PAGE)
48
<PAGE>
- ------------
(1) Membership interests were originally issued to J.M. Partners, Ltd., an
affiliate of John S. Bace. Subsequently, J.M. Partners, Ltd. transferred
its membership interests to Mr. Bace and trusts controlled by Mr. Bace.
(2) Drs. Dennis, Garrison, Hartley, Koepsel and Parker are among the principals
of Texas Podiatry Group-Houston and are owner DPMs involved in the
Transfers.
(3) Drs. Blumfield, Bradbury, Mangun, Bruce Miller, Mineo, Moskowitz and Parker
are among the principals of Bellaire Surgicare, IPA and are owner DPMs
involved in the Transfers.
(4) Drs. Garrison and Koepsel are among the principals of Bay Area Podiatry
Association and are owner DPMs involved in the Transfers.
SEED CAPITAL FINANCING TRANSACTION WITH PROMOTERS
Of the promoters discussed above under the caption "-- Distribution of
Class B Common Stock to Promoters Participating in AFC Financings," certain of
such promoter owner DPMs from whom the Company is acquiring assets or stock in
connection with the Transfers and certain members of management own membership
interests of AFC directly or indirectly purchased in connection with an early
seed capital financing transaction (the "Seed Capital Financing"). As described
above, about the time of the consummation of the IPO, AFC will distribute shares
of Class B Common Stock it currently holds to its members, including such
promoters.
After giving effect to the consummation of the Stock Split, the maximum
number of shares of Class B Common Stock distributable to these promoters, in
connection with the Seed Capital Financing, totaled 171,084 shares. In
connection with the Seed Capital Financing, such promoters were given the option
of exchanging one-seventh of such shares of Class B Common Stock distributable
to them for one-half of the amount loaned to AFC by such promoter. The following
lists the approximate number of shares distributable to each of the promoters or
their related entities, in connection with the Seed Capital Financing, and the
amount each promoter or entity loaned to AFC:
DISTRIBUTABLE SHARES
OF
CLASS B COMMON STOCK
PURSUANT TO
SEED CAPITAL LOAN
PROMOTER OR ENTITY FINANCING AMOUNT
- ------------------ --------------------- --------
Jack N. McCrary...................... 35,892 (1)
John S. Bace (2)..................... 11,964 $ 95,000
David LaGuardia...................... 29,909 237,500
Randy Johnson........................ 598 4,750
Wayne A. Bertsch..................... 2,991 23,750
Stanley R. Kalish, D.P.M............. 11,964 95,000
S. F. Hartley, D.P.M................. 5,982 47,500
Sherman Nagler, D.P.M................ 5,982 47,500
Robert G. Parker, D.P.M.............. 11,964 95,000
Steven P. Richman, D.P.M............. 5,982 47,500
Jerry S. Silverman, D.P.M............ 5,982 47,500
Texas Podiatry Group-Houston (3)..... 11,964 95,000
George R. Vito, D.P.M................ 5,982 47,500
Bellaire Surgicare, IPA (4).......... 11,964 95,000
Bay Area Podiatry (5)................ 8,973 71,250
Thomas S. Garrison, D.P.M............ 2,991 23,750
- ------------
(1) Mr. McCrary's membership interest in AFC was issued to him in exchange for
his agreement to defer compensation of $300,000 until successful completion
of the IPO. See "-- Deferred Salary Payment for Promoter Officer."
(2) Membership interests were originally issued to J. M. Partners, Ltd., an
affiliate of John S. Bace. Subsequently, J. M. Partners, Ltd. transferred
its membership interests to Mr. Bace and trusts controlled by Mr. Bace.
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
49
<PAGE>
(3) Drs. Dennis Garrison, Hartley, Koepsel and Parker are among the principals
of Texas Podiatry Group-Houston and are owner DPMs involved in the
Transfers.
(4) Drs. Blumfield, Bradbury Mangum, Bruce Miller, Mineo, Moskowitz and Parker
are among the principals of Bellaire Surgicare, IPA and are owner DPMs
involved in the Transfers.
(5) Drs. Garrison and Koepsel are among the principals of Bay Area Podiatry
Association and are owner DPMs involved in the Transfers.
PROMOTER MANAGEMENT AND DIRECTOR PARTICIPATION IN BRIDGE FINANCING
During the first quarter of 1998, AFC completed a financing consisting of
15 units in AFC (the "AFC Units") for $1,500,000, representing $1,425,000 in
non-interest bearing loans and $75,000 representing 25,000 membership interests
in AFC to fund certain expenses on behalf of AMP, in connection with the IPO
(the "Bridge Financing"). The Bridge Financing provided for the loans to be
repaid by AFC from funds it will receive from the IPO. Additionally, AFC is
required to repurchase each of the 15 units in AFC for $71,667 in cash. In
connection with the IPO, each investor was to be given the opportunity to
purchase $71,667 worth of Common Stock offered in the IPO valued at the IPO
price. Upon the closing of the IPO, AMP will assume this obligation of AFC in
satisfaction of amounts due to AFC. The Company and AFC has offered to rescind
the investment of the investors in the Bridge Financing and the opportunity to
purchase Common Stock at the initial offering price. See "Description of Capital
Stock -- Units Rescission Offer."
Certain members of management and directors have participated in this
financing by loaning funds to AFC and making such equity investments. The
following lists the promoter who is an officer or director and made such
investment in AFC, the equity investment made, the amount of the loan to be
repaid, and the additional amount of cash (or cash value of the shares of Common
Stock) to be received by such persons upon the repurchase by AFC of the
membership units:
EQUITY LOAN EQUITY
OFFICER/DIRECTOR INVESTMENT AMOUNT REDEMPTION
- ------------------------------------- ----------- ------- -----------
Jack N. McCrary...................... $ 5,000 $95,000 $71,667
Wayne A. Bertsch(1).................. 5,000 95,000 71,667
John S. Bace, CFA.................... 5,000 95,000 71,667
George Vito.......................... 5,000 95,000 71,667
- ------------
(1) Of this investment, 20% was invested by Mr. Bertsch directly and the
remaining 80% was invested by persons or entities related to Mr. Bertsch,
with respect to which Mr. Bertsch expressly disclaims any beneficial
ownership.
REIMBURSEMENT OF AFC EXPENSES BY THE COMPANY
Pursuant to the Reimbursement and Assumption Agreement between AFC and the
Company, the Company has agreed to reimburse AFC approximately $5.3 million
(including any amounts payable pursuant to the Units Rescission Offer) for
expenses, debt and interest incurred by AFC relating to AMP's organizational and
development costs and working capital in connection with the Transfers and the
IPO. AFC owns, prior to the IPO, 56.3% of the outstanding voting securities of
the Company. AFC will provide AMP with assets upon consummation of the Offering
including the assets necessary for certain of AMP's operations after the
completion of the Transactions and primarily including computer equipment,
furniture and office equipment. These assets will be acquired by AMP with a
portion of the proceeds of the Offering at AFC's historical cost basis of
approximately $400,000, which method was approved by the management of both AFC
and AMP.
In addition, AMP will reimburse AFC for the Company's organizational and
affiliation costs incurred by AFC on behalf of AMP. These costs include costs
associated with the IPO consisting principally of professional fees and expenses
which have been or will be paid to AFC's and the Company's attorneys and
independent public accountants, aggregating approximately $4.3 million, as well
as salaries of AFC employees and general office expenses. Those items paid by
AFC on behalf of AMP will be reimbursed with a portion of the proceeds of the
IPO at the cost originally incurred by AFC, which was the then fair market value
of the service provided or property leased. This method for determining the
amount to be reimbursed was approved by management of the Company and AFC. See
"Use of Proceeds."
50
<PAGE>
ACQUISITION OF PRACTICES OF FUTURE MEMBERS OF BOARD AND OFFICERS
The Company is acquiring practices of certain promoters who will be members
of the Company's Board of Directors or executive officers of the Company upon
consummation of the IPO. The Company will acquire the assets and stock of the
practices of S.F. Hartley, D.P.M. and Stanley Kalish, D.P.M., each of whom will
become a member of the Company's Board of Directors upon consummation of the
Offering. Dr. Kalish is also the Chairman of the Company's Medical Policy Board.
In addition, David LaGuardia and Roger Bigham, both of whom are executive
officers of AMP, each own 50% of AnestheCare. Pursuant to the AnestheCare
Acquisition, Messrs. LaGuardia and Bigham will each receive (i) $2.25 million in
cash and (ii) additional consideration of up to $750,000 in cash and $250,000
payable in shares of Common Stock (valued at the initial public offering price),
which will be held in escrow and may be paid to each pending AnestheCare's
achievement of certain performance targets over a three-year period beginning
January 1, 1998, in exchange for the assets of AnestheCare. The purchase price
of AnestheCare was determined by the Company's management based on a multiple of
the operating income of AnestheCare for the most recent twelve month period. The
AnestheCare Acquisition will not be accounted for under SAB No. 48. Instead,
this transaction will be accounted for as a purchase at fair market value, as
agreed among the parties.
CERTAIN LEASE ARRANGEMENTS WITH PROMOTER OFFICER
The Company currently occupies corporate offices consisting of 16,000
square feet of office space located at 3555 Timmons Lane, Houston, Texas. The
original lease for 7,544 square feet of such space between Mid-America
Hospitals, Inc., ("Mid-America") and M & J Wilkow, Ltd., as prime landlord
(subsequently assigned to Timmons Texas, Ltd. ("Landlord")), was originally
dated November 14, 1988, was amended by Amendment of Lease dated May 10, 1994,
and a Second Amendment of Lease dated February 22, 1995, (collectively the Prime
Lease, the Amendment of Lease and the Second Amendment of Lease being referred
to as the "Lease"). Pursuant to an Assignments of Lease entered into on December
17, 1997 by and between Mid-America, as Assignor, Landlord AFC and the Company
as Assignees, Mid-America assigned its rights to lease such corporate offices to
AFC as of December 1, 1997 and AFC agreed to assign its rights to the lease to
the Company upon the closing of the IPO. Jack N. McCrary, the Company's
Chairman, President and Chief Executive Officer and a promoter of the Company,
founded and served as Vice Chairman and President of Mid-America. The Lease
currently expires March 31, 2000, and requires a monthly base rental of $7,060.
DEFERRED SALARY PAYMENT FOR PROMOTER OFFICER
Mr. McCrary has served as the Director, President and Chief Executive
Officer of AFC and is a promoter of the Company. As such, he has managed and
supervised the organizational efforts of AFC. Mr. McCrary has agreed to accept
deferred compensation of $300,000 payable upon successful completion of the IPO.
In exchange for Mr. McCrary agreeing to defer his compensation earned prior to
the IPO, Mr. McCrary has received 52,500 membership interests of AFC's
outstanding and issued membership interests.
CONSULTING ARRANGEMENTS WITH CERTAIN PROMOTER DPMS
Drs. Garrison and Dennis, from whom the Company is acquiring assets in
connection with the Transfers, have entered into consulting arrangements with
AFC. Pursuant to his consulting agreement, Dr. Garrison will be paid
approximately $4,000 per month over the eighteen months following the IPO and
Dr. Dennis will be paid approximately $1,750 per month over the same period.
Both agreements are cancelable by either party with 60 days notice.
51
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of February 17, 1998
regarding the beneficial ownership of the Company's Common Stock and Class B
Common Stock and as adjusted to reflect the sale of the shares offered pursuant
to this Prospectus, by (i) each person known to the Company to own beneficially
more than 5% of the Company's Common Stock and Class B Common Stock, (ii) each
Named Executive Officer of the Company, (iii) each director of the Company, and
(iv) all directors, nominees and executive officers as a group.
<TABLE>
<CAPTION>
PERCENT OF SHARES OF PERCENT OF
CLASS B COMMON STOCK COMMON STOCK
SHARES OF COMMON STOCK BENEFICIALLY BENEFICIALLY
CLASS B BENEFICIALLY OWNED OWNED OWNED
COMMON STOCK -------------------- -------------------- --------------------
BENEFICIALLY PRIOR TO AFTER PRIOR TO AFTER PRIOR TO AFTER
NAME OF BENEFICIAL OWNER OWNED(1)(2) IPO(2) IPO IPO IPO(3) IPO IPO(3)
- ---------------------------------------- ------------ --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C>
Ankle & Foot Centers of America,
LLC(4)................................ 365,625 56.3% 56.3% -- -- -- --
John S. Bace, CFA(5).................... 11,960 1.8 1.8 -- -- -- --
Wayne A. Bertsch........................ 21,028 3.2 3.2 -- -- -- --
Dr. S. F. Hartley, D.P.M.,
F.A.C.F.S.(6)......................... 15,438 2.4 2.4 -- 61,384 -- 1.1 %
Donald S. Huge, M.D.(7)................. -- * * -- -- -- --
Randy Johnson........................... 18,623 2.9 2.9 -- -- -- --
Dr. Stanley Kalish, D.P.M.,
F.A.C.F.S.(8)......................... 21,418 3.3 3.3 -- 85,932 -- 1.5
Jack N. McCrary......................... 256,588 39.5 39.5 -- -- -- --
All Directors and Executive Officers as
a Group............................... 381,518 58.7 58.7 -- 147,316 -- 2.5
- ------------
</TABLE>
* Less than one percent.
(1) Unless otherwise indicated, each of the individual stockholders listed above
has, through the IPO date, granted all of his or her voting power with
respect to the shares of Common Stock or Class B Common Stock beneficially
owned by such stockholder to Jack N. McCrary. Shares of Common Stock subject
to options exercisable within 60 days, of which there are none, would be
deemed outstanding for purposes of computing the percentage of ownership of
the holder. The address of all persons listed except for Mr. Bace, and Drs.
Hartley, Huge and Kalish is 3555 Timmons Lane, Suite 1550, Houston, Texas
77027.
(2) The shares of Class B Common Stock listed as beneficially owned by each
stockholder assumes the distribution of AMP shares held by AFC to its
respective members in accordance with the member ownership percentages. The
following table lists the appropriate number of shares and percent of Class
B Common Stock of the Company giving effect to the Stock Split,
distributable by AFC to the named Principal Stockholders.
SHARES OF PERCENT OF
CLASS B CLASS B
COMMON STOCK COMMON STOCK
------------ ------------
John S. Bace, CFA.................... 11,960 1.8%
Wayne A. Bertsch..................... 2,990 0.5%
Dr. S.F. Hartley, D.P.M., F.A.C.F.S. 15,438 2.4%
Donald S. Huge, M.D.................. -- --
Randy Johnson........................ 585 0.1%
Dr. Stanley Kalish, D.P.M.,
F.A.C.F.S. ........................ 21,418 3.3%
Jack N. McCrary...................... 45,338 7.0%
All Directors and Executive Officers
as a Group......................... 127,693 19.6%
(3) Assumes the mid-point of the initial public offering price range.
(4) Messrs. Bace, Bertsch, Johnson and McCrary and Drs. Hartley and Kalish are
investors in and owners of AFC and will be entitled to distribution of the
Company's Class B Common Stock held by AFC in proportion to their ownership
of membership interests. See footnote number 2 above.
(5) The business address of Mr. Bace is 3730 Del Monte, Houston, Texas 77019.
(6) The business address of Dr. Hartley is 112 W. Pasadena Blvd., Deer Park,
Texas 77536. Dr. Hartley is an owner DPM of one of the Affiliated Practices
and will, upon consummation of the transactions, receive Common Stock having
an equivalent value of $675,226 valued at the Offering price.
(7) Dr. Huge's business address is 1177 W. Loop South, Suite 700, Houston, Texas
77027.
(8) Dr. Kalish's business address is 6911 Tara Blvd., Jonesboro, GA 30236. Dr.
Kalish is an owner DPM of one of the Affiliated Practices and will receive
Common Stock having an equivalent value of $945,261 valued at the IPO price.
52
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company has authorized 20,000,000 shares of Class A Common Stock, $.001
par value per share ("Common Stock"), 1,000,000 shares of Class B Common Stock,
par value $.001 per share ("Class B Common Stock") and 20,000,000 shares of
preferred stock, $.001 par value per share. As of February 17, 1998, no shares
of Common Stock or Preferred Stock were issued and outstanding and 650,000
shares of Class B Common Stock were outstanding and held of record by fourteen
stockholders.
COMMON STOCK AND CLASS B COMMON STOCK
Upon consummation of the Offering, holders of the Class B Common Stock will
have the ability to elect as a class one member of the Board of Directors and
the holders of the Common Stock will have the ability to elect as a class all
other members of the Board of Directors. The Common Stock and Class B Common
Stock possess ordinary voting rights and vote together as a single class in
respect of all other corporate matters, and, in connection therewith, holders of
shares of Common Stock are entitled to one vote per share and holders of shares
of Class B Common Stock are entitled to 2/3 of a vote per share. The Common
Stock and Class B Common Stock afford no cumulative voting rights, and the
holders of a majority of the shares voting for the election of directors can
elect all the directors if they choose to do so. Except for the conversion
rights of the Class B Common Stock described below, the Common Stock and Class B
Common Stock carry no preemptive rights, are not convertible, redeemable,
assessable or entitled to the benefits of any sinking fund. The holders of
Common Stock and Class B Common Stock are entitled to dividends in such amounts
and at such times as may be declared by the Board of Directors out of funds
legally available therefor. The Company intends that, after completion of the
Offering, all future dividends, if any, declared on, or distributions with
respect to, its shares of Common Stock and Class B Common Stock will be paid on
a pro rata basis to the holders of such shares. See "Dividend Policy" for
information regarding the Company's dividend policy.
Directors may be removed, with or without cause, by the holders of the
class or classes of stock that elected them. Directors may be removed by the
Board of Directors only for cause. Vacancies in a directorship may be filled by
the vote of the class or classes of shares that had previously filled that
vacancy, or by the remaining directors or director elected by such class or
classes; however, if there are no such directors, the vacancy may be filled by
the other directors.
Holders of Common Stock of the Company are entitled to one vote per share
and the holders of Class B Common Stock of the Company are entitled to
two-thirds (2/3) of a vote per share. The Company's Board of Directors consists
of seven directors. Holders of Common Stock are entitled to elect as a class six
members of the Board of Directors and the holders of the Class B Common Stock
are entitled to elect as a class the remaining member of the Board of Directors;
provided however, that if 65% or more of the Class B Common Stock outstanding on
the date of this Prospectus has been converted into Common Stock, the Class B
Common Stock shall no longer have the ability to elect a director as a class.
The Common Stock and Class B Common Stock possess ordinary voting rights and
vote together as a single class in respect of all other corporate matters. See
"Description of Capital Stock."
The Class B Common Stock is convertible into Common Stock, at the option of
the holder thereof, upon the occurrence of a Conversion Event (as defined
below). The maximum number of shares of Common Stock that may be issued upon
conversion of the Class B Common Stock is 1,950,000. The Class B Common Stock
converts into Class A Common Stock on a share-for-share basis, provided however,
that if the Common Stock reaches certain average closing prices for 15
consecutive trading days during the next six years on the Nasdaq National
Market, other over-the-counter market or an exchange, as then applicable (the
"Trading Market")then, as set forth below, the conversion ratio with respect to
a certain number of shares of Class B Common Stock will immediately change so
that such shares will thereafter be convertible into Common Stock at the ratio
of three shares of Common Stock for each share of Class B Common Stock (each
such share an "Adjusted Conversion Share").
On the date that the average closing price on the Trading Market for the
preceding 15 consecutive trading days (the "Average Price") exceeds 150% of the
price to the public in the Offering, 130,000 of the issued shares of Class B
Common Stock will immediately become Adjusted Conversion Shares (and subject to
the new 3-for-1 conversion ratio). Thereafter, the remaining 520,000 shares of
Class B Common Stock will become Adjusted Conversion Shares in four remaining
increments of 130,000 shares of Class B Common Stock each (20% of the total
number of shares of Class B Common Stock issued) upon the attainment of new
Average Prices. The Average Prices applicable to each new 20% increment will
equal
53
<PAGE>
120% of each preceding Average Price applicable to the preceding 20% increment.
Therefore, the five Average Prices at which each of the five total increments
shall automatically become Adjusted Conversion Shares are $16.50, $19.80,
$23.76, $28.51 and $34.21. Upon a Conversion Event, each holder of Class B
Common Stock will have the right to have each share of Class B Common Stock
converted into that number of shares of Common Stock as each such share is
entitled to based upon the Average Prices achieved, if any. Any additional
Average Price attained after the occurrence of a Conversion Event will continue
to act to create Adjusted Conversion Shares, as applicable. If any shares of
Class B Common Stock are outstanding on the sixth anniversary of this
Prospectus, such shares will automatically convert into a number of shares of
Common Stock based upon the conversion ratio then applicable to such shares.
Shares of Class B Common Stock held by a holder shall automatically convert into
Common Stock immediately prior to the disposition of such shares of Class B
Common Stock by such holder.
A Conversion Event shall be deemed to have occurred (i) in the event of a
disposition of such share of Class B Common Stock by the holder thereof
(excluding dispositions to such holder's affiliates), (ii) in the event any
person not affiliated with the Company acquires beneficial ownership of 15% or
more of the outstanding shares of capital stock of the Company, (iii) in the
event any person not affiliated with the Company offers to acquire 15% or more
of the outstanding shares of capital stock of the Company, (iv) in the event the
holder of such shares elects to so convert at any time after the second
anniversary of the date of this Prospectus, (v) on the fifth anniversary of the
date of this Prospectus, or (vi) in the event the holders of a majority of the
outstanding shares of Common Stock approve such conversion. In addition, the
Company may elect to convert any outstanding shares of Class B Common Stock into
shares of Common Stock in the event 80% or more of the outstanding shares of
Class B Common Stock as of the date of this Prospectus have previously been
converted into shares of Common Stock.
PREFERRED STOCK
The Board of Directors is authorized, without further action by the
stockholders, to provide for the issuance of shares of Preferred Stock as a
class without series or in one or more series, to establish the number of shares
in each class or series and to fix the designation, powers, preferences and
rights of each such class or series and the qualifications, limitations or
restrictions thereof. Because the Board of Directors has the power to establish
the preferences and rights of each class or series of Preferred Stock, the Board
of Directors may afford the holders of any class or series of Preferred Stock
preferences, powers and rights, voting or otherwise, senior to the rights of
holders of Common Stock or the Class B Common Stock. The issuance of Preferred
Stock could have the effect of delaying or preventing a change in control of the
Company. As of the date of this Prospectus, the Company has not issued any
Preferred Stock but the Board has authorized the issuance of the Series A Junior
Participating Preferred Stock of the Company (the "Series A Preferred Stock").
See--"Certain Anti-Takeover and Other Provisions of Delaware Law and the
Company's Certificate of Incorporation and Bylaws." Other than the foregoing,
there are no plans, agreements or understandings for the issuance of any shares
of Preferred Stock.
UNITS RESCISSION OFFER
During the first quarter of 1998, AFC completed a financing of $1.5 million
representing 15 units (the "AFC Units"), consisting of $1,425,000 in
non-interest bearing loans (the "AFC Promissory Notes") and 25,000 membership
interests in AFC to fund certain expenses on behalf of AMP in connection with
the Offering (the "Bridge Financing"). The Bridge Financing provided for the
loans to be repaid by AFC from funds it will receive from the IPO. Additionally,
AFC is required to repurchase each of the 15 AFC Units for $71,667 in cash. In
connection with the Bridge Financing, each investor was to be given the
opportunity to notify the Company that he or she would prefer to purchase
$71,667 worth of Common Stock offered in the IPO valued at the IPO price. Upon
the closing of the IPO, AMP will assume this obligation of AFC in satisfaction
of amounts due to AFC.
The Company has been advised that the Bridge Financing of AFC may be
integrated for securities laws purposes with the IPO and that the 15 AFC Units
sold pursuant to the Bridge Financing for $1.5 million may not have been sold in
compliance with the registration provisions of the Securities Act. All of these
AFC Units were sold at a price of $100,000 per AFC Unit. Concurrently with the
IPO, the Company and AFC are conducting a Units Rescission Offer with respect to
the Bridge Financing. If the Units Rescission
54
<PAGE>
Offer is accepted, the Bridge Financing investors will be paid only the purchase
price of the AFC Units equal to $1.5 million plus statutory interest on the AFC
Units from the date of issuance through the date of purchase. If the Units
Rescission Offer is rejected in full, holders of the AFC Units will continue to
hold AFC Units, the AFC Promissory Notes will be repurchased by AFC for
$1,425,000 in cash and the AFC membership interests will be repurchased by AFC
for $1,075,000 in cash, or a total of $2.5 million, upon the successful
completion of the Company's IPO. In either case, the Bridge Investors will no
longer have the opportunity to purchase shares of Common Stock set aside by the
Company at the IPO price. There can be no assurance that the liability of the
Company based upon any possible failure of the Company or AFC to comply with
federal or state securities law in connection with the Bridge Financing will be
eliminated. Upon the conclusion of this Offering, management does not believe
that any of the persons who acquired the AFC Units will assert any claim with
respect thereto, notwithstanding any potential continuing liability. For the
aforementioned reasons, the Company does not believe that the Units Rescission
Offer or any continuing liability under the Securities Act will have a material
adverse effect on the Company.
CERTAIN ANTI-TAKEOVER AND OTHER PROVISIONS OF DELAWARE LAW AND THE COMPANY'S
CERTIFICATE OF INCORPORATION AND BYLAWS
The Company has authorized a dividend distribution of rights (each, a
"Right") to purchase a certain number of units (determined by a formula
described herein) at a price of $33, subject to adjustment (the "Exercise
Price"). Each unit is equal to one one-hundredth of a share of a newly
authorized Series A Preferred Stock. One Right will be distributed per share of
Common Stock and Class B Common Stock of the Company on the record date (the
"Record Date"). Rights will also be distributed in connection with the future
issuance of shares of Common Stock and Class B Common Stock. The description and
terms of the Rights are set forth in a Stockholder Protection Agreement (the
"Agreement") between the Company and the rights agent (the "Rights Agent").
Until the Separation Time (as defined below), the Rights are not
exercisable and certificates for the Rights will not be sent to stockholders.
Subject to certain exceptions described in the Agreement, the Rights will
separate from the Common Stock and the Class B Common Stock, separate
certificates evidencing the Rights (the "Rights Certificates") will be issued
and the Rights will become exercisable 10 business days (the "Separation Time")
following the date on which a person (including its affiliates and associates)
(i) acquires, (ii) obtains the right to acquire or (iii) announces or commences
a tender or exchange offer to acquire beneficial ownership of 15% or more (or in
the case of certain institutional investors, more than 20% of the outstanding
Common Stock (such person thereby becoming an "Acquiring Person")).
Following the Separation Time, holders of the Rights (the "Rights Holders")
(other than Rights beneficially owned by the Acquiring Person or its affiliates
or associates, which will thereafter be void) will be entitled to receive upon
exercise and payment of the Exercise Price that number of units of Series A
Preferred Stock which equals the result obtained by dividing the Exercise Price
by 50% of the Market Price (as defined in the Agreement) per share of Common
Stock and Class B Common Stock at the Separation Time (subject to adjustment, if
applicable). Each unit of Series A Preferred Stock will be entitled to one vote
on all matters on which share of Common Stock and Class B Common Stock may vote.
If, after the Separation Time, (i) the Company were to be acquired in a
merger or other business combination transaction in which the Company was not
the surviving corporation nor in which the Company's outstanding Common Stock
were changed or exchanged for cash, stock or assets of another person or (ii)
50% or more of the Company's consolidated assets or earning power were to be
sold (other than in transactions in the ordinary course of business), then
proper provision would be made so that each Rights Holder who has not
theretofore exercised his Rights (other than Rights beneficially owned by the
Acquiring Person or its affiliates or associates, which will thereafter be void)
will thereafter have the right to receive, upon exercise, a number of shares of
common stock of the acquiring entity having a value equal to two times the
Exercise Price.
Each share of Series A Preferred Stock for which Rights had been exercised
prior to a business combination or other transaction of the type referred to in
clause (i) in the immediately preceding paragraph
55
<PAGE>
would be entitled to receive upon consummation thereof 100 times the
consideration (cash, securities or other property, or a combination thereof)
that one share of Common Stock would receive. At any time on or prior to the
earlier of (i) the Separation Time or (ii) the Expiration Date of the Rights,
the Company may redeem the Rights in whole, but not in part, at a price of $.01
per Right (the "Redemption Price"). Immediately upon the action of the Board of
Directors authorizing redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the Rights Holders will be to receive the
Redemption Price.
At any time following the Separation Time but before the Expiration Date,
the Company may, at its option, exchange all or any portion of the Rights for
shares of Common Stock at an exchange ratio which equals the Exercise Price
divided by the Market Price per share of Common Stock. The Company, however, may
not effect such an exchange if an Acquiring Person become the owner of 50% or
more of the then outstanding Common Stock.
The Company is subject to the provisions of Section 203 of the General
Corporation Law of the State of Delaware (the "DGCL"). Section 203 prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes a merger, asset sale or other transaction resulting in a
financial benefit to the interested stockholder. Subject to certain exceptions,
an "interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years prior to the proposed business
combination, has owned 15% or more of the corporation's voting stock.
The Company's Certificate of Incorporation provides that liability of
directors of the Company is eliminated to the fullest extent permitted under the
DGCL. As a result, no director of the Company will be liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability: (i) for any breach of the director's duty of
loyalty to the Company or its stockholders; (ii) for acts omissions not in good
faith or which involve intentional misconduct or a knowing violation of law;
(iii) for any willful or negligent payment of an unlawful dividend, stock
purchase or redemption; or (iv) for any transaction from which the director
derived an improper personal benefit. The Company's Bylaws generally provide
that the Company shall indemnify its directors, employees and other agents to
the fullest extent provided by Delaware law.
In addition, the Company's Certificate of Incorporation requires the vote
of 60% of the Board of Directors to effect certain actions, including a sale of
substantially all of the assets of the Company, certain mergers and
combinations, and the acquisition of securities representing a majority of the
voting power of the Company. The "supermajority" voting rights could have the
effect of making it more difficult for a third party to acquire, or discouraging
a third party from seeking to acquire, control of the Company.
The Bylaws of the Company provide that stockholders must follow an advance
notification procedure for certain stockholder nominations of candidates for the
Board of Directors and for certain other stockholder business to be conducted at
an annual meeting. These provisions could, under certain circumstances, operate
to delay, defer or prevent a change in control of the Company. The Transfer
Agent and Registrar for the Common Stock is American Securities Transfer &
Trust, Inc.
56
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
The market price of the Common Stock of the Company could be adversely
affected by the sale of substantial amounts of the Common Stock in the public
market following the IPO. After giving effect to the sale of the shares of
Common Stock offered hereby, the Company will have 5,778,322 shares of Common
Stock issued and outstanding (8,328,322 shares of the Underwriter's
over-allotment option is excercised in full) (assuming an initial public
offering price of $11.00 per share). Of these shares, 3,700,000 shares
(4,255,000 shares if the Underwriters' over-allotment option is exercised in
full) of Common Stock sold in the Offering will be freely tradable without
restriction under the Securities Act, except for any shares exchanged by
"affiliates" of the Company as that term is defined under the Securities Act.
None of the 2,078,322 remaining shares of Common Stock were acquired in a
transaction registered under the Securities Act. Such shares may not be sold
except in transactions registered under the Securities Act or pursuant to an
exemption from registration. All such 2,078,322 shares of Class A Common Stock
will be eligible for sale pursuant to Rule 144 promulgated under the Securities
Act in March 1999. In addition, 598,807 shares of Class B Common Stock will be
eligible for sale pursuant to Rule 144 promulgated under the Securities Act and
the balance of these shares will be eligible for sale at various times from June
1998 through October 1998.
In general, under Rule 144 as currently in effect, a person who has (or
persons whose shares are aggregated who have) beneficially owned "restricted"
shares for at least one year, including an "affiliate" of the Company, as that
term is defined in the Securities Act, is entitled to sell within any
three-month period a number of shares of Common Stock that does not exceed the
greater of 1% of the then outstanding shares of Common Stock or the average
weekly trading volume during the four calendar weeks preceding the date on which
notice of the sale is filed with the Commission. Sales under Rule 144 are also
subject to certain manner of sale provisions and the availability of current
public information about the Company. A person who is not an affiliate of the
Company at any time during the three months preceding a sale, and who has
beneficially owned shares for at least two years, would be entitled to sell such
shares without regard to the volume limitations, manner of sale provisions or
notice or other requirements of Rule 144.
In addition, the Company, its officers and directors and certain other
stockholders of the Company have agreed that they will not offer, contract to
sell, announce their intention to sell, pledge or otherwise dispose of, directly
or indirectly, or file with the Commission a registration statement under the
Securities Act relating to any additional shares of Common Stock or securities
convertible or exchangeable or exercisable for any shares of Common Stock
without the prior written consent of the Representative for a period of days
after the date of this Prospectus (the "lock-up period"), except (i) subsequent
sales of Common Stock offered in the Offering, (ii) issuances of unregistered
Common Stock by the Company in connection with affiliation with practices,
physicians and ancillary providers (although persons receiving such shares would
be subject to such restrictions for the remainder of the lock-up period) or
(iii) issuances of Common Stock by the Company pursuant to the exercise of
employee stock options outstanding on the date of this Prospectus.
Pursuant to an agreement with the Company, the holders of all shares of
Common Stock outstanding on the date of this prospectus have certain
registration rights with respect to such shares and additional shares that may
be issued to such persons upon exercise of options (subject to certain
limitations on the number of shares such holders are entitled to have registered
under any registration statement), although the holders of at least 2,078,322 of
these shares of Class A Common Stock and all holders of Class B Common Stock
(including all AFC members to whom shares of Class B Common Stock will be
distributed) have agreed to refrain from selling their shares during the lock-up
period. Pursuant to the Registration Rights Agreements, the Company has granted
certain registration rights to the DPMs permitting them to include their shares
of Common Stock on a registration statement filed by the Company within one year
of the date of such agreements. The Company intends to register an additional
1,157,098 shares of Common Stock reserved for issuance under the 1997 Plan as
soon as practicable after expiration of the lock-up period. The shares of Common
Stock issuable pursuant to this Offering will be freely tradable after their
issuance by persons not affiliated with the Company unless the Company
contractually restricts their sale. These shares generally will be freely
tradable upon issuance to persons not deemed to be affiliates of the Company,
unless the Company contractually restricts the sale or other transfer of such
shares. Initially, the Company will issue such shares subject to a lock-up
period of up to 180 days from the date of this Prospectus. See "Plan of
Distribution."
57
<PAGE>
PLAN OF DISTRIBUTION
THE COMPANY
This Prospectus covers the offer and sale of up to 2,000,000 shares of
Common Stock, which the Company may issue from time to time in connection with
the future direct and indirect acquisitions of other businesses, properties or
securities in business combination transactions in accordance with Rule
415(a)(1)(viii) of Regulation C under the Securities Act or as otherwise
permitted under the Securities Act.
The Company expects that the terms upon which it may issue the shares of
Common Stock will be determined through negotiations with the securityholders or
principal owners of the businesses whose securities or assets are acquired. It
is expected that the shares that are issued will be valued at prices reasonably
related to market prices for the Common Stock prevailing either at the time an
acquisition agreement is executed or at the time an acquisition is consummated.
GENERAL
All expenses of this Offering will be paid by the Company. No underwriting
discounts or commissions will be paid in connection with the issuance of shares
of Common Stock by the Company in business combination transactions, although
finder's fees may be paid with respect to specific acquisitions. Any person
receiving a finder's fee may be deemed to be an Underwriter within the meaning
of the Securities Act.
The Company will apply for the listing of the shares of Common Stock
offered hereunder on the Nasdaq National Market, but such shares may be subject
to certain contractual holding period restrictions.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Baker & Hostetler LLP. As a result of his membership in AFC, a
partner of Baker & Hostetler LLP will be distributed approximately 4,273 shares
of Class B Common Stock and one of counsel attorney at Baker & Hostetler LLP
holds 18,038 shares of Class B Common Stock and will be distributed
approximately 2,991 shares of Class B Common Stock as a result of his membership
in AFC. In addition, such of counsel attorney is participating in the Bridge
Financing and will receive repayment of the $95,000 AFC Promissory Note issued
to him by AFC, and AFC will repurchase his membership interests for $71,667 in
cash.
EXPERTS
The financial statements of American Medical Providers, Inc., Pyramid
Anesthesiology Group, Inc. and Bellaire Surgicare, Inc. appearing in this
Prospectus and Registration Statement have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of such firm as
experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all exhibits, schedules and amendments relating thereto, the
"Registration Statement") under the Securities Act with respect to the Common
Stock offered hereby. This Prospectus, which is a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Common Stock, reference is hereby made to the
Registration Statement and the exhibits and schedules filed as part thereof.
Statements contained in this Prospectus concerning the provisions or contents of
any contract, agreement or any other document referred to herein are not
necessarily complete. With respect to each such contract, agreement or document
filed as an exhibit to the Registration Statement, reference is made to such
exhibit for a more complete description of the matters involved, and each
statement shall be deemed qualified in its entirety by such reference to the
copy of the applicable document filed with the Commission. The Registration
Statement, including the exhibits and schedules thereto, may be inspected
without charge at the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
following Regional Offices of the Commission: New York Regional
58
<PAGE>
Office, 7 World Trade Center, 13th Floor, New York, New York 10048; and Chicago
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of the Registration Statement and the exhibits and schedules thereto can
be obtained from the Public Reference Section of the Commission upon payment of
prescribed fees. The Registration Statement, including the exhibits and
schedules thereto, is also available on the Commission's Web site at
http://www.sec.gov. In addition, the Company will make application for the
Common Stock to be listed for trading on the Nasdaq National Market. Upon
listing, periodic reports, proxy material and other information concerning the
Company, when filed, may be inspected at the offices of the Nasdaq Operations,
1735 K Street, N.W., Washington, D.C.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by the Company's independent public
accountants.
59
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
----
AMERICAN MEDICAL PROVIDERS, INC.
Report of Independent Public
Accountants....................... F-2
Balance Sheets..................... F-3
Statements of Operations........... F-4
Statements of Stockholders'
Deficit........................... F-5
Statements of Cash Flows........... F-6
Notes to Financial Statements...... F-7
PYRAMID ANESTHESIOLOGY GROUP, INC.
Report of Independent Public
Accountants....................... F-18
Balance Sheets..................... F-19
Statements of Operations........... F-20
Statements of Stockholders'
Equity............................ F-21
Statements of Cash Flows........... F-22
Notes to Financial Statements...... F-23
BELLAIRE SURGICARE, INC.
Report of Independent Public
Accountants....................... F-26
Balance Sheets..................... F-27
Statements of Operations........... F-28
Statements of Shareholders'
Equity............................ F-29
Statements of Cash Flows........... F-30
Notes to Financial Statements...... F-31
UNAUDITED PRO FORMA COMBINED BALANCE
SHEET
Introduction to Unaudited Pro Forma
Combined Balance Sheet............ F-35
Unaudited Pro Forma Combined
Balance Sheet..................... F-36
Notes to Unaudited Pro Forma
Combined Balance Sheet............ F-37
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Medical Providers, Inc.:
We have audited the accompanying balance sheet of American Medical
Providers, Inc., a development-stage enterprise and a Delaware corporation (the
"Company"), as of December 31, 1996, and the related statement of operations,
stockholders' deficit and cash flows for the period from inception (August 9,
1996) to December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Medical Providers,
Inc. as of December 31, 1996, and the results of its operations and its cash
flows for the period from inception (August 9, 1996) to December 31, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
October 16, 1997
F-2
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)
BALANCE SHEETS
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash............................ $ -- $ --
Deferred issuance costs......... 404,622 1,791,902
Other current assets............ 12,092 25,200
------------ -------------
Total current assets....... 416,714 1,817,102
EQUIPMENT, at cost................... 116,648 234,314
Less - Accumulated
depreciation................... (5,258) (25,100)
------------ -------------
Equipment, net............. 111,390 209,214
------------ -------------
Total assets............... $ 528,104 $ 2,026,316
============ =============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable................ $ 262,806 $ 1,208,533
Accrued salaries................ 166,970 303,210
Due to stockholder.............. 612,269 2,425,692
------------ -------------
Total current
liabilities............ 1,042,045 3,937,435
------------ -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Preferred Stock, $.001 par
value; 20,000,000 shares
authorized, no shares issued
and outstanding................ -- --
Class A Common Stock, $.001 par
value; 20,000,000 shares
authorized, no shares issued
and outstanding................ -- --
Class B Common Stock, $.001 par
value; 1,000,000 shares
authorized, 650,000 shares
issued and outstanding......... 650 650
Additional paid-in capital...... 921,850 1,213,060
Deficit accumulated during the
development stage.............. (1,436,441) (3,124,829)
------------ -------------
Total stockholders'
deficit................ (513,941) (1,911,119)
------------ -------------
Total liabilities and
stockholders'
deficit................ $ 528,104 $ 2,026,316
============ =============
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
FOR THE PERIOD
FROM INCEPTION
(AUGUST 9, NINE MONTHS
1996) TO ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
--------------- -------------
(UNAUDITED)
REVENUES............................. $ -- $ --
EXPENSES:
Salaries, wages and benefits.... 1,323,618 797,166
General and administrative...... 112,823 891,222
--------------- -------------
Total expenses........ 1,436,441 1,688,388
--------------- -------------
LOSS BEFORE INCOME TAXES............. (1,436,441) (1,688,388)
INCOME TAX BENEFIT................... -- --
--------------- -------------
NET LOSS............................. $(1,436,441) $ (1,688,388)
=============== =============
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)
STATEMENTS OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
DEFICIT
CLASS A CLASS B ACCUMULATED
PREFERRED STOCK COMMON STOCK COMMON STOCK ADDITIONAL DURING THE
--------------- --------------- ---------------- PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE
------ ------ ------ ------ ------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
INITIAL CAPITALIZATION
AUGUST 9, 1996 (Inception)......... -- $-- -- $-- 650,000 $650 $ -- $ --
Non-cash compensation charge..... -- -- -- -- -- -- 921,850 --
Net loss......................... -- -- -- -- -- -- -- (1,436,441)
------ ------ ------ ------ ------- ------ ---------- -----------
BALANCE AT DECEMBER 31, 1996......... -- -- -- -- 650,000 650 921,850 (1,436,441)
Non-cash compensation charge..... -- -- -- -- -- -- 291,210 --
Net loss (Unaudited)............. -- -- -- -- -- -- -- (1,688,388)
------ ------ ------ ------ ------- ------ ---------- -----------
BALANCE AT SEPTEMBER 30, 1997
(Unaudited)........................ -- $-- -- $-- 650,000 $650 $1,213,060 $(3,124,829)
====== ====== ====== ====== ======= ====== ========== ===========
</TABLE>
STOCKHOLDERS'
DEFICIT
-------------
INITIAL CAPITALIZATION
AUGUST 9, 1996 (Inception)......... $ 650
Non-cash compensation charge..... 921,850
Net loss......................... (1,436,441)
-------------
BALANCE AT DECEMBER 31, 1996......... (513,941)
Non-cash compensation charge..... 291,210
Net loss (Unaudited)............. (1,688,388)
-------------
BALANCE AT SEPTEMBER 30, 1997
(Unaudited)........................ $(1,911,119)
=============
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
FOR THE PERIOD
FROM INCEPTION
(AUGUST 9, NINE MONTHS
1996) TO ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
-------------- -------------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................... $ (1,436,441) $ (1,688,388)
Adjustments to reconcile net loss
to net cash used in operating
activities --
Non-cash compensation and
consulting expense............. 921,850 291,210
Depreciation.................... 5,258 19,842
Changes in assets and
liabilities --
Deferred issuance costs....... (404,622) (1,387,280)
Other current assets.......... (11,442) (13,108)
Accounts payable.............. 262,806 945,727
Accrued salaries.............. 166,970 136,240
-------------- -------------
Net cash used in
operating
activities......... (495,621) (1,695,757)
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment............. (116,648) (117,666)
-------------- -------------
Net cash used in
investing
activities......... (116,648) (117,666)
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from stockholder.......... 612,269 1,813,423
-------------- -------------
Net cash provided by
financing
activities......... 612,269 1,813,423
-------------- -------------
NET CHANGE IN CASH................... -- --
CASH, beginning of period............ -- --
-------------- -------------
CASH, end of period.................. $ -- $ --
============== =============
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
(A DEVELOPMENT-STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION
American Medical Providers, Inc. (the "Company" or "AMP") was founded in
August 1996 to provide physician practice management services and comprehensive
foot care delivery systems to podiatric practices throughout the United States.
Simultaneously with, and as a condition to the closing of an initial public
offering (the "Offering"), 46 separate podiatric practices will transfer (the
"Transfers") either certain of their operating assets and accounts receivable or
stock to the Company in exchange for cash, shares of class A common stock (the
"Common Stock") and the assumption of certain indebtedness (these practices,
including the practice relating to the Kramer Transfer and the Ambulatory
Surgery Center Acquisitions discussed below, collectively referred to as the
"Affiliated Practices"). The Company will own the operating assets and
receivables of the Affiliated Practices, hire their non-physician employees and
otherwise assume the management of each practice. The doctors of podiatric
medicine ("DPMs") will join regional group practices organized by geographic
location (the "Regional Group Practices"). The Company will enter into a
long-term management agreement with each Regional Group Practice under which AMP
will receive fees for its services. At the time of the Offering, AMP will
acquire in a purchase accounting transaction Pyramid Anesthesiology Group, Inc.
("AnestheCare") (the "AnestheCare Acquisition"), an anesthesiology management
services organization. The Company will also acquire the stock of one of the
Affiliated Practices in a transaction to be accounted for as a purchase (the
"Kramer Transfer"). The Transfers, the AnestheCare Acquisition and the Kramer
Transfer are collectively referred to as the "Transactions." Each owner DPM of
the Affiliated Practices and AnestheCare is considered a "promoter" of the
Company.
The Company has had no on-going, non-developmental business operations to
date, and the financial statements have been prepared on the basis that the
proposed Transactions will occur, although no assurance can be made that the
proposed Transactions will be completed or that the Company will be successful
in completing planned future acquisitions. If the Company is unable to
successfully complete the Offering, the Company will be unable to satisfy its
obligations. The Company intends to expand by affiliating with additional
podiatric practices throughout the United States. In order to expand, the
Company will need additional capital in the form of debt or equity financing.
There can be no assurance that such capital will be available.
Ankle & Foot Centers of America, LLC ("AFC") was formed to fund the
organization and development of AMP through the date of the Offering. Thus, for
purposes of these financial statements, costs and expenses incurred by AFC are
treated as transactions of AMP. Upon the Offering's consummation, AMP will
reimburse AFC for all costs and expenses that AFC has incurred to the Offering
date and will assume all liabilities of AFC with respect to AMP. Accordingly,
all amounts actually incurred by AFC on behalf of AMP with respect to such
costs, expenses and liabilities are reflected in these financial statements of
AMP as amounts due to stockholder.
During August 1996, the Company authorized for issuance 1,000,000 shares of
AMP Common Stock, $.01 par value, and approved the issuance of 20,000 shares of
AMP Common Stock, of which 16,500 were issued to AFC and 3,500 to a founder of
AFC who is also a member of AFC management. In addition, certain members of
management and consultants to the Company received 440,250 and 51,000 membership
interests in AFC, during 1996 and the nine months ended September 30, 1997,
respectively. AFC management plans to distribute the AMP shares held by AFC to
AFC members and to certain members of AFC management as determined by AFC. As of
December 31, 1996 and September 30, 1997, 5,250 shares of the AMP Common Stock
received by AFC had been issued to members of AFC management and consultants.
The Company has recognized a non-cash compensation charge of $921,850 and
$291,210 during 1996 and the nine months ended September 30, 1997, respectively,
representing the difference between the amount paid for these interests and the
estimated fair value of these interests and the AMP shares issued. In addition,
management plans to distribute the amounts payable to AFC by AMP at closing.
Certain of the Promoter DPMs (defined below) have made investments in AFC
either individually or participate in organizations which have invested in AFC.
Consequently, it is anticipated that certain of these Promoters will be
distributed shares of AMP as a result of their ownership in AFC. In addition,
certain Promoter DPMs who are also directors of AMP will participate in the
directors stock option plan. See
F-7
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
"Distribution of Class B Common Stock to Certain Promoters" included on page 48
of this Registration Statement for further discussion.
THE TRANSACTIONS
All of the Transfers of the initial Affiliated Practices (together with
AMP, "the Promoters"), except for the acquisition of two ambulatory surgery
centers included in the Transfers (collectively, the "Ambulatory Surgery Center
Acquisitions") and the Kramer Transfer, will be accounted for by the Company
under Securities and Exchange Commission Staff Accounting Bulletin ("SAB") No.
48, "Transfers of Non-Monetary Assets by Promoters or Shareholders," such that
the non-monetary assets and liabilities of these initial Affiliated Practices
will be received by the Company at the transferor's historical cost basis for
accounting purposes. The Ambulatory Surgery Center Acquisitions, the AnestheCare
Acquisition, in which the Company will acquire assets of an anesthesiology
management services organization located in Georgia, and the Kramer Transfer, in
which the Company will acquire the stock of Dr. Kramer's podiatric practice in
Georgia, will not be accounted for under SAB 48. Instead, these and all future
individual practice affiliations will be accounted for as purchases at fair
market value and are expected to result in purchase prices in excess of net
assets acquired (goodwill) which will require subsequent annual noncash
amortization charges in the Company's statements of operations. Monetary assets
and liabilities, including billed and unbilled receivables and credit balances,
payables and certain miscellaneous accruals will either be acquired by AMP at
their fair market value or retained by the Affiliated Practices, as agreed among
the parties.
In connection with the Transfers, AMP will acquire certain operating
assets, accounts receivable or the stock of entities holding the non-monetary
assets of the 46 separate Affiliated Practices in exchange for a combination of
cash, shares of Common Stock and assumed liabilities, and will enter into
long-term management agreements with the Regional Group Practices. The aggregate
consideration to be paid by the Company in the Transfers is approximately $34.5
million, consisting of approximately $18.3 million payable in shares of Common
Stock at the initial public offering price attributed to the net non-monetary
assets, approximately $4.7 million in cash and $156,000 of assumed indebtedness
attributed to the net non-monetary assets of the SAB 48 Transfers, $4.3 million
in cash attributed to the net monetary assets of the SAB 48 Transfers, $4.1
million payable in shares of Common Stock at the initial public offering price,
$1.0 million in cash and $500,000 of assumed indebtedness attributed to the
Ambulatory Surgery Center Acquisitions which are included in the Transfers but
not accounted for under SAB 48, and $1.4 million in cash attributed to the
Kramer Transfer. Of the total consideration attributed to the non-monetary
assets for each SAB 48 transaction, the Affiliated Practices could elect to
receive up to 25% in cash and the balance in shares of Common Stock based on the
initial offering price. The non-monetary assets and liabilities of these
Affiliated Practices excluding the Ambulatory Surgery Center Acquisitions and
the Kramer Transfer, will carry over at their historical costs to AMP. The
number of shares to be issued is contingent upon the Offering price and will not
be determined until the Offering date. The assets to be transferred include
cash, billed and unbilled receivables, supplies inventory, other receivables,
prepaid expenses, net equipment and certain other current and noncurrent assets.
The liabilities to be transferred include credit balances of accounts
receivable, certain miscellaneous accruals and debt assumed. Consideration in
the AnestheCare Acquisition will consist of approximately $4.5 million in cash.
Additional consideration of up to $1.5 million in cash and a number of shares of
Common Stock equal to $500,000 valued at the initial offering price, may be paid
to the owners of AnestheCare pending AnestheCare's achievement of certain
performance targets over a three-year period beginning January 1, 1998. Cash and
liabilities assumed totaling approximately $4.7 million paid to the Affiliated
Practices for the non-monetary assets will be recorded as a dividend by the
Company.
The Company's methodology for valuing the non-monetary assets in the
Transfers was primarily based upon a multiple of the projected earnings
contribution to AMP utilizing adjusted historical financial information of the
respective Affiliated Practices.
F-8
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEFERRED ISSUANCE COSTS
The Company has incurred certain costs including legal, accounting and
other professional services associated with the Transactions and the Offering.
These costs have been deferred pending the consummation of the Transactions and
the Offering.
REVENUE RECOGNITION
Revenues from managing the practices and ancillary operations will be
recognized on a monthly basis as the services are provided. The revenue of AMP
will consist of the sum of the management fees and such amounts equal to the
operating expenses of the podiatric practice assumed by AMP under the management
agreements and owned ancillary operations. In general, the management agreements
provide for the payment of fees to the Company based on a negotiated percentage
of the adjusted patient revenue of the podiatric practice and ancillary
operations. Adjusted patient revenue is net patient revenue, as determined under
generally accepted accounting principles, including adjustments for contractual
allowances and other discounts, plus an adjustment for uncollectible accounts.
Expenses not required to be paid by AMP pursuant to the agreements primarily
consist of certain professional expenses of the podiatrist.
INCOME TAXES
The Company follows the liability method of accounting for income taxes in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109.
Under this method, deferred income taxes are recorded based upon the differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
underlying assets or liabilities are recovered or settled.
Since inception, the Company has incurred losses and is dependent upon the
consummation of the Transactions and the Offering to generate future income.
Accordingly, a full valuation allowance has been provided on tax benefits
generated during the development stage.
STOCK OPTIONS
The Company anticipates accounting for the issuance of options to employees
in accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting
for Stock Issued to Employees." Options issued to employees at an exercise price
at or above fair value at the date of grant would require no compensation
expense to be recorded under APB Opinion No. 25. In addition, Statement of
Financial Accounting Standards (SFAS) No. 123 "Accounting for Stock-Based
Compensation"(SFAS 123) will require pro forma disclosure reflecting the effect
of recording the employee stock options under SFAS 123 which would require
compensation expense based upon the fair value of the equity instrument granted
over the expected vesting period. Options issued to non-employees will be
accounted for under SFAS No. 123. Options issued to non-employees require
compensation expense to be recorded for the fair value of the equity instrument
granted over the expected vesting period.
EARNINGS PER SHARE
Earnings per share has been excluded from the financial statements because
the Company has limited historical operations and does not have a significant
operating history. Accordingly, earnings per share is less meaningful.
USE OF ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those estimates.
INTERIM UNAUDITED FINANCIAL INFORMATION
The interim financial statements as of and for the nine months ended
September 30, 1997 are unaudited and certain information and footnote
disclosures normally included in financial statements prepared in
F-9
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
accordance with generally accepted accounting principles, have been omitted. In
the opinion of management, they include all adjustments (consisting solely of
normal recurring adjustments) necessary for a fair presentation of the unaudited
financial statements for this interim period have been included. Accounting
measurements at interim dates inherently involve greater reliance on estimates
than at year end. The results of interim periods are not necessarily indicative
of the results to be obtained for a full year.
ACCOUNTING PRONOUNCEMENTS
In November 1997, the Emerging Issues Task Force (EITF) of the Financial
Accounting Standards Board issued EITF Consensus 97-2 regarding various
accounting matters relating to the physician practice management industry. This
pronouncement, which was along expected guidelines published during the
deliberation period, did not negatively impact the planned transaction or the
proposed accounting for the transactions and future accounting for AMP. The
pronouncement clarifies that stock options issued to non-employees of the
Company, such as the DPM's in the Regional Group Practices, do not qualify for
employee stock option accounting. Thus any such options issued to non employee
DPM's will be charged to the income statement. As expected, further affiliations
with podiatric practices will need to be accounted for as a contractual
relationship with the excess of purchase price paid over net assets acquired
being assigned to an intangible asset and amortized over future periods.
3. COMMITMENTS AND CONTINGENCIES
The Company will be subject to certain government regulations at the
federal and state levels. In compliance with certain regulatory requirements,
the Company will not control the practice of podiatry. There can be no assurance
that the legality of any long-term management services agreements that will be
entered into will not be successfully challenged. There also can be no assurance
that the laws and regulations of states in which the Company will maintain
operations will not change or be interpreted in the future to restrict or
further restrict the Company's relationship with podiatrists.
Podiatrists may be subject to legal liability suits while under management
or physician engagement agreements with the Company. The Company will not
control or employ the podiatrists; however, the Company intends to acquire
certain liability insurance.
4. TRANSACTIONS WITH AFFILIATED PRACTICES
As discussed in Note 1, the Company plans to complete the Transfers through
a series of stock and asset exchanges, the acquisition of certain monetary
assets and assumption of certain liabilities of the Affiliated Practices
concurrently with an initial public offering of shares of its Common Stock.
AGREEMENTS WITH AFFILIATED PRACTICES AND REGIONAL GROUP PRACTICES
The Company is party to management agreements with each Regional Group
Practice. The owners of the Affiliated Practices (promoters of the Company),
except Dr. Kramer, will enter into five-year DPM engagement agreements with the
Regional Group Practices. Additionally, the non-owner employee podiatrists at
the Affiliated Practices will enter into employment and noncompete agreements
with the Regional Group Practices.
MANAGEMENT AGREEMENTS
The following summary of the management agreements is a general summary of
the form of the management agreements. The Company expects to enter into similar
agreements with other affiliated practices. The terms of the individual
management agreements into which the Company may enter in the future may vary
from the description below as a result of negotiations with individual practices
and the requirements of local laws and regulations.
Pursuant to the management agreements, the Company, among other things,
will (a) act as the exclusive manager and administrator of non-physician
services related to the operation of the Regional Group Practices, subject to
matters for which the Regional Group Practices maintain responsibility or which
are referred to the board of managers of the Regional Group Practices, (b) bill
patients, insurance companies and other third-party payors and collect, on
behalf of the Regional Group Practices, the fees for professional medical and
other services rendered (as allowed by local regulations), including goods and
supplies sold by the Regional Group Practices, (c) provide or arrange for, as
necessary, clerical, accounting, purchasing, payroll, legal, bookkeeping and
computer services and personnel, information management, preparation of
F-10
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
certain tax returns, printing, postage and duplication services and medical
transcribing services, (d) supervise and maintain custody of substantially all
files and records (medical records of the Regional Group Practices remain the
property of the Regional Group Practices), (e) provide facilities for the
Regional Group Practices, (f) prepare, in consultation with the policy boards
and the Regional Group Practices, all annual and capital operating budgets, (g)
order and purchase inventory and supplies as reasonably requested by the
Regional Group Practices, (h) implement, in consultation with the policy boards
and the Regional Group Practices, national and local public relations or
advertising programs, and (i) provide financial and business assistance in the
negotiation, establishment, supervision and maintenance of contracts and
relationships with managed-care and other similar providers and payors. Most of
the services described above are expected to be provided by employees previously
employed by the Affiliated Practices.
Under the management agreements, the Regional Group Practices will retain
the responsibility for, among other things, (a) hiring and compensating
physician employees and certain other medical professionals, (b) ensuring that
physicians have the required licenses, credentials, approvals and other
certifications needed to perform their duties and (c) complying with certain
federal and state laws and regulations applicable to the practice of podiatric
medicine and (d) matters involving its corporate governance, employees and
similar internal matters, including but not limited to preparation and the
contents of reports to regulatory authorities and distribution of professional
fee income. In addition, the Regional Group Practices will maintain exclusive
control of all aspects of the practice of medicine and the delivery of medical
services.
Under the management agreements, the Company will earn fees from the
Regional Group Practices on a monthly basis. The Company will be entitled to
retain a service fee equal to the Regional Group Practice expenses and ancillary
expenses plus approximately 9% to 25% of the Regional Group Practice adjusted
patient revenues, subject to quarterly adjustment to reflect the fair value of
the management services provided considering the nature and volume of services
required and risks assumed by the Company. Adjustments to reflect the fair value
of the management services may occur for a variety of reasons including
unexpected variations in revenues or expenses of the Regional Group Practice.
Any adjustments to the service fee percentage would be made on a prospective
basis. Accordingly, the Company will maintain a net revenue interest and not a
net profits interest. In addition, the Company will generally be entitled to a
fee of approximately 70% of the ancillary revenues, net of certain operating
expenses, of the Regional Group Practice.
The management agreements between the Company and the Regional Group
Practices will have initial terms of 40 years, with automatic extensions (unless
specified notice is given) of additional 10-year terms. The management
agreements may be terminated by either party if the other party (a) files a
petition in bankruptcy or other similar events occur or (b) defaults on the
performance of a material duty or obligation, which default continues for a
specified term after notice and, in the case of the Regional Group Practice, has
also been approved by 80% of the equity holders of the Regional Group Practice.
In addition, the Company may terminate the agreement if the Regional Group
Practice or any DPM (a) engages in conduct or is formally accused of conduct
that would subject his or her license to practice medicine to be revoked or (b)
is otherwise disciplined by any licensing, regulatory or professional entity or
institution, if the result of any event described in clause (a) or (b)
reasonably would be expected to materially adversely affect the group practice.
During the term of the management agreement and for a period of one year
thereafter, the Regional Group Practices agree not to compete with the Company
in providing services similar to those provided by the Company or by any
Regional Group Practice anywhere within 20 miles of any location at which any
DPM of the Regional Group Practice has practiced medicine in the last year. In
addition, the initial management agreement makes the Company a third-party
beneficiary of the physician engagement agreement including the noncompetition
and liquidated damages provisions therein. The management agreements generally
require the Regional Group Practices to pursue enforcement of these provisions
or to assign to the Company the right to pursue enforcement. Furthermore, the
Company may require the Regional Group Practice to pay liquidated damages owed
by a departing DPM before those damages are collected by the Regional Group
Practice.
F-11
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Regional Group Practices will be responsible for obtaining professional
liability and workers' compensation insurance for the DPMs and other medical
employees of the Regional Group Practices, as well as general liability umbrella
coverage. The Company is responsible for obtaining professional liability and
workers' compensation insurance for employees of the Company and arranging for
general liability and property insurance for the Regional Group Practices.
The management agreements will contain indemnification provisions pursuant
to which the Company will indemnify the Regional Group Practices for damages
resulting from negligent acts or omissions by the Company or its agents,
employees or stockholders. In addition, the Regional Group Practices indemnify
the Company for any damages resulting from any negligent act or omission by any
affiliated DPM, agent or employee of the Regional Group Practices, other than
damages resulting from claims arising from the performance or nonperformance of
medical services.
PHYSICIAN ENGAGEMENT AGREEMENTS
In addition to becoming a member of a Regional Group Practice, each
affiliated DPM will enter into an engagement agreement with that Regional Group
Practice (the "Physician Engagement Agreement").
The Physician Engagement Agreements are for a period of five years with
successive two-year renewal periods thereafter. DPMs entering into Physician
Engagement Agreements agree to practice podiatric medicine on a full-time basis
for the Regional Group Practice in return for a percentage of the earnings
before taxes of and certain ancillary revenues related to that Regional Group
Practice. A Physician Engagement Agreement terminates (a) upon the death of the
DPM, (b) upon the DPM's "disability" or (c) at the Regional Group Practice's
option, for "cause," as defined in the Physician Engagement Agreement. If the
Physician Engagement Agreement terminates, other than at the normal expiration
of its term or as a result of a violation by the Regional Group Practice, the
DPM agrees to pay an amount of liquidated damages to the Regional Group Practice
approximately equal to the twelve months of the Affiliated Practice expenses
attributable to that DPM and agreed to by the Company at the time the Purchase
Agreement was executed. Furthermore, during the term of the Physician Engagement
Agreement and for a period of one year commencing upon expiration or termination
of the agreement, the DPM will not compete with the Regional Group Practice
within a radius of 20 miles of the offices at which that DPM practiced podiatry
in the last year.
The management fees earned by the Company will be in accordance with a
standard management agreement which calls for a calculation of the monthly
management fee based primarily on the total revenues earned by the Regional
Group Practices. There are adjustments to the management fees designed to both
provide incentives for the DPMs to provide efficient patient treatment and to
increase the number of patients treated, as well as to ensure that the DPMs
retain a minimum amount for payment of their compensation from their respective
Regional Group Practice on a monthly basis. The Company believes the fees to be
generated by these formulas will be reflective of the fair market value of the
services provided and will be comparable to the fees earned by other management
companies in the respective jurisdictions where these arrangements will exist.
HISTORICAL INFORMATION OF AFFILIATED PRACTICES
The combined historical financial information of the Affiliated Practices
presented herein is not related to the financial position or results of
operations of AMP. This information is presented solely for the purpose of
providing disclosures to potential investors regarding the group of entities
with which AMP will be contracting to provide future services due to the
significant relationships between AMP and the Affiliated Practices. The
Affiliated Practices' financial information is presented on a combined
historical basis due to the fact that their service and engagement agreements
with the Company will be effective on the completion of the Offering. The
Affiliated Practices were not operated under common control or management during
the fiscal year ended December 31, 1996, or during the nine months ended
September 30, 1997.
F-12
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED ADJUSTED REVENUES
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -----------
(UNAUDITED)
Affiliated Practices' net patient
revenues........................... $ 21,238,392 $15,847,767
Ancillary service revenues of
Affiliated Practices............... 2,486,220 1,716,494
AnestheCare.......................... 1,867,646 1,662,522
------------ -----------
Total combined adjusted
revenues................ $ 25,592,258 $19,226,783
============ ===========
OPERATING EXPENSES
Subsequent to the Transfers, substantially all of the operating expenses of
the Affiliated Practices will be the responsibility of AMP through the Regional
Group Practices to be formed. The Company shall be responsible for the payment
of all operating expenses incurred by the Regional Group Practice as required to
operate a podiatric office. These expenses will include the following:
a. Salaries, benefits, payroll taxes, workers' compensation, health
insurance and other benefit plans, and other direct expenses of all
employees of the Regional Group Practices, excluding those costs
associated with AMP and any other classification of employee which AMP
is prohibited from employing by law.
b. Direct costs of all employees or consultants that provide services to
each Regional Group Practice.
c. Office supplies as permitted by law.
d. Lease or rent payments as permitted by law, depreciation, principal and
other debt service, utilities, telephone and maintenance expenses for
practice facilities.
e. Property taxes on AMP assets located at Regional Group Practice
offices.
f. Property, casualty, liability and malpractice insurance premiums.
g. Recruiting expenses.
h. Interest on advances to Regional Group Practice bank accounts.
i. Advertising and other marketing expenses attributable to the promotion
of Regional Group Practice offices.
All of the above expenses will be incurred by AMP and be paid directly to
the third-party provider of the goods or services indicated.
The Regional Group Practices will assume responsibility for the payment of
any and all direct employment expenses, including benefits, for any DPM or other
employee that AMP is prohibited by law from employing. In addition, the Regional
Group Practices will retain responsibility for the payment of continuing
education expenses, seminars, professional licenses, professional membership
dues and all other expenses of any DPM.
The combined historical expenses of the Affiliated Practices, ancillary
services of the Affiliated Practices and AnestheCare for the year ended December
31, 1996, and the nine months ended September 30, 1997, were as follows:
COMBINED DETAIL OF EXPENSES
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(UNAUDITED)
Salaries, wages and benefits of
employees, excluding the DPMs...... $ 4,188,504 $ 3,049,196
Supplies............................. 1,552,930 1,184,584
Rent................................. 1,728,239 1,210,081
Advertising and marketing............ 520,945 388,983
General and administrative........... 7,006,604 5,919,435
Depreciation and amortization on
acquired assets.................... 592,823 314,873
------------ -------------
Total expenses............. $ 15,590,045 $ 12,067,152
============ =============
F-13
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The DPM's received $6,535,071 and $4,425,287 as compensation expense
leaving $3,873,967 and $3,105,621 as distributable earnings during the year
ended December 31, 1996 and the nine months ended September 30, 1997
(unaudited), respectively.
The above presentation of the combined expenses of the Affiliated
Practices, ancillary services of the Affiliated Practices and AnestheCare is
presented solely for the purpose of providing disclosure to potential investors
regarding the group of entities with which AMP will be contracting to provide
future services. All of the historical expenses incurred (as noted above) will
not be assumed by AMP and are not necessarily indicative of the expenses to be
incurred by the Company in the future.
RECEIVABLES OF AFFILIATED PRACTICES
The following table presents the combined uncollected patient receivables
of the Affiliated Practices and AnestheCare affiliate receivables, net of
allowance for bad debts and contractual allowances.
COMBINED NET RECEIVABLES
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ --------------
(UNAUDITED)
Patient receivables, net of
contractual and bad debt allowances
of $4,356,060 and $4,390,398,
respectively....................... $4,117,057 $3,883,231
AnestheCare affiliate receivables.... 386,970 216,412
------------ --------------
$4,504,027 $4,099,643
============ ==============
5. SUBSEQUENT EVENTS (UNAUDITED)
On February 17, 1998 the Company authorized 20,000,000 shares of Class A
Common Stock, par value $.001 per share ("Common Stock"), 1,000,000 shares of
Class B Common Stock, par value $.001 per share ("Class B Common Stock") and
20,000,000 shares of preferred stock, par value $.001 per share. Immediately
thereafter, the Company converted each share of its existing 20,000 shares of
common stock, par value $.01 per share, into 32.5 shares of the Company's Class
B Common Stock. Accordingly, the historical share data has been restated for all
periods presented. The Class B Common Stock is convertible into Common Stock, at
the option of the holder thereof, upon the occurrence of a Conversion Event (as
defined). The maximum number of shares of Common Stock that may be issued upon
conversion of the Class B Common Stock is 1,950,000. The Class B Common Stock
converts into Class A Common Stock on a share-for-share basis, provided however,
that if the Common Stock reaches certain average closing prices over a 15-day
period during the next six years on the Nasdaq National Market, other
over-the-counter market or an exchange, as then applicable (the "Trading
Market") then the conversion ratio with respect to a certain number of shares of
Class B Common Stock will immediately change so that such shares will thereafter
be convertible into Common Stock at the ratio of three shares of Common Stock
for each share of Class B Common Stock (each such share an "Adjusted Conversion
Share").
On the date that the average closing price on the Trading Market for the
preceding 15 consecutive trading days (the "Average Price") exceeds 150% of the
price to the public in the Offering, 130,000 of the issued shares of Class B
Common Stock will immediately become Adjusted Conversion Shares (and subject to
the new 3-for-1 conversion ratio). Thereafter, the remaining 520,000 shares of
Class B Common Stock will become Adjusted Conversion Shares in four remaining
increments of 130,000 shares of Class B Common Stock each (20% of the total
number of shares of Class B Common Stock issued) upon the attainment of new
Average Prices. The Average Prices applicable to each new 20% increment will
equal 120% of each preceding Average Price applicable to the preceding 20%
increment.
A Conversion Event shall be deemed to have occurred (i) in the event of a
disposition of such share of Class B Common Stock by the holder thereof
(excluding dispositions to such holder's affiliates), (ii) in the event any
person not affiliated with the Company acquires beneficial ownership of 15% or
more of the outstanding shares of capital stock of the Company, (iii) in the
event any person not affiliated with the Company offers to acquire 15% or more
of the outstanding shares of capital stock of the Company, (iv) in the event the
holder of such shares elects to so convert at any time after the second
anniversary of the date of the Prospectus included in the Company's initial
public offering Registration Statement (the "IPO Prospectus"), (v) on the sixth
anniversary of the date of the IPO Prospectus or (vi) in the event the holders
of a majority of the outstanding shares of Common Stock approve such conversion.
In addition, the
F-14
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Company may elect to convert any outstanding shares of Class B stock into shares
of Common Stock in the event 95% or more of the outstanding shares of Class B
Common Stock as of the date of this Prospectus have previously been converted
into shares of Common Stock.
Upon consummation of the Offering, holders of the Class B Common Stock will
have the ability to elect as a class one member of the Board of Directors and
the holders of the Common Stock will have the ability to elect as a class all
other members of the Board of Directors; provided however that if 65% or more of
the Class B Common Stock outstanding on the date of the IPO Prospectus have been
converted into Common Stock, the Class B Common Stock shall no longer have the
ability to elect director as a class . The Common Stock and Class B Common Stock
possess ordinary voting rights and vote together as a single class in respect of
all other corporate matters, and, in connection therewith, holders of shares of
Common Stock are entitled to one vote per share and holders of shares of Class B
Common Stock are entitled to 2/3 of a vote per share. The Common Stock and Class
B Common Stock afford no cumulative voting rights, and the holders of a majority
of the shares voting for the election of directors can elect all the directors
if they choose to do so. Except for the conversion rights of the Class B Common
Stock described below, the Common Stock and Class B Common Stock carry no
preemptive rights, are not convertible, redeemable, assessable or entitled to
the benefits of any sinking fund. The holders of Common Stock and Class B Common
Stock are entitled to dividends in such amounts and at such times as may be
declared by the Board of Directors out of funds legally available therefore.
The Board of Directors is authorized, without further action by the
stockholders, to provide for the issuance of shares of Preferred Stock as a
class without series or in one or more series, to establish the number of shares
in each class or series and to fix the designation, powers, preferences and
rights of each such class or series and the qualifications, limitations or
restrictions thereof. Because the Board of Directors has the power to establish
the preferences and rights of each class or series of Preferred Stock, the Board
of Directors may afford the holders of any class or series of Preferred Stock
preferences, powers and rights, voting or otherwise, senior to the rights of
holders of Common Stock or the Class B Common Stock. The issuance of Preferred
Stock could have the effect of delaying or preventing a change in control of the
Company. To date, the Company has not issued any Preferred Stock but the Board
has authorized the issuance of the Series A Junior Participating Preferred Stock
of the Company.
Subsequent to September 30, 1997, the Company adopted the 1997 Incentive
and Non-Qualified Stock Option Plan (the "1997 Plan") to provide incentives to
attract and retain directors, officers, advisors, consultants and key employees.
Officers, directors, employees of the Company, consultants and advisors to the
Company are eligible to receive awards under the 1997 Plan, at the Plan
Administrator's discretion. Awards available under the 1997 Plan include: (i)
common stock purchase options; (ii) stock appreciation rights; (iii) restricted
stock; (iv) deferred stock; (v) performance shares and (vi) other stock based
awards. The Company has reserved up to 1,157,098 of the shares of its Common
Stock for granting of options under the 1997 Plan. Under the terms of the 1997
Plan, the Plan Administrator retains discretion, subject to plan limits, to
modify the terms of outstanding awards and to reprice awards. Subsequent to
September 30, 1997, options to purchase 464,500 of the shares of Common Stock
were granted all at an exercise price equal to the initial public offering price
vesting over a period of four years. The Company anticipates granting options to
purchase additional shares of Common Stock to employees of AMP and the Regional
Group Practices, prior to or contemporaneous with the closing of the Offering,
at a purchase price equal to the initial public offering price.
During September 1997, AFC entered into a loan and security agreement which
resulted in borrowings of $500,000 from a third party. The borrowings bear
interest at an annual rate of 18%, payable quarterly, and are due March 31, 1998
or the fifth day following the date of the initial public offering of AMP.
Proceeds under the loan are being used by AFC to fund certain expenses on behalf
of AMP in conjunction with AMP's proposed initial public offering. Upon the
closing of the Offering, AMP will assume this obligation of AFC in satisfaction
of amounts due to AFC. The agreement provides for, at the lenders' option
exercised by notice prior to the initial public offering pricing, the conversion
of any or all of the outstanding principal and accrued interest on the loan into
shares of AMP Common Stock offered in the Offering valued at the initial public
offering price.
During the first quarter of 1998, AFC intends to complete a financing of
$1.5 million (the "Bridge Financing"), representing $1.425 million in
non-interest bearing loans and $75,000 representing 15
F-15
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
membership units in AFC to fund certain expenses on behalf of AMP, in
conjunction with AMP's proposed initial public offering. The financing provides
for the loans to be repaid by AFC from funds it will receive from AMP's initial
public offering. Additionally, AFC is required to repurchase each of the 15
membership units in AFC for $71,667 in cash. In connection with the Offering
each investor was given the opportunity to keep such cash or purchase $71,667
worth of AMP Common Stock offered in the Offering valued at the initial public
offering price. Upon the closing of the Offering, AMP will assume this
obligation of AFC in satisfaction of amounts due to AFC. AMP will recognize an
interest charge totaling $1.0 million during the period through settlement of
this obligation representing the difference between the $1.5 million face value
of the obligation and the $2.5 million settlement value.
The Bridge Financing was offered and sold by AFC in reliance on certain
exemptions from registration under the Securities Act of 1993 (the "Act").
Because the Bridge Financing was not completed when the Company filed a
registration statement with the Securities and Exchange Commission (the
"Commission") pursuant to a public offering of the Company's stock, an argument
could be made that the consummation of the Company's public offering caused such
exemptions to be unavailable retroactively. Consequently, the Company has
registered the Bridge Financing and is offering the investors thereof the
opportunity to rescind their investment (the "Bridge Financing Rescission
Offer"). If this rescission offer is accepted, the investors in the Bridge
Financing will be repaid the amount of their original $1.5 million investment,
plus interest at the applicable statutory rate from the date of issuance. If the
rescission offer is rejected, the investors in the Bridge Financing will be
repaid a total of $2.5 million.
The Company has received from a major international financial institution a
commitment for a $30.0 million, three-year revolving credit facility that is
expected to be available to help fund the Company's working capital needs,
capital expenditures and anticipated future affiliations. The credit facility is
expected to contain customary affirmative and negative covenants (including
proscriptions on the payment of dividends and capital expenditures.) The credit
facility is expected to bear interest at either the London Inter-Bank Offered
Rate or, at the Company's option, the lender's base rate, plus a margin based on
the ratio of the Company's senior debt to earnings before interest, taxes,
depreciation and amortization. There can be no assurance that the Company will
ultimately close on the credit facility.
The Board of Directors is authorized without further action by the
stockholders to provide for the issuance of shares of Preferred Stock as a class
without series or in one or more series, to establish the number of shares in
each class or series and to fix the designation, powers, preferences, powers and
rights, of each such class or series and the qualifications, limitations or
restrictions thereof. The issuance of Preferred Stock could have the effect of
delaying or preventing a change in control of the Company.
Between November 5, 1997 and February 11, 1998, the Company entered into
negotiations with and delivered non-binding letters of intent to 13 holders of
certain operating assets of, or the stock of entities holding certain operating
assets of, twelve podiatric practices (the Practice Owners) by which each
Practice Owner was to come to an agreement with the Company to dispose of
certain operating assets of, or the stock of entities holding certain operating
assets of such Practice Owner's podiatric practices (the "Letters of Intent").
The Company has subsequently determined that its negotiations with and
deliveries of Letters of Intent to the Practice Owners may constitute an offer
to sell Common Stock inconsistent with the prospectus delivery requirements of
the Securities Act. In order to limit its potential liability under the Act, the
Company is undertaking a rescission offer (the"Practice Rescission Offer") with
respect to any potential offer made within or outside of the Letters of Intent.
Practice Owners may accept the Practice Rescission Offer or reject the
Practice Rescission Offer. To the extent that a Practice Owner accepts the
Practice Rescission Offer, the Company takes the position that its potential
liability based upon any possible failure of the Company to comply with the
Securities Act by negotiating and delivering the Letters of Intent without a
prospectus will be eliminated. If a Practice Owner accepts the Practice
Rescission Offer, the previous Letters of Intent will be deemed canceled. A
Practice Owner will receive no other consideration by accepting the Practice
Rescission Offer. To the extent that a Practice Owner rejects the Practice
Rescission Offer he or she will retain whatever rights he or she presently has
under the Securities Act in connection with the earlier Letter of Intent.
F-16
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
It is the position of the Staff of the Securities and Exchange Commission
that any liability of the Company under the Securities Act for the Practice
Rescission Offer may survive and not be barred by the Practice Rescission Offer.
However, it is possible that a court would hold that the legal remedies
available to the Practice Owners are diminished as a result of the Practice
Rescission Offer. Although the legal principles applicable to a transaction such
as the Practice Rescission Offer are not clear, among possible bases for such a
determination are that any Practice Owners who accept the Rescission Offer
thereby will have entered into an accord and satisfaction that moots any claim
for damages and that any such Practice Owners who reject the Practice Rescission
Offer may have waived or be estopped from asserting his or her rights by failing
to accept the Practice Rescission Offer.
As discussed in Note 1, pursuant to a reimbursement and assumption
agreement with AFC, the Company will reimburse the affiliation-related expenses
incurred by AFC since May 1996, including AFC's payroll, travel and
entertainment and professional fees. In addition, the Company will assume
certain lease obligations of AFC for office space, and has entered into recent
lease obligations for additional office space.
In the first quarter of 1998, AMP intends to complete its initial public
offering of its Common Stock and intends to simultaneously exchange cash and
shares of its Common Stock for certain assets and liabilities of the founding
practices upon consummation of the Offering. An investment in shares of Common
Stock offered by this prospectus involves a high degree of risk, including,
among others, limited operating history of the Company and combined practices,
dependence on operative agreements, dependence on Regional Group Practices,
implementation of information systems, dependence upon key personnel, growth
strategy, managed care, future health care reform, competition and the need for
additional funds. For a more thorough discussion of risk factors, see "Risk
Factors" included elsewhere in this prospectus.
F-17
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Pyramid Anesthesiology Group, Inc.:
We have audited the accompanying balance sheets of Pyramid Anesthesiology
Group, Inc. (the "Company" or "AnestheCare"), a Georgia S Corporation, as of
December 31, 1995 and 1996, and September 30, 1997, and the related statements
of operations, stockholders' equity and cash flows for the years ended December
31, 1995 and 1996, and the nine months ended September 30, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pyramid Anesthesiology
Group, Inc., as of December 31, 1995 and 1996, and September 30, 1997, and the
results of its operations and its cash flows for the years ended December 31,
1995 and 1996, and the nine months ended September 30, 1997, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
December 15, 1997
F-18
<PAGE>
PYRAMID ANESTHESIOLOGY GROUP, INC.
BALANCE SHEETS
DECEMBER 31,
---------------------- SEPTEMBER 30,
1995 1996 1997
---------- ---------- --------------
ASSETS
CURRENT ASSETS:
Cash............................ $ 5 $ 42,464 $ 36,947
Accounts receivable............. 31,970 -- --
Accounts receivable from
affiliates.................... 550,525 386,970 216,412
Other current assets............ 3,980 1,183 --
---------- ---------- --------------
Total current assets....... 586,480 430,617 253,359
---------- ---------- --------------
EQUIPMENT, at cost
Computers and equipment......... 88,960 132,029 151,867
Furniture and fixtures.......... 97,575 115,860 115,860
---------- ---------- --------------
186,535 247,889 267,727
Less-Accumulated depreciation... (26,373) (86,775) (118,440)
---------- ---------- --------------
160,162 161,114 149,287
---------- ---------- --------------
OTHER ASSETS:
Investment...................... 18,000 7,200 7,200
---------- ---------- --------------
$ 764,642 $ 598,931 $ 409,846
========== ========== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable................ $ 13,726 $ 20,904 $ 58,390
Due to affiliates............... 250,770 260,504 30,984
Accrued expenses................ 15,122 41,543 55,931
Note payable to related party... 26,438 74,776 59,484
---------- ---------- --------------
Total current
liabilities............. 306,056 397,727 204,789
---------- ---------- --------------
STOCKHOLDERS' EQUITY:
Common stock.................... 2,000 2,000 2,000
Retained earnings............... 456,586 199,204 203,057
---------- ---------- --------------
Total stockholders'
equity.................. 458,586 201,204 205,057
---------- ---------- --------------
$ 764,642 $ 598,931 $ 409,846
========== ========== ==============
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
PYRAMID ANESTHESIOLOGY GROUP, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS
DECEMBER 31, ENDED
----------- SEPTEMBER 30,
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES ................................................. $1,009,017 $1,867,646 $1,662,522
OPERATING EXPENSES ....................................... 495,960 763,825 705,765
---------- ---------- ----------
Income from operations ......................... 513,057 1,103,821 956,757
---------- ---------- ----------
OTHER INCOME:
Interest income ..................................... 3,851 1,719 1,540
Gain on sale of investment to
affiliate ......................................... -- 196,875 --
Other ............................................... 16,558 11,203 50,253
---------- ---------- ----------
Total other income ............................. 20,409 209,797 51,793
---------- ---------- ----------
NET INCOME ............................................... $ 533,466 $1,313,618 $1,008,550
========== ========== ==========
PRO FORMA DATA (unaudited):
Historical net income ............................... $ 533,466 $1,313,618 $1,008,550
Pro forma owners'
compensation ...................................... 300,000 300,000 175,000
Pro forma income taxes .............................. 93,386 405,447 333,420
---------- ---------- ----------
Pro forma net income ........................... $ 140,080 $ 608,171 $ 500,130
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-20
<PAGE>
PYRAMID ANESTHESIOLOGY GROUP, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
----- ------ ----------- -----------
<S> <C> <C>
BALANCE, December 31, 1994 ............................ 2,000 $2,000 $ 45,341 $ 47,341
Stockholder distributions ........................ -- -- (122,221) (122,221)
Net income ....................................... -- -- 533,466 533,466
----- ------ ----------- -----------
BALANCE, December 31, 1995 ............................ 2,000 2,000 456,586 458,586
Stockholder distributions ........................ -- -- (1,571,000) (1,571,000)
Net income ....................................... -- -- 1,313,618 1,313,618
----- ------ ----------- -----------
BALANCE, December 31, 1996 ............................ 2,000 2,000 199,204 201,204
Stockholder distributions ........................ -- -- (1,004,697) (1,004,697)
Net income ....................................... -- -- 1,008,550 1,008,550
----- ------ ----------- -----------
BALANCE, September 30, 1997 ........................... 2,000 $2,000 $ 203,057 $ 205,057
===== ====== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
PYRAMID ANESTHESIOLOGY GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED NINE MONTHS
DECEMBER 31, ENDED
------------------------- SEPTEMBER 30,
1995 1996 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................. $ 533,466 $ 1,313,618 $ 1,008,550
Adjustments to reconcile net income
to net cash provided by
operating activities --
Depreciation ......................................... 26,373 60,402 31,664
Gain on sale of investments .......................... -- (196,875) --
Changes in assets and
liabilities --
Accounts receivable ................................ 3,030 31,970 --
Accounts receivable from
affiliates ...................................... 926,388 163,555 170,550
Other current assets ............................... (3,980) 2,797 1,183
Accounts payable ................................... (13,486) 7,178 37,486
Due to affiliates .................................. (1,186,590) 9,734 (229,520)
Accrued expenses ................................... 15,122 26,421 14,388
----------- ----------- -----------
Net cash provided by operating
activities ......................................... 300,323 1,418,800 1,034,301
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and
equipment ............................................ (186,535) (61,354) (19,829)
Purchase of investment .................................. (18,000) -- --
Proceeds from sale of investment ........................ -- 207,675 --
----------- ----------- -----------
Net cash provided by (used in)
investing activities ............................... (204,535) 146,321 (19,829)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to shareholders ........................... (122,221) (1,571,000) (1,004,697)
Note payable to related party ........................... 26,438 48,338 (15,292)
----------- ----------- -----------
Net cash used in financing
activities ......................................... (95,783) (1,522,662) (1,019,989)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH ........................... 5 42,459 (5,517)
CASH, beginning of period ................................. -- 5 42,464
----------- ----------- -----------
CASH, end of period ....................................... $ 5 $ 42,464 $ 36,947
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
F-22
<PAGE>
PYRAMID ANESTHESIOLOGY GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Pyramid Anesthesiology Group, Inc. (the "Company"), a Georgia S
Corporation, was incorporated on February 1, 1993, for the purpose of providing
billing and management services for entities that provide health care-related
services for local hospitals and to members of the community. The Company began
generating revenues from its primary operations in March 1995.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Accordingly, actual results could differ from those estimates.
INVESTMENT
The Company maintains an ownership interest in a partnership. Since the
Company's ownership does not represent a significant influence, the investment
is accounted for under the cost method.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash, receivables and accounts payable approximates
fair value due to the short maturity of these instruments.
PROPERTY AND DEPRECIATION
Property and equipment are stated at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of the respective assets.
Those lives are as follows:
Computers and equipment......................................... 5 years
Furniture and fixtures.......................................... 7 years
Maintenance and repairs are charged to expense as incurred whereas major
renewals and betterments are capitalized. When items of property or equipment
are sold or retired, the related cost and accumulated depreciation are removed
from the accounts and any gain or loss is included in income.
REVENUE RECOGNITION
The Company earns revenues under various cost-sharing agreements which are
based upon a percentage of revenues of the customer. Accordingly, the Company
recognizes revenues under the cost-sharing agreements based upon the accrual
basis revenues of the respective customer.
Additionally, the Company earns revenues from SCNA for providing consulting
services as the service is provided (see Note 2).
The Company also earns revenues through the provision of management and
billing services (see Note 2). The Company's management agreements primarily
provide that revenues are earned based upon a percentage of cash collected by
the respective business. Accordingly, the Company recognizes management fee
revenues as cash is collected by the customer.
INCOME TAXES
The Company, with the consent of its stockholders, has elected under the
Internal Revenue Code to be an S Corporation for tax purposes. In lieu of
corporation income taxes, the stockholders of an S Corporation
F-23
<PAGE>
PYRAMID ANESTHESIOLOGY GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
are taxed on their proportionate share of the Company's taxable income.
Therefore, no provisions or liability for income taxes has been included in the
financial statements.
The Company's S-Corporation status will terminate effective with the
acquisition by AMP as further discussed in Note 4. The deferred taxes estimated
upon conversion to C-Corporation status are not expected to be material. The
unaudited pro forma data presents the incremental provision for income taxes as
if the Company had been subject to federal and state income taxes, assuming a
blended rate of 40%.
OWNERS' COMPENSATION
Effective July 1, 1997, the shareholders began to receive salaries of
$25,000 each per quarter. Prior to July 1, 1997, the shareholders had not
historically received a salary for their services, but received distributions as
S-Corporation shareholders. All earnings of the Company are available for
distribution to the shareholders. The pro forma owners' compensation reflects
the compensation the shareholders will receive prospectively under the terms of
the employment agreements with AMP as further discussed in Note 4.
SIGNIFICANT CONCENTRATIONS
Substantially all of the Company's revenue is from services performed
through affiliates of the Company (see Note 2). The Company's parent has signed
a professional services agreement with one hospital which expires September 30,
1999, with continuing one-year renewal options thereafter. Approximately 32% and
47% of the Company's revenues were from services associated with this contract
during the years ended December 31, 1995 and 1996, respectively. Effective
January 1, 1997, the Company restructured the professional services agreements.
The Company began processing the billing of patients directly at this time for
affiliates of the Company (as described in Note 2) and the revenues generated
associated with this contract were intermingled with the revenues from
affiliates of the Company.
2. RELATED-PARTY TRANSACTIONS
The Company provides services to a group of affiliated companies (the
"Affiliates"). As of December 31, 1995 and 1996, and September 30, 1997 the
Affiliates with some common owners are Georgia Rehabilitation Center ("GRC"),
Southern Crescent Nurse Anesthesia, LLC, ("SCNA") and Cell Saver, Inc. Southern
Crescent Anesthesiology, Inc. ("SCA"), is also an affiliate but is not under
common control.
The Company earns 7 to 10 percent of all revenues collected on behalf of
the Affiliates. In addition, revenues from services provided to three hospitals
are earned through affiliates of the Company, primarily through a professional
services agreement between the parent company, AnestheCare, Inc. (the "Parent"),
and one hospital. Accounts receivable from these affiliated entities as of
December 31, 1995 and 1996, and September 30, 1997, were $550,525, $386,970, and
$216,412, respectively. Revenues from these affiliated entities for the years
ended December 31, 1995 and 1996, and the nine months ended September 30, 1997
under these collections agreements were $1,006,035, $1,632,125, and $500,626,
respectively. Based upon contractual arrangements between the Company and the
Affiliates through December 31, 1996, certain general and administrative costs
which benefit all the entities are shared amongst all entities. The contractual
arrangements provided that these indentified costs, primarily payroll costs of
certain personnel, would be allocated evenly among Pyramid, GRC, SCNA and SCA.
Expenses allocated to the Affiliates for the years ended December 31, 1995 and
1996, were $57,500 and $230,728, respectively. As of December 31, 1996, one of
the Affiliates had prepaid $17,166 of these expenses, which is shown as due to
affiliates in the accompanying financial statements. Management believes that
the methods used to allocate these expenses are reasonable. Effective January 1,
1997, the agreements with Affiliates were restructured and the Company now earns
6 to 12 percent of revenues of the Affiliates as a charge for general and
administrative costs. Revenues earned under this cost-sharing agreement were
$825,507 for the nine months ended September 30, 1997.
F-24
<PAGE>
PYRAMID ANESTHESIOLOGY GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In January of 1996, the Company sold its 60% interest in Peachtree
Lithotripsy to an affiliate, SCA, for approximately $208,000 resulting in a gain
on the sale of approximately $197,000.
During 1997, two owners of the Company, who were previously member owners
in SCNA, withdrew their membership from SCNA. Additionally, the Company entered
into an agreement whereby it would act as consultant on behalf of SCNA. Included
in 1997 revenues are $274,075 of consulting revenues related to these
agreements. Effective January 1, 1997, the terms of this agreement specified
that the consulting fee would be $25,000 per month, plus 15% of SCNA's taxable
income, as defined.
3. COMMITMENTS AND CONTINGENCIES
The Company rents office space from one of the Affiliates for $5,166 per
month through August 2005. Rent expense for 1996 was $61,992. The Company
additionally leases a light truck and an office copier.
Future minimum payments under these leases are as follows:
Year ending September 30 --
1998............................ $ 74,647
1999............................ 75,024
2000............................ 72,444
2001............................ 69,261
2002............................ 62,532
Thereafter...................... 177,264
----------
$ 531,172
==========
The Company has a defined contribution 401(k) plan. Eligible employees can
contribute up to 15 percent of their compensation, and the Company may make a
discretionary matching contribution. For 1996, the Company contributed $8,625.
No matching contributions have been approved for 1997.
4. SUBSEQUENT EVENTS
In October 1997, the Company entered into an agreement with American
Medical Providers, Inc. ("AMP"), pursuant to which AMP or a designated
subsidiary will acquire substantially all of the assets and operations of the
Company. The scope of the ongoing operations of Pyramid will be significantly
reduced as a result of the sale as AMP will assume substantially all operations
from Pyramid.
F-25
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Bellaire Surgicare, Inc.
We have audited the accompanying balance sheets of Bellaire Surgicare,
Inc., as of December 31, 1995 and 1996, and the related statements of
operations, shareholders' equity and cash flows for the period from the date of
inception (March 15, 1995) to December 31, 1995, and for the year ended December
31, 1996. These financial statements are the responsibility of Bellaire
Surgicare, Inc.'s management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Bellaire Surgicare, Inc., as
of December 31, 1995 and 1996, and the results of its operations and its cash
flows for the period from the date of inception (March 15, 1995) to December 31,
1995, and for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
January 19, 1998
F-26
<PAGE>
BELLAIRE SURGICARE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- SEPTEMBER 30,
1995 1996 1997
---------- ---------- --------
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................................................... $ 45,201 $ 130,001 $139,045
Accounts receivable, net of
allowance for contractual
adjustments and bad debts of
$690,878, $466,415 and $416,770
(unaudited) ............................................................... 558,608 394,670 320,156
Due from related parties ..................................................... -- 28,000 20,500
Prepaid expenses and other current assets .................................... 64,799 80,889 92,041
---------- ---------- --------
Total current assets ................................................. 668,608 633,560 571,742
PROPERTY AND EQUIPMENT, net .................................................... 492,090 445,574 351,872
OTHER NONCURRENT ASSETS, net ................................................... 18,750 3,750 --
---------- ---------- --------
Total assets ......................................................... $1,179,448 $1,082,884 $923,614
========== ========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt ............................................ $ 132,023 $ 597,216 $594,876
Current portion of obligations under capital leases .......................... 22,740 25,014 16,698
Accounts payable and accrued expenses ........................................ 133,539 142,255 137,004
Due to related parties ....................................................... -- 12,119 10,401
---------- ---------- --------
Total current liabilities ............................................ 288,302 776,604 758,979
LONG-TERM DEBT, net of current portion ......................................... 549,476 26,653 --
LONG-TERM OBLIGATIONS UNDER CAPITAL LEASES, net of current portion ............. 51,184 26,170 13,035
---------- ---------- --------
Total liabilities .................................................... 888,962 829,427 772,014
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value;
1,000,000 shares authorized and
140,000 shares issued and outstanding ..................................... 14,000 14,000 14,000
Retained earnings ............................................................ 276,486 239,457 137,600
---------- ---------- --------
Total shareholders' equity ........................................... 290,486 253,457 151,600
---------- ---------- --------
Total liabilities and shareholders' equity ........................... $1,179,448 $1,082,884 $923,614
========== ========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
BELLAIRE SURGICARE, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD
FROM INCEPTION
(MARCH 15, NINE MONTHS ENDED
1995) TO YEAR ENDED SEPTEMBER 30,
DECEMBER 31, DECEMBER 31, --------------------------
1995 1996 1996 1997
--------------- ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES............................. $ 1,922,496 $ 2,486,220 $ 1,755,781 $ 1,716,494
COSTS AND EXPENSES:
Surgical costs..................... 404,481 444,939 313,187 364,996
Salaries, wages and benefits....... 232,989 359,325 252,619 284,645
Management and professional fees... 242,030 340,064 241,203 253,103
General and administrative
expenses........................ 298,392 392,125 296,906 318,217
Depreciation and amortization...... 89,287 143,677 104,729 107,091
Interest expense................... 49,831 68,011 48,776 43,606
--------------- ------------- ------------ ------------
Total costs and expenses...... 1,317,010 1,748,141 1,257,420 1,371,658
--------------- ------------- ------------ ------------
Income from operations............. 605,486 738,079 498,361 344,836
OTHER INCOME......................... -- 2,392 1,304 1,304
--------------- ------------- ------------ ------------
NET EARNINGS......................... $ 605,486 $ 740,471 $ 499,665 $ 346,140
=============== ============= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE>
BELLAIRE SURGICARE, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------- RETAINED
SHARES AMOUNT EARNINGS
--------- ------- ---------
<S> <C> <C> <C>
INITIAL CAPITALIZATION, March 15,
1995.................................. 140,000 $14,000 $ --
Net earnings....................... -- -- 605,486
Dividends to shareholders.......... -- -- (329,000)
--------- ------- ---------
BALANCE, December 31, 1995.............. 140,000 14,000 276,486
Net earnings....................... -- -- 740,471
Dividends to shareholders.......... -- -- (777,500)
--------- ------- ---------
BALANCE, December 31, 1996.............. 140,000 14,000 239,457
Net earnings (unaudited)........... -- -- 346,140
Dividends to shareholders
(unaudited)...................... -- -- (447,997)
--------- ------- ---------
BALANCE, September 30, 1997
(unaudited)........................... 140,000 $14,000 $ 137,600
========= ======= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE>
BELLAIRE SURGICARE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION NINE MONTHS
(MARCH 15, ENDED
1995) TO YEAR ENDED SEPTEMBER 30
DECEMBER 31, DECEMBER 31, --------------------------
1995 1996 1996 1997
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings....................... $ 605,486 $ 740,471 $ 499,665 $ 346,140
------------ ------------ ------------ ------------
Adjustments to reconcile net
earnings to net cash provided by
operating activities --
Depreciation and amortization... 89,287 143,677 104,729 107,091
Changes in assets and
liabilities --
(Increase) decrease in --
Accounts receivable, net... (559,326) 163,938 131,033 74,514
Due from (to) related
parties................. -- (28,000) -- 7,500
Prepaid expenses and other
current assets.......... (64,081) (16,090) (21,272) (11,152)
Increase (decrease) in --
Accounts payable and
accrued expenses........ 133,539 20,835 75,832 (6,969)
------------ ------------ ------------ ------------
(400,581) 284,360 290,322 170,984
------------ ------------ ------------ ------------
Net cash provided by
operating activities.... 204,905 1,024,831 789,987 517,124
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of non-compete
agreement....................... (30,000) -- -- --
Purchase of property and
equipment....................... (482,532) (82,161) (81,730) (9,639)
------------ ------------ ------------ ------------
Net cash used in investing
activities.............. (512,532) (82,161) (81,730) (9,639)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common
stock........................... 14,000 -- -- --
Proceeds from long-term
obligations..................... 738,543 566,731 49,465 98,000
Payment of long-term obligations... (57,044) (624,361) (101,763) (126,993)
Payment of obligations under
capital leases.................. (13,671) (22,740) (18,866) (21,451)
Dividends to shareholders.......... (329,000) (777,500) (523,906) (447,997)
------------ ------------ ------------ ------------
Net cash provided by (used
in) financing
activities.............. 352,828 (857,870) (595,070) (498,441)
------------ ------------ ------------ ------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS........................ 45,201 84,800 113,187 9,044
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 0 45,201 45,201 130,001
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 45,201 $ 130,001 $ 158,388 $ 139,045
============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTMENT ACTIVITIES:
Capital lease obligations incurred
to acquire equipment............ $ 87,595 $ -- $ -- $ --
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-30
<PAGE>
BELLAIRE SURGICARE, INC.
NOTES TO FINANCIAL STATEMENTS
1. BUSINESS, ORGANIZATION AND BASIS OF PRESENTATION:
Bellaire Surgicare, Inc. (the Center), is a free-standing ambulatory
surgery center which services Houston, Texas, and its surrounding communities.
The Center is organized as an S Corporation under the laws of the state of
Texas.
The Center's financial statements have been prepared on the accrual basis
of accounting. As the Center is organized as an S Corporation for federal income
tax reporting purposes, all tax liability is reported on the personal returns of
the shareholders. Upon acquisition by AMP as further discussed in Note 7, the
Company will record a deferred tax liability of approximately $75,000
representing the tax effect of differences between the book and tax bases of
assets and liabilities existing as of the acquisition date.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
INTERIM FINANCIAL INFORMATION
The interim financial statements as of September 30, 1997, and for the nine
months ended September 30, 1996 and 1997, are unaudited, and certain information
and footnote disclosures, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have been omitted. In
the opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the financial position, results of
operations and cash flows with respect to the interim financial statements, have
been included. The results of operations for the interim periods are not
necessarily indicative of the results for the entire fiscal year.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Center believes that the fair value of their financial instruments
approximates their carrying amounts. Financial instruments include cash and cash
equivalents, accounts receivable and certain current and long-term debt.
CASH AND CASH EQUIVALENTS
The Center considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
ACCOUNTS RECEIVABLE
Accounts receivable primarily consist of receivables from patients,
insurers, government programs and other third-party payors for medical services
provided by the Center. Such amounts are reduced by an allowance for contractual
adjustments and other uncollectible amounts. Contractual adjustments result from
the differences between the rates charged by the Center for services performed
and the amounts allowed by the Medicare and Medicaid programs and other
govenmental and private insurers.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Equipment under capital leases
is stated at the net present value of the future minimum lease payments at the
inception of the related leases. Depreciation of property and equipment is
calculated using the straight-line method over the estimated useful lives of the
assets. Routine maintenance and repairs are charged to expense as incurred,
while costs of betterments and renewals are capitalized.
OTHER NONCURRENT ASSETS
Other noncurrent assets consist of a noncompete agreement. The noncompete
agreement was amortized on the straight-line basis over two years, which was the
term of the agreement.
F-31
<PAGE>
BELLAIRE SURGICARE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
REVENUES
Medical service revenues are accounted for in the period the services are
provided. The revenues are reported at the estimated realizable amounts from
patients, third-party payors and others. Provisions for estimated third-party
payor adjustments are estimated in the period the related services are provided.
Any adjustment to the amounts recorded will be recorded in the period in which
the revised amount is determined. Medicare and other governmental programs
reimburse based on fee schedules which are determined by the related
governmental agency. Additionally, the Center participates in agreements with
managed-care organizations to provide services at negotiated rates or for
capitated payments. Any differences between estimated contractual adjustments
and actual final settlements under reimbursement contracts are recognized when
the final settlements are made.
CONCENTRATION OF CREDIT RISK
The Center extends credit to patients covered by insurance programs such as
governmental programs like Medicare and Medicaid and private insurers. The
Center manages credit risk with the various public and private insurance
providers, as appropriate. Allowances for doubtful accounts have been made for
potential losses, where appropriate.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1996, consist of the
following:
<TABLE>
<CAPTION>
ESTIMATED DECEMBER 31,
USEFUL LIVES ----------------------
(YEARS) 1995 1996
------------ ---------- ----------
<S> <C> <C> <C>
Equipment............................... 5 $ 459,262 $ 538,521
Leasehold improvements.................. 5 4,513 4,512
Furniture and fixtures.................. 7 18,757 21,660
Equipment under capital leases.......... 3-5 87,595 87,595
---------- ----------
570,127 652,288
Less -- Accumulated depreciation........ (78,037) (206,714)
---------- ----------
Net property and equipment......... $ 492,090 $ 445,574
========== ==========
</TABLE>
4. OTHER NONCURRENT ASSETS:
Other noncurrent assets at December 31, 1995 and 1996, consist of the
following:
DECEMBER 31,
--------------------
1995 1996
--------- ---------
Noncompete agreements................... $ 30,000 $ 30,000
Less -- Accumulated amortization... 11,250 26,250
--------- ---------
$ 18,750 $ 3,750
========= =========
F-32
<PAGE>
BELLAIRE SURGICARE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM OBLIGATIONS
LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1996, consists of the following:
DECEMBER 31,
----------------------
1995 1996
---------- ----------
Note payable to Southwest Bank of Texas,
bearing interest at prime,
collateralized by accounts receivable,
equipment and inventory............... $ -- $ 566,731
Notes payable to Stillwater National Bank
bearing interest at prime plus 1%,
collateralized by accounts
receivable, equipment and inventory... 598,516 --
Notes payable to Alcon Surgical, bearing
interest at 8%, collateralized by
equipment............................. 82,983 57,138
---------- ----------
Total long-term debt............... 681,499 623,869
Less -- Current portion................. 132,023 597,216
---------- ----------
Long-term debt, excluding current
portion.......................... $ 549,476 $ 26,653
========== ==========
Certain debt obligations contain covenants that require maintenance of
certain financial ratios. Default of any covenant could affect the ability of
individual entities to borrow under the agreements and, if not waived or
corrected, could accelerate the maturity of any borrowings outstanding under the
agreements. As of December 31, 1996, the Center has complied with existing loan
covenants.
As of December 31, 1996, the aggregate amounts of annual principal
maturities of long-term debt (excluding capital lease obligations) are as
follows:
1997................................. $ 597,216
1998................................. 26,653
1999................................. --
2000................................. --
2001................................. --
Thereafter........................... --
----------
Total........................... $ 623,869
==========
The Center leases office space as well as certain equipment under capital
leases. Additionally, the Center has certain commitments under noncancelable
operating lease agreements. At December 31, 1996, minimum annual rental
comitments under capital leases and noncancelable operating leases with terms in
excess of one year are as follows:
CAPITAL OPERATING
LEASES LEASES
--------- ---------
1997................................. $ 30,000 $ 168,000
1998................................. 15,000 168,000
1999................................. 8,000 168,000
2000................................. 7,000 168,000
2001................................. -- 168,000
Thereafter........................... -- 55,000
--------- ---------
Total minimum lease
payments................... 60,000 $ 895,000
=========
Less -- Amounts representing
interest............................. 8,816
---------
Present value of minimum capital
lease payments................ 51,184
Less -- Current portion of
obligations under capital leases... 25,014
---------
Long-term obligations under
capital leases, net of current
portion....................... $ 26,170
=========
F-33
<PAGE>
BELLAIRE SURGICARE, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Rent expense related to operating leases amounted to approximately $58,000
and $140,000 for 1995 and 1996. Cash interest paid related to all obligations
was approximately $50,000 and $68,000 in 1995 and 1996, respectively.
6. COMMITTMENTS AND CONTINGENCIES:
The Center is insured with respect to medical malpractice risks on a
claims-made basis. In the normal course of business, the Center has been named
in various lawsuits, primarily alleging medical malpractice. In the opinion of
the Center's management, the ultimate liability, if any, will not exceed the
insurance coverages carried by the Center and will not impact the operating
results or results of financial condition of the Center.
Surgery Centers of America (SCOA) provides management services for the
Center under a management contract expiring January 12, 2000. Fees under the
contract are based on 5 percent of accrual basis revenues plus 10 percent of any
distributions. Additionally, the Center reimburses SCOA for the salary paid to a
SCOA employee who acts as an office administrator of the Center. Expenses under
this arrangement totaled $200,623 and $272,091 for 1995 and 1996, respectively.
7. SUBSEQUENT EVENTS
A majority of the owners of the Center are doctors of podiatry medicine
(DPM's). Eight of these owner/DPMs have agreed to acquire the remaining minority
interests, and will then transfer their respective interests in the Center along
with other non-monetary assets of their practice to American Medical Providers,
Inc. (AMP) in exchange for stock of AMP and cash. The Center is expected to
continue similar operations under the AMP ownership.
F-34
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
INTRODUCTION TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
Simultaneously with and as a condition to the closing of the initial public
offering (the "Offering"), American Medical Providers, Inc. (the "Company" or
"AMP") will acquire certain operating assets and accounts receivable or stock of
46 separate podiatric practices (these practices, including the practice
acquired in the Kramer Transfer (defined below), the "Affiliated Practices")
(the "Transfers") in exchange for cash, shares of class A common stock, $.01 par
value per share (the "Common Stock") and the assumption of certain indebtedness.
The aggregate consideration to be paid by the Company to the initial Affiliated
Practices is approximately $27.5 million, excluding the Ambulatory Surgery
Center Acquisitions (defined below) and the Kramer Transfer which will be
accounted for as purchases. AMP will also acquire through a transaction to be
accounted for as a purchase, certain assets of Pyramid Anesthesiology Group,
Inc. (the "AnestheCare Acquisition"), an anesthesiology management services
organization ("AnestheCare" for consideration of approximately $4.5 million in
cash. Additional consideration of up to $1.5 million in cash and $500,000
payable in shares of Common Stock at the initial public offering price may be
paid in the AnestheCare Acquisition pending AnestheCare's achievement of certain
performance targets over a three-year period beginning January 1, 1998. In
addition, AMP will acquire the stock of the podiatric practice of Dr. Jerald N.
Kramer ("Dr. Kramer"), one of the affiliated practices (the "Kramer Transfer",
and together with the Transfers and the AnestheCare Acquisition, "the
Transactions"). Dr. Kramer will receive cash of $1.4 million in exchange for
assets acquired by the Company, but Dr. Kramer will not enter into a management
services agreement or a physician engagement agreement with a Regional Group
Practice. The Company will also acquire two surgery centers through the
transfers (collectively the "Ambulatory Surgery Center Acquisitions") for
consideration of $5.1 million in cash and Common Stock plus assumed indebtedness
of $500,000. The Transfers, except for the Ambulatory Surgery Center
Acquisitions and the Kramer Transfer, will be accounted for pursuant to Staff
Accounting Bulletin No. 48, "Transfers of Non-monetary Assets by Promoters and
Shareholders" ("SAB No. 48"). As a result, these transactions will result in the
carryover basis of non-monetary assets of the Affiliated Practices. Each owner
doctor of podiatry medicine ("DPM") of the Affiliated Practices and AnestheCare
is considered a "promoter" of the Company.
The following unaudited pro forma combined balance sheet gives effect to
the Transactions and the Offering, and is based upon the historical financial
statements of AMP, the Affiliated Practices as a group, and AnestheCare.
The unaudited pro forma combined balance sheet gives effect as if such
events had occurred on September 30, 1997. The unaudited pro forma combined
balance sheet should be read in conjunction with other financial information,
including the financial statements of AMP included elsewhere in this Prospectus.
The unaudited pro forma combined balance sheet does not give effect to the
Practice Rescission Offer or the Bridge Financing Rescission Offer discussed
further in Note 5 to the financial statements of AMP.
The Company will not employ podiatrists or control the practice of
podiatry. As the Company will not be acquiring the future patient revenues
earned by the Affiliated Practices, the Transfers are not deemed to be business
combinations. In accordance with SAB No. 48, the Transfers will be accounted for
at the historical cost basis with the shares of common stock to be issued in
those transactions being valued at the historical cost of the net non-monetary
assets acquired.
The unaudited pro forma combined balance sheet is presented for
illustrative purposes only and is not necessarily indicative of the financial
position that would have been achieved if the Transactions and Offering had been
consummated on the date indicated, nor is it necessarily indicative of the
future operating results of the Company. The pro forma adjustments are based
upon estimates, available information and certain assumptions and may be revised
as additional information becomes available. Any variance between the estimated
offering price and actual offering price will directly impact the net proceeds
from the Offering. The preliminary allocations of the purchase prices are not
expected to materially differ from the final results.
F-35
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
AMERICAN COMBINED BELLAIRE PRO
MEDICAL AFFILIATED SURGICARE, PRO FORMA FORMA
PROVIDERS, INC. PRACTICES ANESTHECARE INC. ADJUSTMENTS COMBINED
--------------- --------- ----------- ---- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............ $-- $ 952 $ 37 $139 $ (912)(1) $ 37
(179)(3)
Patient receivables, net............. -- 3,840 -- 320 -- 4,160
Affiliate receivables................ -- -- 217 -- -- 217
Deferred issuance costs.............. 1,792 -- -- -- -- 1,792
Other current assets................. 25 221 -- 113 (131)(1) 228
--------------- -------- --- --- ----------- --------
Total current assets............. 1,817 5,013 254 572 (1,222) 6,434
Equipment, net....................... 209 802 149 352 500(3) 2,012
Other assets......................... -- 389 7 -- (389)(1) 1,207
1,200(2)
Goodwill............................. -- -- -- -- 2,890(2) 7,492
651(3)
3,824(5)
127(6)
Restricted cash held in escrow....... -- -- -- -- -- --
--------------- -------- --- --- ----------- --------
Total assets..................... $ 2,026 $ 6,204 $ 410 $924 $ 7,581 $17,145
=============== ======== === === =========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Accounts payable and other current
liabilities........................ $ 1,511 $ 1,163 $ 205 $147 $ (1,305)(1) $ 1,511
(205)(2)
(5)(3)
Due to stockholders.................. 2,426 -- -- -- -- 2,426
Payable to Affiliated Practices...... -- -- -- -- 8,989(1) 8,989
Payable to AnestheCare............... -- -- -- -- 4,500(2) 4,500
Payable to Kramer.................... -- -- -- -- 1,400(3) 1,400
Payable for Ambulatory Surgery Center
Acquisitions....................... -- -- -- -- 1,000(1) 1,000
Deferred income taxes................ -- -- -- -- 966(4) 966
Current portion of long-term debt.... -- 284 -- 612 (240)(1) 656
--------------- -------- ----- --- ----------- --------
Total current liabilities........ 3,937 1,447 205 759 15,100 21,448
--------------- -------- ----- --- ----------- --------
Long-term debt, less current
portion............................ -- 1,103 -- 13 (1,116)(1) --
--------------- -------- ----- --- ----------- --------
Total liabilities................ 3,937 2,550 205 772 13,984 21,448
--------------- -------- ----- --- ----------- --------
STOCKHOLDERS' EQUITY (DEFICIT):
American Medical Providers, Inc.
Class A Common Stock............. -- -- -- -- 2(1) 2
Class B Common Stock............. 1 -- -- -- -- 1
Accumulated deficit.............. (3,125) -- -- -- (5,204)(1) (9,470)
(175)(3)
(966)(4)
Additional paid-in capital....... 1,213 -- -- -- 3,824(5) 5,164
127(6)
AnestheCare
Common Stock..................... -- -- 2 -- (2)(2) --
Retained earnings................ -- -- 203 -- (203)(2) --
Affiliated Practices' combined
equity............................. -- 3,654 -- 152 (3,558)(1) --
(248)(3)
--------------- -------- ----- --- ----------- --------
Total stockholders' equity
(deficit)...................... (1,911) 3,654 205 152 (6,403) (4,303)
--------------- -------- ----- --- ----------- --------
Total liabilities and
stockholders' equity........... $ 2,026 $ 6,204 $ 410 $924 $ 7,581 $17,145
=============== ======== ===== === =========== ========
</TABLE>
POST
OFFERING PRO FORMA
ADJUSTMENTS AS ADJUSTED
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............ 14,017(7) $14,054
Patient receivables, net............. -- 4,160
Affiliate receivables................ -- 217
Deferred issuance costs.............. (1,792)(7) --
Other current assets................. -- 228
----------- -----------
Total current assets............. 12,225 18,659
Equipment, net....................... -- 2,012
Other assets......................... -- 1,207
Goodwill............................. -- 7,492
Restricted cash held in escrow....... 1,500(7) 1,500
----------- -----------
Total assets..................... $13,725 $30,870
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Accounts payable and other current
liabilities........................ (1,511)(7) $--
Due to stockholders.................. (2,426)(7) --
Payable to Affiliated Practices...... (8,989)(7) --
Payable to AnestheCare............... (4,500)(7) --
Payable to Kramer.................... (1,400)(7) --
Payable for Ambulatory Surgery Center
Acquisitions....................... (1,000)(7) --
Deferred income taxes................ -- 966
Current portion of long-term debt.... -- 656
----------- -----------
Total current liabilities........ (19,826) 1,622
----------- -----------
Long-term debt, less current
portion............................ -- --
----------- -----------
Total liabilities................ (19,826) 1,622
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT):
American Medical Providers, Inc.
Class A Common Stock............. 4(7) 6
Class B Common Stock............. -- (7) 1
Accumulated deficit.............. (9,470)
Additional paid-in capital....... 33,547(7) 38,711
AnestheCare
Common Stock..................... -- --
Retained earnings................ -- --
Affiliated Practices' combined
equity............................. -- --
----------- -----------
Total stockholders' equity
(deficit)...................... 33,551 29,248
----------- -----------
Total liabilities and
stockholders' equity........... $13,725 $30,870
=========== ===========
The accompanying notes to the unaudited pro forma combined balance
sheet are an integral part of this financial statement.
F-36
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
The following is a summary of the adjustments reflected in the unaudited
combined pro forma balance sheet:
(1) Reflects the issuance of 2,032,867 shares of Common Stock of the
Company and cash of approximately $10.1 million in exchange for
certain operating assets and accounts receivable or stock and
assumption of certain liabilities of the Affiliated Practices and the
Ambulatory Surgery Centers. Assets not acquired include cash, prepaid
assets, and other non current assets. Liabilities not assumed include
accounts payable, accrued liabilities, and a portion of long-term
debt. The Affiliated Practices and the Ambulatory Surgery Centers will
receive up to twenty five percent of the consideration in cash and the
remainder in Common Stock.
(2) Reflects the AnestheCare Acquisition for a cash purchase price of $4.5
million. Additional consideration of up to $1.5 million in cash and
$500,000 payable in shares of Common Stock valued at the initial
public offering price will be held in escrow and may be paid to the
owners of AnestheCare pending AnestheCare's achievement of certain
performance targets over a three-year period beginning January 1,
1998. All assets of AnestheCare have been acquired and the owners
assumed the liabilities, thus eliminating any liabilities acquired.
The goodwill of $2.9 million will be amortized on a straight line
basis over the estimated life of 25 years. The other intangible assets
relate to customer contracts for which purchase price will be
allocated and amortized on a straight line basis over their estimated
lives ranging from 10 to 15 years.
(3) Reflects the issuance of cash in exchange for stock and property in
the Kramer Transfer. The goodwill of $651,000 will be amortized on a
straight line basis over the estimated life of 25 years.
(4) Reflects the deferred income tax liability attributable to the
temporary differences between financial reporting and income tax bases
of assets and liabilities currently being acquired by AMP through the
Transactions.
(5) Reflects the step-up in the historical basis of Bellaire Surgicare,
Inc. ("Bellaire") which will be acquired by the Company in the
Transfers, but will be accounted for as a purchase business
combination in accordance with APB No. 16. The goodwill of $3.8
million will be amortized on a straight line basis over the estimated
life of 25 years.
(6) Reflects the step-up in the historical basis of the surgical care
center of Dr. Kalish which will be acquired by the Company in the
Transfers, but will be accounted for as a purchase business
combination in accordance with APB No. 16.
(CONTINUED ON FOLLOWING PAGE)
F-37
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET -- (CONTINUED)
(7) Reflects the issuance of 3,700,000 shares of common stock of the
Company assuming an initial public offering price of $11.00 per share
and the application of proceeds as follows (in 000's)
Gross offering proceeds.............. $ 40,700
Underwriting discount................ (2,849)
Offering costs(*).................... (2,508)
Cash portion of the transactions..... (15,889)
Funds placed in escrow............... (1,500)
Due to stockholder................... (2,426)
Payment of accounts payable and other
current liabilities................ (1,511)
--------
Pro forma cash adjustment as of
September 30, 1997................. $ 14,017
========
(*) This amount represents the portion of the total estimated
offering costs of $4,300,000 which is expected to be incurred
subsequent to September 30, 1997, consisting principally of
professional fees associated with the Offering.
Subsequent to September 30, 1997, until the anticipated closing of
this Offering, the Company estimates that it will have incurred
approximately $1.8 million in period costs and capital expenditures
(principally salaries, general office expenses and equipment
purchases) paid by AFC on behalf of the Company, as well as
approximately $1.1 million in interest expense associated with certain
AFC bridge financing transactions. These amounts as well as the
approximate $2.4 million reflected on the historical balance sheet as
due to stockholder will be repaid to AFC out of the proceeds of the
Offering. Additionally, the Company anticipates using approximately
$1.0 million of the proceeds from the Offering to complete the
purchase and installation of the Company's management information
systems. These future expenditures are not reflected in the
accompanying unaudited pro forma combined balance sheet.
F-38
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SHARES OF
COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary...................... 3
Risk Factors............................ 9
Dividend Policy......................... 17
Capitalization.......................... 18
Selected Financial Data................. 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 20
Business................................ 23
Management.............................. 40
Certain Transactions.................... 46
Principal Stockholders.................. 52
Description of Capital Stock............ 53
Shares Eligible for Future Sale......... 57
Plan of Distribution.................... 58
Legal Matters........................... 58
Experts................................. 58
Additional Information.................. 58
Index to Financial Statements........... F-1
UNTIL , 1998 ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS ON SUBSCRIPTIONS.
2,000,000 SHARES
AMERICAN MEDICAL
PROVIDERS, INC.
CLASS A COMMON STOCK
------------------------
PROSPECTUS
------------------------
, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
DELAWARE GENERAL CORPORATION LAW
The General Corporation Law of the State of Delaware (the "DGCL") provides
for indemnification by a corporation of costs incurred by directors, employees
and agents in connection with an action, suit or proceeding brought by reason of
their position as a director, employee or agent. The person being indemnified
must have acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation. The DGCL provides that a
corporation may advance payment of expenses. The DGCL further provides that the
indemnification and advancement of expenses provisions of the DGCL will not be
deemed exclusive of any other rights to which these indemnifications or
advancements of expenses may be entitled under bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action under
official capacity and as to action in another capacity when holding such office.
In addition to the general indemnification section, Delaware law provides
further protection for directors under Section 102(b)(7) of the DGCL. This
section was enacted in June 1986 and allows a Delaware corporation to include in
its certificate of incorporation a provision that eliminates and limits certain
personal liability of a director for monetary damages for certain breaches of
the director's fiduciary duty of care, provided that any such provision does not
(in the words of the statute) do any of the following:
"eliminate or limit the liability of a director (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of this
Title [dealing with willful or negligent violation of the statutory
provision concerning dividends and stock purchases and redemptions], or
(iv) for any transaction from which the director derived an improper
personal benefit. No such provision shall eliminate or limit the liability
of a director for any act or omission occurring prior to the date when such
provision becomes effective. . . ."
CERTIFICATE OF INCORPORATION
The Amended Restated Certificate of Incorporation of the Company provides
that the liability of directors of the Company shall be eliminated to the
fullest extent permissible under DGCL. If the DGCL is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Company, in addition to the limitation on
personal liability described above, shall be limited to the fullest extent
permitted by the amended DGCL. Further, any repeal or modification of such
provision of the Amended and Restated Certificate of Incorporation by the
stockholders of the Company shall be prospective only, and shall not adversely
affect any limitation on the personal liability of a director of the Company
existing at the time of such repeal or modification.
BYLAWS
The Bylaws of the Company generally provide that the Company will indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action by reason of the fact that he or she is
or was a director, officer employee or agent, of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), actually and
reasonably incurred by him or her in connection with such action if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interest of the Corporation; provided, however, that the
Company is only required to indemnify persons serving as directors, officers,
employees or agents of the Company for the expenses incurred in a proceeding if
such person is a party to and is successful, on the merits or otherwise, in such
proceeding. The Bylaws further provide that, in the event of any threatened, or
pending action, suit or proceeding in which any of the persons referred to above
II-1
<PAGE>
is a party or is involved and that may give rise to a right of indemnification
under the Bylaws, following written request by such person, the Company will
promptly pay to such person amounts to cover expenses reasonably incurred by
such person in such proceeding in advance of its final disposition upon the
receipt by the Company of an undertaking executed by or on behalf of such person
providing that such person will repay the advance if it is ultimately determined
that such person is not entitled to be indemnified by the Company as provided in
the Bylaws.
UNDERWRITING AGREEMENT
The Underwriting Agreement provides for the indemnification of the
directors and officers of the Company in certain circumstances.
INSURANCE
The Company intends to maintain liability insurance for the benefit of its
directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
The following exhibits are filed pursuant to Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<C> <S>
3.1 -- Form of Amended and Restated Certificate of Incorporation of American Medical Providers,
Inc. (the "Company")
3.2 -- Form of Amended and Restated Bylaws of the Company
4.1 -- Form of Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock.
4.2 -- Form of Certificate for Class A Common Stock
4.3 -- Form of Certificate for Class B Common Stock
5.1 -- Opinion of Baker & Hostetler, LLP regarding legality of securities being registered
10.1 -- Form of 1997 Incentive and Non-Qualified Stock Option Plan of the Company
10.2 -- Employment Agreement between Ankle & Foot Centers of America LLC ("AFC") and Jack N.
McCrary
10.3 -- Employment Agreement between AFC and Wayne A. Bertsch
10.4 -- Employment Agreement between AFC and Randy E. Johnson
10.5 -- Form of Management Services Agreement by and among the Company and each Regional Group
Practice
10.6 -- Form of Physician Employment Agreement by and between each non-practice owner DPM and the
Regional Group Practice
10.7 -- Form of Physician Engagement Agreement by and between each DPM practice owner and the
Regional Group Practice
10.8 -- Form of Stock Purchase Agreement among the Company and certain DPM practice owners (with
attached schedule)
10.9 -- Form of Business Purchase Agreement among the Company and certain DPM practice owners
(with attached schedule)
10.10 -- Asset Purchase Agreement dated October 31, 1997 among the Company and Pyramid
Anesthesiology Group, Inc.
10.11 -- Form of Registration Rights Agreement between the Company and each DPM practice owner
10.12 -- Form of Stockholder Protection Agreement dated as of February , 1998 between the Company
and , as Rights Agent.
10.13 -- Reimbursement and Assumption Agreement dated as of January 20, 1998 between the Company
and Ankle & Foot Centers of America, L.L.C.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<C> <S>
10.14 -- Letter Agreement dated December 30, 1997 between the Company and Cooperative Centrale
Raiffeisen-Boerenleenbank B.A. "Rabobank Nederland," New York Branch
10.15 -- Stock Purchase Agreement among the Company, Jerald N. Kramer, D.P.M., P.C., and the Owners
named thereon
10.16 -- Employment Agreement between AFC and David LaGuardia
10.17 -- Employment Agreement between AFC and Roger Bigham
10.18 -- Lease Agreement made and entered into effective January 19, 1997 by and between Doctors Hospital 1997, LP
and the Company
10.19 -- Lease Agreement made and entered into effective January 19, 1997 by and between Mid America Equities, L.P.
and the Company
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Baker & Hostetler, LLP (contained in Exhibit 5.1)
24.1 -- Power of Attorney (contained on the signature page II-4 of this Registration Statement)
27.1 -- Financial Data Schedule
99.1 -- Consent of Stanley R. Kalish, D.P.M. to serve on the Company's Board of Directors
99.2 -- Consent of John S. Bace to serve on the Company's Board of Directors
99.3 -- Consent of S.F. Hartley, D.P.M. to serve on the Company's Board of Directors
99.4 -- Consent of Donald S. Huge, M.D. to serve on the Company's Board of Directors
</TABLE>
(b) Financial Statement Schedules.
All schedules are omitted because they are not applicable or because the
required information is contained in the Financial Statements or Notes thereto.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
1. For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) and (4) or
497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
3. To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually
II-3
<PAGE>
or in the aggregate, represent a fundamental change in the information
set forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee"table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
4. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
5. Prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
6. Every prospectus: (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
7. The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day
of receipt of such request, and to send the incorporated documents by first
class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
8. The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
American Medical Providers, Inc. has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Houston, State of Texas, on February 17, 1998.
AMERICAN MEDICAL PROVIDERS, INC.
By: /s/ JACK N. McCRARY
JACK N. MCCRARY
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Jack N. McCrary and Wayne A. Bertsch, and each of
them, as true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities to sign any and all amendments (including pre-effective and
post-effective amendments) to this Registration Statement, and to file the same
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/JACK N. McCRARY Chairman, President, Chief Executive February 17, 1998
JACK N. MCCRARY Officer and Director (Principal
Executive Officer)
/s/WAYNE A. BERTSCH Vice President, Chief Financial Officer February 17, 1998
WAYNE A. BERTSCH and Director (Principal Financial
Officer)
/s/CECIL R. PICKENS Vice President and Chief Accounting February 17, 1998
CECIL R. PICKENS Officer (Principal Accounting Officer)
II-5
</TABLE>
EXHIBIT 3.1
FORM OF
AMERICAN MEDICAL PROVIDERS, INC.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Jack N. McCrary and Wayne A. Bertsch, being the duly elected President and
Secretary, respectively, of American Medical Providers, Inc. (the
"Corporation"), a corporation organized and existing under and by virtue of
the Delaware General Corporation Law, do hereby certify as follows:
1. That the Corporation was originally incorporated in the State of
Delaware on August 9, 1996, under the name of Podiatry Newco, Inc.
2. That the Board of Directors of the Corporation, in accordance with
Sections 242 and 245 of the Delaware General Corporation Law, adopted
resolutions as of February 17, 1998 providing for the adoption of an Amended and
Restated Certificate of Incorporation of the Corporation in the form attached
hereto as EXHIBIT A which amends and restates the Certificate of Incorporation
in its entirety. The resolution further directed that the Amended and Restated
Certificate of Incorporation be submitted to the stockholders of the Corporation
for their consideration and approval.
3. That, in accordance with Section 242 of the Delaware General
Corporation Law, the holders of a majority of the outstanding stock of the
Corporation adopted a resolution dated as of February 17, 1998 providing for the
adoption of the Amended and Restated Certificate of Incorporation of the
Corporation. Such resolution was adopted by written consent in lieu of a special
meeting of stockholders of the Corporation, as permitted by Section 228(a) of
the Delaware General Corporation Law, and written notice of the taking of a
corporate action without a meeting by less than unanimous written consent has
been given as required by Section 228(d) of the Delaware General Corporation
Law.
4. The existing Certificate of Incorporation is amended and restated in
its entirety as set forth on EXHIBIT A attached hereto.
5. This Amended and Restated Certificate shall become effective on the
17th day of February, 1998 (the "Effective Time") pursuant to Section 103(d)
of the DGCL.
6. At the Effective Time, each share of the Corporation's common stock,
$.01 par value per share, issued and outstanding immediately prior to the
Effective Time (the "Old Common Stock") shall be reclassified as and changed
into thirty-two and one-half (32.5) validly issued, fully paid, and
non-assessable shares of Class B Common Stock $.001 par value per share ("Class
B Common Stock") authorized by the Third Article of the Amended and Restated
Certificate, without any action by the holder thereof. Each certificate that
theretofore represented a share or shares of Old Common Stock shall thereafter
represent that number of shares of Class B Common Stock into which the share or
shares of Old Common Stock represented by such certificate shall have been
reclassified.
IN WITNESS WHEREOF, American Medical Providers, Inc. has caused this
Amended and Restated Certificate of Incorporation to be executed by Jack N.
McCrary, its President, and Wayne A. Bertsch, its Secretary, as of this 17th day
of February, 1998.
AMERICAN MEDICAL PROVIDERS, INC.
By: __________________________________
Jack N. McCrary, President
ATTEST:
By:
Wayne A. Bertsch, Secretary
<PAGE>
EXHIBIT A
FORM OF
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
AMERICAN MEDICAL PROVIDERS, INC.
A DELAWARE CORPORATION
FIRST. NAME. The name of the corporation is AMERICAN MEDICAL PROVIDERS,
INC.
SECOND. A._PURPOSE. The purpose of this corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of the State of Delaware ("Delaware Law").
B._ADDRESS. The address of its registered office in the State of Delaware
is 1209 Orange Street, Wilmington, Delaware 19801, in the County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
THIRD. A. AUTHORIZED SHARES. The total number of shares of all classes of
stock which the corporation shall have authority to issue is 41,000,000,
consisting of (i) 21,000,000 shares of Common Stock (a) 20,000,000 shares of
which shall be designated as Class A Common Stock (the "Class A Common Stock")
with a par value of $.001 per share and (b) 1,000,000 shares of which shall be
designated as Class B Common Stock (the "Class B Common Stock") with a par
value of $.001 per share and (ii) 20,000,000 shares with a par value of $.001
per share shall be designated as Preferred Stock. Except as set forth below, the
designations, preferences, qualifications, limitations, restrictions, and
special or relative rights of the Class A Common Stock and the Class B Common
Stock shall be identical and equal in all respects, share for share, except that
the voting power in the Corporation for the election of directors and for any
and all other purposes shall be vested exclusively in the holders of the Class A
Common Stock and the Class B Common Stock as set forth below, and at all
meetings of the shareholders and at all elections of the directors, each holder
of the Class A Common Stock on the relevant record date shall be entitled to one
vote for each share of Class A Common Stock held by him or her and registered on
the books of the Corporation and each holder of the Class B Common Stock shall
be entitled to two-thirds ( 2/3) of a vote for each share of Class B Common
Stock held by him or her and registered on the books of the Corporation. Each
fractional share of Class A Common Stock or Class B Common Stock shall be
entitled to a corresponding fractional vote on each matter submitted to a vote
of shareholders equal to the fraction of a share held multiplied by the vote for
a share of such class.
B. VOTING. Holders of Class A Common Stock of the Company are entitled to
one vote per share and the holders of Class B Common Stock of the corporation
are entitled to two-thirds ( 2/3) of a vote per share. The corporation's Board
of Directors consists of the number of directors set forth in the by-laws of the
corporation. Except as set forth in the next sentence, holders of Class B Common
Stock are entitled to elect as a class one member of the Board of Directors and
the holders of the Class A Common Stock are entitled to elect as a class all
remaining members of the Board of Directors. Upon the conversion of 65% or more
of the Class B Common Stock outstanding on the Effective Date (as defined below)
into Class A Common Stock, as provided below, the holders of Class B Common
Stock shall no longer have the right to vote on the election of one director as
a separate class and such director shall thereafter be elected by holders of the
Class A Common Stock and Class B Common Stock voting together as a single class.
The "Effective Date" shall mean the date of the Prospectus for the
corporation's initial public offering of the Class A Common Stock pursuant to a
Registration Statement filed with the Securities and Exchange Commission on Form
S-1, as amended. The Class A Common Stock and Class B Common Stock possess
ordinary voting rights and vote together as a single class in respect of all
other corporate matters.
C. CLASS B CONVERSION. The Class B Common Stock is convertible into Common
Stock, at the option of the holder thereof, upon the occurrence of a Conversion
Event (as defined below) on a share-for-share basis, provided however, that if
during the six years following the date of the Prospectus (the "Effective
Date") for the corporation's initial public offering of the Class A Common
Stock pursuant to a Registration Statement filed with the Securities and
Exchange Commission on Form S-1, as amended the
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Common Stock reaches certain average closing prices over a 15-day period on the
Nasdaq National Market, other over-the-counter market or an exchange, as then
applicable (the "Trading Market") then, as set forth below, the conversion
ratio with respect to a certain number of shares of Class B Common Stock will
immediately be adjusted such that a pro rata share of all Class B Common Stock
held by each holder of Class B Common Stock (each such share, an "Adjusted
Conversion Share") shall be convertible in accordance with this Third Article
into three (3) validly issued, fully paid and non-assessable shares of Class A
Common Stock without further action on the part of the holder thereof or the
Corporation (except the cancellation of stock certificate(s) representing the
applicable shares of Class B Common Stock and the issuance of certificate(s)
representing the number of shares of Class A Common Stock into which such shares
of Class B Common Stock are converted).
On the date that the average closing price on the Trading Market for the
preceding 15 consecutive trading days (the "Average Price") exceeds 150% of
the price to the public on the Effective Date, 130,000 of the shares of Class B
Common Stock outstanding on the Effective Date will immediately become Adjusted
Conversion Shares. Thereafter, the remaining 520,000 shares of Class B Common
Stock outstanding on the Effective Date will become Adjusted Conversion Shares
in four remaining increments of 130,000 shares of Class B Common Stock each (20%
of the total number of shares of Class B Common Stock outstanding on the
Effective Date) upon the attainment of new Average Prices. The Average Prices
which must be attained prior to each new 20% increment becoming Adjusted
Conversion Shares will equal 120% of each preceding Average Price applicable to
the preceding 20% increment. Upon a Conversion Event, each holder of Class B
Common Stock will have the right to have each share of Class B Common Stock
converted into that number of shares of Class A Common Stock as each such share
is entitled to based upon the Average Prices achieved, if any. Any additional
Average Price attained after the occurrence of a Conversion Event but before
conversion of a share of Class B Common Stock will continue to act to make such
share an Adjusted Conversion Share, as applicable. Shares of Class B Common
Stock held by a holder shall automatically convert into Class A Common Stock
immediately prior to the disposition of such shares of Class B Common Stock by
such holder.
A Conversion Event shall be deemed to have occurred (i) in the event of a
disposition of such share of Class B Common Stock by the holder thereof
(excluding dispositions to such holder's affiliates), (ii) in the event any
person not affiliated with the corporation acquires beneficial ownership of 15%
or more of the outstanding shares of capital stock of the corporation, (iii) in
the event any person not affiliated with the corporation offers to acquire 15%
or more of the outstanding shares of capital stock of the corporation, (iv) in
the event the holder of such shares elects to so convert at any time after the
second anniversary of the Effective Date, (v) on the sixth anniversary of the
Effective Date, or (vi) in the event the holders of a majority of the
outstanding shares of Class A Common Stock approve such conversion. In addition,
the corporation may elect to convert any outstanding shares of Class B Common
Stock into shares of Common Stock in the event 95% or more of the outstanding
shares of Class B Common Stock as of the Effective Date have previously been
converted into shares of Class A Common Stock. Appropriate adjustments shall be
made to all Average Prices to reflect changes in the capital structure of the
corporation including, but not limited to, stock splits or stock dividends.
Upon the sixth anniversary of the Effective Date, all shares of Class B
Common Stock not previously converted to Class A Common Stock shall
automatically convert as follows: (i) each share of Class B Common Stock which
is not an Adjusted Conversion Share shall automatically convert into one validly
issued, fully paid and non-assessable share of Class A Common Stock and (ii)
each share of Class B Common Stock which is an Adjusted Conversion Share shall
automatically convert in three validly issued, fully paid and non-assessable
shares of Class A Common Stock and both conversions shall be without further
action on the part of the holder thereof or the corporation (except the
cancellation of stock certificate(s) representing the applicable shares of Class
B Common Stock and the issuance of certificate(s) representing the number of
shares of Class A Common Stock into which such shares of Class B Common Stock
are converted).
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At the time of any voluntary conversion, the record holder of shares of
Class B Common Stock shall deliver to the principal office of the corporation or
any transfer agent for shares of the Class A Common Stock (i) the certificate or
certificates representing the shares of Class B Common Stock to be converted,
duly endorsed in blank or accompanied by proper instruments of transfer, and
(ii) written notice to the corporation specifying the number of shares of Class
B Common Stock to be converted into shares of Class B Common Stock and stating
the name or names (with addresses) and denomination in which the certificate or
certificates representing the shares of Class A Common Stock issuable upon such
conversion are to be issued and including instructions for the delivery thereof.
Conversion shall be deemed to have been effected at the time when delivery is
made to the corporation or to the transfer agent of both such written notice and
the certificate or certificates representing the shares of Class B Common Stock
to be converted or such later time as may be specified in such written notice,
and as of such time each person named in such written notice as the person to
whom a certificate representing shares of Class A Common Stock is to be issued
shall be deemed to be the holder of record of the number of Class A Common Stock
to be evidenced by that certificate. Delivery of such certificates and such
written notice shall obligate the corporation to issue such shares of Class A
Common Stock, and thereupon the corporation or its transfer agent shall promptly
issue and deliver at such stated address to such record holder of shares of
Class A Common Stock a certificate or certificates representing the number of
shares of Class A Common Stock to which such record holder is entitled by reason
of such conversion, and shall cause such shares of Class A Common Stock to be
registered in the name of such record holder.
In the event of the conversion of less than all of the shares of Class B
Common Stock evidenced by a certificate surrendered to the corporation in
accordance with the procedures herein, the corporation shall execute and and
deliver to or upon the written order of the holder of such unconverted shares,
without charge to such holder, a new certificate evidencing the number of shares
of Class B Common Stock not converted.
The corporation hereby reserves and shall at all times reserve and keep
available, out of its authorized and unissued shares of Class A Common Stock,
for the purposes of effecting conversions, such number of duly authorized shares
of Class A Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Class B Common Stock. The corporation
covenants that all of the shares of Class A Common Stock so issuable shall, when
so issued, be duly and validly issued, fully paid and non-assessable, and free
from liens and charges. The corporation shall take all action as may be
necessary to ensure that all such shares of Class A Common Stock may be issued
without violation of any applicable law or regulation, or of any requirements of
any Trading Market upon which the shares of Class A Common Stock are or may be
listed.
D. PREEMPTIVE RIGHTS. No Holder of shares of Class A Common Stock or
Class B Common Stock shall be entitled to preemptive or subscriptive rights.
E. PREFERRED STOCK. Shares of Preferred Stock may be issued in series
from time to time by the board of directors, and the board of directors is
expressly authorized to fix by resolution or resolutions the designations and
the powers, preferences and rights, and the qualifications, limitations and
restrictions thereof, of the shares of each series of Preferred Stock, including
without limitation the following:
(a) the distinctive serial designation of such series which shall
distinguish it from other series;
(b) the number of shares included in such series, which number may be
increased or decreased from time to time unless otherwise provided by the
board of directors in the resolution or resolutions providing for the issue
of such series;
(c) the dividend rate (or method of determining such rate, which may
be faced or variable) payable to the holders of the shares of such series,
any conditions upon which such dividends shall be paid and the date or
dates upon which such dividends shall be payable;
(d) whether dividends on the shares of such series shall be cumulative
and, in the case of shares of any series having cumulative dividend rights,
the date or dates or method of determining the date or dates from which
dividends on the shares of such series shall be cumulative;
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(e) the amount or amounts which shall be payable out of the assets of
the corporation to the holders of the shares of such series upon voluntary
or involuntary liquidation, dissolution or winding up the corporation;
(f) the price or prices at which, the period or periods within which
and the terms and conditions upon which the shares of such series may be
purchased or redeemed, in whole or in part, at the option of the
corporation or at the option of the holder or holders thereof or upon the
happening of a specified event or events;
(g) the obligation, if any, of the corporation to purchase or redeem
shares of such series pursuant to a sinking fund or otherwise and the price
or prices at which, the period or periods within which and the terms and
conditions upon which the shares of such series shall be redeemed or
purchased, in whole or in part, pursuant to such obligation;
(h) whether or not the shares of such series shall be convertible or
exchangeable, at any time or times at the option of the holder or holders
thereof or at the option of the corporation or upon the happening of a
specified event or events, into shares of any other class or classes or any
other series of the same or any other class or classes of stock or debt
securities of the corporation or of any other entity, and the price or
prices or rate or rates of exchange or conversion and any adjustments
applicable thereto; and
(i) the voting rights, if any, of the holders of the shares of such
series.
FOURTH. Bylaws. The board of directors of the corporation is expressly
authorized to adopt, amend or repeal the by-laws of the corporation. This
Article Fourth and the by-laws of the corporation may not be amended, modified
or repealed by the holders of the capital stock of the corporation except by the
affirmative vote of the holders of not less than a majority of the Total Voting
Power (as hereinafter defined) of the corporation.
The term "Total Voting Power" shall mean the nondiluted aggregate number
of votes that may be cast by the holders of outstanding Voting Securities. The
term "Voting Securities" shall mean securities entitled to vote in the
ordinary course in the election of directors or of persons serving in a similar
governing capacity, including the voting rights attached to such securities and
rights or options to acquire such securities.
FIFTH. A. NUMBER OF DIRECTORS. The number of directors of the corporation
shall be up to nine (9) with the exact number set from time to time pursuant to
the by-laws of the corporation.
B. CLASSES OF DIRECTORS. The directors of the corporation shall be divided
into three classes, as nearly equal in number as possible, as determined by the
board of directors, with the initial term of office of Class I to expire at the
first annual meeting of shareholders thereafter, the initial term of office of
Class II to expire at the second annual meeting of shareholders thereafter and
the initial term of office of Class III to expire at the third annual meeting of
shareholders thereafter, with each class of directors to hold office until their
successors have been duly elected and qualified. Except as set forth in the
Third Article, the holders of Class B Common Stock are entitled to elect as a
class one member of Class I of the Board of Directors and the holders of Class A
Common Stock are entitled to elect as a class the remaining member or members of
Class I of the Board of Directors and all members of Class II and Class III of
the Board of Directors. At each annual meeting of shareholders following such
initial classification and election, directors elected to succeed the directors
whose terms expire at such annual meeting shall be elected to hold office for a
term expiring at the annual meeting of shareholders in the third year following
the year of their election and until their successors have been duly elected and
qualified. If the number of directors is changed, any increase or decrease shall
be apportioned among the classes so as to maintain or attain a number of
directors in each class as nearly equal as possible, but no decrease in the
number of directors may shorten the term of any incumbent director.
C. TERM; VACANCIES. Directors shall hold office until the annual meeting
for the year in which their terms expire and until their successors shall be
elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. Any vacancy on the
Corporation's Board of
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Directors, however resulting, may be filled by the affirmative vote of a
majority of the remaining directors then in office, even if less than a quorum.
Any director elected to fill a vacancy shall hold office only until the next
annual meeting of stockholders and until their successors shall be elected and
shall qualify. No director may be removed by the stockholders of the Corporation
except for cause.
D. CUMULATIVE VOTING. Shareholders shall not be entitled to cumulate votes
in the election of directors.
This Article Fifth may not be amended, modified or repealed except by the
affirmative vote of the holders of not less than sixty percent (60%), of the
Total Voting Power.
SIXTH. CONSENT. No action required or permitted to be taken by the
holders of any class or series of stock of the corporation, including but not
limited to the election of directors, may be taken by written consent or
consents and must be taken at a duly called annual meeting or at a special
meeting of shareholders. This Article Sixth may not be amended, modified or
repealed except by the affirmative vote of the holders of not less than sixty
percent (60%) of the Total Voting Power of the corporation.
SEVENTH. MATERIAL INTEREST OF AFFILIATES. In addition, any contract or
transaction between the Corporation or any of its subsidiaries and one or more
of its directors or Controlling Persons (or any of their "affiliates" as such
term is defined in Rule 12b-2 of the Securities and Exchange Act of 1934, as
amended), or between the corporation or any of its subsidiaries and any other
corporation, partnership, association or other organization in which one or more
of its directors or Controlling Persons have a material financial interest,
shall require that (i) the material facts as to his or her relationship or
interest and as to the contract or transaction be fully and fairly disclosed in
good faith to the Board of Directors and (ii) the Board of Directors in good
faith authorize the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors
which authorizes the contract or transaction. A mere common directorship does
not constitute a material financial interest within the meaning of this
subdivision. A director is not interested within the meaning of this subdivision
in a resolution fixing the compensation of another director as a director,
officer or employee of the corporation, notwithstanding the fact that the first
director is also receiving compensation from the corporation.
If the other provisions hereinabove are met, no such contract or other
transaction contemplated above, or vote of a director, whether one or more, or
the Board of Directors, shall be void or voidable solely because a director is
not a disinterested director with respect to a matter and is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction to which such director is not a
disinterested director or solely because his or her or their votes are counted
for such approval.
(c) Dividends on the outstanding shares of the corporation, if any,
shall not be declared except upon the affirmative vote of not less than
sixty percent (60%) of the whole Board of Directors at any regular or
special meeting. Dividends may be paid by the corporation in cash, in
property, or in the corporation's own shares, but only as permitted under
Delaware Law. Subject to limitations upon the authority of the Board of
Directors imposed by any law, the declaration of and provision for payment
of dividends shall be at the discretion of the Board of Directors.
(d) The Board of Directors may, by resolution passed by the
affirmative vote of at least sixty percent (60%) of the whole Board of
Directors, appoint from its membership, annually, an Executive Committee of
two or more directors, which shall include the Chief Executive Officer and
the Chief Financial Officer of the corporation. The appointment or removal
of any member (or alternate members) of the Executive Committee shall
require the affirmative vote of not less than sixty percent (60%) of the
whole Board of Directors.
This Article Seventh may not be amended, modified or repealed by the
holders of the capital stock of the corporation except by the affirmative vote
of the holders of not less than a majority of the Total Voting Power of the
corporation.
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EIGHTH. LIABILITY OF DIRECTORS. The liability of directors of the
corporation for monetary damages shall be eliminated so the fullest extent
permissible under Delaware Law. No amendment, modification or repeal of this
Article Eighth shall adversely affect any right or protection of a director that
exists at the time of such amendment, modification or repeal.
This Article Eighth may not be amended, modified or repealed except by the
affirmative vote of the holders of not less than eighty percent (80%), of the
Total Voting Power of the corporation.
NINTH. INDEMNIFICATION. The corporation is authorized to indemnify the
directors, officers, employees or other agents of the corporation to the fullest
extent permissible under Delaware Law.
TENTH. SHAREHOLDER PROTECTION RIGHTS PLAN. The Board of Directors is
expressly authorized to adopt, amend or repeal a shareholder protection rights
plan, which plan may distinguish between shares of Common Stock or other
securities of the same class or series and may distinguish between shareholders
of Common Stock or other securities of the same class or series.
This Article Tenth may not be amended, modified or repealed except by the
affirmative vote of the holders of not less than eighty percent (80%), of the
Total Voting Power of the corporation.
ELEVENTH. EXISTENCE. This Corporation shall have perpetual existence.
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EXHIBIT 3.2
FORM OF
AMENDED AND RESTATED BYLAWS
OF
AMERICAN MEDICAL PROVIDERS, INC.
ARTICLE I
CORPORATE OFFICES
1.1 PRINCIPAL OFFICE
The Board of Directors shall fix the location of the principal executive
office of the corporation at any place within or outside the State of Delaware.
Unless and until redesignated by the Board of Directors, the principal executive
office of the corporation is 3555 Timmons Lane, Suite 1550, Houston, Texas
77027. The Board of Directors may at any time establish branch or subordinate
offices at any place or location.
1.2 REGISTERED OFFICE AND AGENT
The Corporation shall have and maintain at all times (a) a registered
office in the State of Delaware, which office shall be located at 1209 Orange
Street, Wilmington, Delaware 19801, and (b) a registered agent located at such
address whose name is The Corporation Trust Company, until changed from time to
time as provided by the General Corporation Law of the State of Delaware
("Delaware Corporation Law").
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
All meetings of the stockholders of the Corporation shall be held within
or without the State of Delaware as may be designated by the Board of Directors
or the president, or, if not designated, at the registered office of the
Corporation.
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2.2 ANNUAL MEETINGS
The annual meeting of stockholders for the election of directors and for
the transaction of such other business as may properly be brought before the
meeting shall be held on such date and at such time as determined by resolution
of the Board of Directors. If, at the place of the meeting, this date shall fall
upon a legal holiday, then such meeting shall be held on the next succeeding
business day at the same hour. If no annual meeting is held in accordance with
the foregoing provisions, the board of directors shall cause the meeting to be
held as soon thereafter as convenient. If no annual meeting is held in
accordance with the foregoing provisions, a special meeting may be held in lieu
of the annual meeting, and any action taken at that special meeting shall have
the same effect as if it had been taken at the annual meeting, and in such case
all references in these Bylaws to the annual meeting of stockholders shall be
deemed to refer to such special meeting.
2.3 SPECIAL MEETINGS
Unless otherwise prescribed law or by the Certificate of Incorporation,
special meetings of stockholders, for any purpose or purposes, may be called
only by either the Chairman, if there be one, or the President, and shall be
called by the Secretary or any Assistant Secretary, if there be one, at the
request in writing of a majority of the Board of Directors or of any holder or
holders of an aggregate of ten percent (10%) or more of the issued and
outstanding stock of the Corporation entitled to vote at any such meeting
called. Such request shall state the purpose or purposes of the proposed
meeting. Upon receipt of such written request, the president shall fix a date
and time for such meeting which such date shall be within ten business days of
the proposed date specified in the written request.
2.4 NOTICE OF MEETING
Except as otherwise provided in these Bylaws or Delaware Corporation Law,
written notice of any meeting of stockholders stating the place, date and hour
of the meeting and, in the case of a special meeting, the purpose for which the
meeting is called, shall be delivered either personally or by mail to each
stockholder of record entitled to vote at such meeting not less than ten nor
more than sixty days before the date of the meeting. If mailed, such notice
shall be deemed to be delivered as to any stockholder of record when deposited
in the United States mail addressed to the stockholder at his address as it
appears on the stock transfer books of the Corporation, with postage prepaid.
When a meeting is adjourned to another time or place, notice need not be given
of the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken. At the adjourned meeting the
Corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
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2.5 WAIVER OF NOTICE
Any stockholder, either before or after any stockholders, meeting, may
waive in writing notice of the meeting, and his waiver shall be deemed the
equivalent of giving notice. Attendance at a meeting by a stockholder shall
constitute a waiver of notice, except when the stockholder attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
2.6 FIXING OF RECORD DATE
For the purpose of determining the stockholders entitled to notice of or
to vote at any meeting of stockholders or any adjournment thereof, or express
consent to corporate action in writing without a meeting or entitled to receive
payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock or for the purpose of any other lawful action, the board of directors
of the Corporation may fix, in advance, a record date which shall be not more
than sixty (60) days nor less than ten (10) days prior to the date of such
meeting, nor more than sixty (60) days prior to any other action. If no record
date is fixed, the record date for determining the stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting, provided, however,
that the board of directors may fix a new record date for the adjourned meeting.
2.7 NOTICE OF BUSINESS
At any meeting of the stockholders of the Corporation, only such proper
business shall be conducted as shall have been brought before the meeting (i) by
or at the direction of the Board of Directors or (ii) by any stockholder of the
Corporation who is a stockholder of record at the time of giving of the notice
provided for in this Section 2.7, who shall be entitled to vote at such meeting
and who complies with the notice procedures set forth in this Section 2.7. For
business to be brought before a meeting of stockholders by a stockholder, the
stockholder shall have given timely notice thereof in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered to
or mailed and received at the principal executive office of the Corporation not
less than 50 days nor more than 75 days prior to the meeting; PROVIDED, HOWEVER,
that in the event that less than 60 days' notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the tenth day following the day on
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which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs. Such stockholder's notice to the
Secretary of the Corporation shall set forth as to each matter the stockholder
proposes to bring before the meeting (i) a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and, in the event that such business includes a proposal
to amend any document, including these Bylaws, the language of the proposed
amendment, (ii) the name and address, as they appear on the Corporation's books,
of the stockholder proposing such business, (iii) the class and number of shares
of capital stock of the Corporation which are beneficially owned by such
stockholder and (iv) any material interest of such stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at a meeting of the stockholders except in accordance with the
procedures set forth in this Section 2.7. The chairman of the meeting of
stockholders shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting and in accordance with
the provisions of these Bylaws, and if he should so determine, he shall so
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted. Notwithstanding the foregoing provisions of
this Section 2.7, a stockholder shall also comply with all applicable
requirements of the Securities and Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder with respect to matters set forth
in this Section 2.7.
2.8 QUORUM
Except as otherwise provided by law or by the Certificate of
Incorporation, the holders of a majority of the capital stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder entitled to vote at the
meeting.
2.9 VOTING
Unless otherwise required by law, the Certificate of Incorporation or
these Bylaws, any question brought before any meeting of stockholders shall be
decided by the vote of the holders of a majority of the stock represented and
entitled to vote thereat. Each stockholder shall have one vote for each share of
Class A Common Stock and 2/3 of a vote for each share of Class B Common Stock
entitled to vote held of record by such stockholder and a proportionate vote for
each fractional share so held, unless otherwise provided in the Certificate of
Incorporation. The Board of Directors, in its discretion, or the officer of the
Corporation presiding at a meeting of stockholders, in his discretion, may
require that any votes cast at such meeting shall be cast by written ballot.
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Persons holding stock in a fiduciary capacity shall be entitled to vote
the shares so held. Persons whose stock pledged shall be entitled to vote,
unless in the transfer by the pledgor on the books of the Corporation he has
expressly empowered the pledgee to vote thereon, in which case only the pledgee,
or his proxy, may represent such stock and vote thereon.
If shares having voting power stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, tenants by the entirety, or otherwise, or if two or more persons have
the same fiduciary relationship respecting the same shares, unless the secretary
of the Corporation is given written notice to the contrary and is furnished with
a copy of the instrument or order appointing them or creating the relationship
wherein it is so provided, their acts with respect to voting shall have the
following effect: (i) if only one votes, his act binds all; (ii) if more than
one vote, the act of the majority so voting binds all; and (iii) if more than
one vote, but the vote is evenly split on any particular matter, each fraction
may vote the securities in question proportionately, or any person voting the
shares or a beneficiary, if any, may apply to the Court of Chancery or any court
of competent jurisdiction in the State of Delaware to appoint an additional
person to act with the persons so voting the shares. The shares shall then be
voted as determined by a majority of such persons and the person appointed by
the Court. If a tenancy is held in unequal interests, a majority or even-split
for the purpose of this subsection shall be a majority or even-split in
interest.
2.10 PROXIES
A stockholder entitled to vote at a meeting of stockholders or to express
consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by proxy. No proxy shall be
voted or acted upon after three (3) years from its date, unless the proxy
provides for a longer period.
2.11 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer of the Corporation who has charge of the stock ledger of the
Corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder of the
Corporation who is present.
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2.12 STOCK LEDGER
The stock ledger of the Corporation shall be the only evidence as to who
are the stockholders entitled to examine the stock ledger, the list required by
Section 2.11 of this Article II or the books of the Corporation, or to vote in
person or by proxy at any meeting of stockholders.
2.13 ORGANIZATION OF MEETINGS
The Chairman of the Board of Directors, if any, shall preside at each
meeting of stockholders, or in the absence of the Chairman of the Board of
Directors, the Vice-Chairman of the Board of Directors, if any, or in the
absence of the Vice-Chairman, the President, or in the absence of the President,
the Chief Financial Officer of the Company, or in the absence of the Chief
Financial Officer, by a chairman designated by the Board of Directors, in the
absence of such designation, by a chairman chosen at the meeting. The Secretary
shall act as secretary of all meetings of stockholders and keep the records of
such meetings, and in the absence of the Secretary, his or her duties shall be
performed by any other officer authorized by the Board of Directors or in the
absence of such authorization any officer authorized by these Bylaws or if no
such officer is available or willing to so act, by any person appointed by
resolution duly adopted at the meeting.
The order of business at each such meeting shall be as determined by the
chairman of the meeting. The chairman of the meeting shall have the right and
authority, subject to applicable law and the provisions of the Amended and
Restated Articles of Incorporation and these Bylaws, to prescribe such rules,
regulations and procedures and to do all such acts and things as are necessary
or desirable for the proper conduct of the meeting, including without
limitation, the establishment of procedures for the maintenance of order and
safety, limitation on the time allotted to questions or comments on the affairs
of the corporation, restrictions on entry to such meetings after the time
prescribed for the commencement thereof and the opening and closing of the
voting polls.
2.14 ADVANCE NOTICE
(a) NOMINATION OF DIRECTORS. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors of the corporation, except as may be otherwise provided in the Amended
and Restated Articles of Incorporation of the corporation with respect to the
right of holders of certain classes of stock of the corporation to nominate and
elect a specified number of directors in certain circumstances. Nominations of
persons for election to the Board of Directors may be made at any annual meeting
of stockholders, or at any special meeting of stockholders called for the
purpose of electing directors, (i) by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (ii) by the stockholder
of the corporation (x) who is a stockholder of record on the date of the giving
of the notice provided for in this Section 2.14 and on the record date for the
determination of stockholders entitled to vote at such meeting and (y) who
complies with the notice procedures set forth in this Section 2.14.
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In addition to any other applicable requirements, for a nomination to be
made by a stockholder, such stockholder must have given timely notice thereof in
proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the corporation not
less than sixty (60) days nor more than ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting of the
stockholders; provided, however, that (i) in the event that the annual meeting
is called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the annual meeting was mailed for
such public disclosure of the date of the annual meeting was made, whichever
first occurs; and (ii) in the case of a special meeting of stockholders called
for the purpose of electing directors, not later than the close of business on
the tenth (10th) day following the day on which notice of the date of the
special meeting was mailed or public disclosure of the date of the special
meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth (x) as to each person whom the stockholder proposes to nominate for
election as a director (i) the name, age, business address and residence address
of the person, (ii) the principal occupation or employment of the person, (iii)
the class or series and number of shares of capital stock of the corporation
which are owned beneficially or of record by the person and (iv) any other
information relating to the person that would be required to be disclosed in a
proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder; and (y) as to the stockholder giving the
notice (i) the name and record address of such stockholder, (ii) the class or
series and number of shares of capital stock of the corporation which are owned
beneficially (as determined pursuant to Rule 13d-3 of the Exchange Act) or of
record by such stockholder, (iii) a description of all arrangements or
understandings between such stockholder and each proposed nominee and any other
person or persons (including their names) pursuant to which the nomination(s)
are to be made by such stockholder, (iv) a representation that such stockholder
intends to appear in person or by proxy at the meeting to nominate the persons
named in its notice and (v) any other information relating to such stockholder
that would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a written
consent of each proposed nominee to being named as a nominee and to serve as a
director if elected.
No person shall be eligible for election as a director of the corporation
unless nominated in accordance with the procedures set forth in this Section
2.14. If the Chairman of the meeting determines that a nomination was not made
in accordance with the foregoing procedures, the Chair-
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man shall declare to the meeting that the nomination was defective and such
defective nomination shall be disregarded.
(b) BUSINESS AT ANNUAL MEETING. No business may be transacted at an annual
meeting of stockholders, other than business that is either (1) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors (or any duly authorized committee thereon, (ii) otherwise
properly brought before the annual meeting by or at the direction of the Board
of Directors (or any duly authorized committee thereof) or (iii) otherwise
properly brought before the annual meeting by any stockholder of the corporation
(x) who is a stockholder of record on the date of the giving of the notice
provided for in this Section 2.14 and on the record date for the determination
of stockholders entitled to vote at such annual meeting and (y) who complied
with the notice procedures set forth in this Section 2.14.
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the corporation.
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the corporation not
less than sixty (60) days nor more than ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within thirty (30) days before or after such anniversary date,
notice by the stockholder in order to be timely must be so received not later
than the close of business on the tenth (10th) day following the day on which
such notice of the date of the annual meeting was mailed for such public
disclosure of the date of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth as to each matter such stockholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and record address of such stockholder, (iii) the class
or series and number of shares of capital stock of the corporation which are
owned beneficially (as determined pursuant to Rule 13d-3 of the Exchange Act) or
of record by such stockholders, (iv) a description of all arrangements or
understandings between such stockholder and any other person or persons
(including their names) in connection with the proposal of such business by such
stockholder and any material interest of such stockholder in such business and
(v) a representation that such stockholder intends to appear in person or by
proxy at the annual meeting to bring such business before the meeting.
No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 2.14, provided, however, that, once
business has been properly brought before the annual meeting in accordance with
such procedures, nothing in this Section 2.14 shall be deemed to preclude
discussion by any stockholder of any such business. If the Chairman of an annual
meeting
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determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
2.15 INSPECTORS OF ELECTION
In advance of any meeting of stockholders, the Board of Directors may
appoint inspectors of election to act at the meeting and any adjournment
thereof. If inspectors of election are not so appointed or designated or if any
persons so appointed fail to appear or refuse to act, then the Chairman of the
meeting may, and on the request of any stockholder or a stockholder's proxy
shall, appoint inspectors of election (or persons to replace those who so fail
to appear) at the meeting The number of inspectors shall be either one (1) or
three (3). If appointed at a meeting on the request of one ( 1 ) or more
stockholders or proxies, the majority of shares represented in person or by
proxy shall determine whether one (1) or three (3) inspectors are to be
appointed.
The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum and the authenticity, validity, and effect of proxies,
receive votes, ballots or consents, hear and determine all challenges and
questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, (if permitted by the Amended and Restated
Articles of Incorporation), determine when the polls shall close, determine the
result and do any other acts that may be proper to conduct the election or vote
with fairness to all stockholders. If there are three (3) inspectors of
election, the decision, act or certificate of a majority is effective in all
respects as to the decision, act or certificate or all. Any report or
certificate made by the inspectors of election is prima facie evidence of the
facts stated therein.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of Delaware Corporation Law and any limitations
in the Amended and Restated Articles of Incorporation and these Bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the Board of
Directors. The Board may delegate the management of the day-to-day operation of
the business of the corporation to a management company or other person provided
that the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised under the ultimate direction of the Board.
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3.2 NUMBER OF DIRECTORS
The authorized number of directors of the corporation shall be not less
than seven (7) nor more than twelve (12), and the exact number of directors
shall be eight (8) until changed, within the limits specified above, by a
resolution amending such exact number, duly adopted by at least sixty percent
(60%) of the entire Board of Directors or by the stockholders, in accordance
with-the provisions set forth in the Amended and Restated Articles of
Incorporation, these Bylaws and applicable laws. In accordance with the
provisions set forth in the Restated Articles of Incorporation and subject to
the limitations contained therein, the minimum and maximum number of directors
may be changed, or a definite number may be fixed without provision for an
indefinite number, by a duly adopted amendment to the Amended and Restated
Articles of Incorporation or by an amendment to this Bylaw duly adopted by the
vote or written consent, if permitted by the Amended and Restated Articles of
Incorporation, of stockholders entitled to vote in such manner as set forth in
the Amended and Restated Articles of Incorporation; provided, however, that an
amendment reducing the fixed number or the minimum number of directors to a
number less than five (5) cannot be adopted if the votes cast against its
adoption at a meeting are equal to more than the outstanding shares entitled to
vote thereon.
No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS AND REMOVAL
At each annual meeting of stockholders, directors shall be elected to hold
office until the next election of the class for which such directors were
designated and until their successors have been elected and qualified, in
accordance with the provisions set forth in the Amended and Restated Articles of
Incorporation and in these Bylaws. Each director, including a director elected
to fill a vacancy, shall hold office, in accordance with the provisions set
forth in the Amended and Restated Articles of Incorporation and in these Bylaws,
until the expiration of the term for which elected and until a successor has
been elected and qualified, except in the case of the death, resignation, or
removal of such a director.
No director may be removed from office, except as provided by the Amended
and Restated Articles of Incorporation or by law.
3.4 CLASS OR SERIES DIRECTORS
Whenever the holders of any class or series of stock are entitled to elect
one or more directors by the articles of incorporation, the provisions of the
last sentence of Section 3.3 shall apply, with respect to the removal without
cause of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class or series and not to the vote of the
outstanding shares as a whole. Unless otherwise provided in the Restated
Articles of Incorporation or these Bylaws, vacancies and newly created
directorships resulting from any increase in the authorized number of directors
elected by all of the stockholders having the right to vote as a single class or
from any other cause may be filled by a majority of the directors then in
office, although less than
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a quorum, or by the sole remaining director. Whenever the holders of any class
or classes of stock or series thereof are entitled to elect one or more
directors by the articles of incorporation, vacancies and newly created
directorships of such class or classes or series may be filled by a majority of
the directors elected by such class or classes or series thereof then in office,
or by the sole remaining director so elected. Any director elected or appointed
to fill a vacancy shall hold office until the next election of the class of
directors of the director which such director replaced, and until and his or her
successor is elected and qualified or until his or her earlier resignation or
removal.
3.5 RESIGNATION AND VACANCIES
(a) Any director may resign effective upon giving oral or written notice
to the Chairman of the Board, the President, the Secretary or the Board of
Directors, unless the notice specifies a later time for the effectiveness of
such resignation. If the resignation of a director is effective at a future
time, the Board of Directors may elect a successor to take office when the
resignation becomes effective.
(b) Unless otherwise provided in the Restated Articles of Incorporation of
these Bylaws, vacancies on the Board of Directors may be filled by a majority of
the remaining directors, although less than a quorum, or a sole remaining
director.
(c) The stockholders may elect a director to fill any vacancy not filled
by the directors in accordance with law and with the provisions of the Restated
Articles of Incorporation and these Bylaws.
(d) A vacancy or vacancies in the Board of Directors shall be deemed to
exist (i) in the event of the death, resignation or removal of any director,
(ii) if the Board of Directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or convicted
of a felony, (iii) if the authorized number of directors is increased as
provided in the Restated Articles of Incorporation, or (iv) if the stockholders
fail, at any meeting of stockholders at which any director or directors are
elected, to elect the full authorized number of directors to be elected at that
meeting, as provided in the Restated Articles of Incorporation.
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the Board of Directors may be held at any place within
or outside the State of Delaware that has been designated from time to time by
resolution of the Board. In the absence of such a designation, regular meetings
shall be held at the principal executive office of the Corporation. Special
meetings of the Board may be held at any place within or outside the State of
Delaware that has been designated in the notice of the meeting or, if not stated
in the notice or if there is no notice, at the principal executive office of the
corporation.
Members of the Board may participate in a meeting through the use of
conference telephone or similar communications equipment, so long as all
directors participating in such meeting can hear
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one another. Participation in a meeting pursuant to this paragraph constitutes
presence in person at such meeting
3.7 REGULAR MEETINGS
Regular meetings of the Board of Directors may be held without notice if
the time and place of such meetings are fixed by the Board of Directors or by
these Bylaws.
3.8 SPECIAL MEETINGS; NOTICE
Subject to the provisions of the following paragraph, special meetings of
the Board of Directors for any purpose or purposes may be called at any time by
the Chairman of the Board, the President, any Vice President, the Secretary or
any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
telegram, charges prepaid, or by telecopier, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least four
(4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone or by telecopier or telegram, it shall be
delivered personally or by telephone or by telecopier or to the telegraph
company at least forty-eight (48) hours before the time of the holding of the
meeting. Any oral notice given personally or by telephone may be communicated
either to the director or to a person at the office of the director who the
person giving the notice has reason to believe will promptly communicate it to
the director. The notice need not specify the purpose of the meeting.
3.9 QUORUM AND ACTION AT MEETING
At meetings of the board of directors or any committee designated by the
board, a majority of the total number of directors, or a majority of the members
of any such committee, as the case may be, shall constitute a quorum for the
transaction of business. In the event one or more of the directors shall be
disqualified to vote at any meeting, then the required quorum shall be reduced
by one for each such director so disqualified; provided, however, that in no
case shall less than one-third (1/3) of the number so fixed constitute a quorum.
If a quorum is present, the act of the majority of directors in attendance shall
be the act of the board of directors or any committee thereof, as the case may
be, unless the act of a greater number is required by these Bylaws, the
Certificate of Incorporation or Delaware Corporation Law. If a quorum shall not
be present at any meeting of the board of directors, the directors present
thereat may adjourn that meeting from time to time, without notice other than
announcement at the meting, until a quorum shall be present.
3.10 WAIVER OF NOTICE
Notice of a meeting need not be given to any director who signs a waiver
of notice or a consent to holding the meeting or an approval of the minutes
thereof, whether before or after the meeting, or who attends the
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meeting without protesting, prior thereto or at its commencement, the lack of
notice to such director. All such waivers, consents, and approvals shall be
filed with the corporate records or made a part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the Board of Directors.
3.11 ADJOURNMENT
A majority of the directors present, whether or not a quorum is present,
may adjourn any meeting to another time and place.
3.12 NOTICE OF ADJOURNMENT
If the meeting is adjourned for more than twenty-four (24) hours, notice
of any adjournment to another time and place shall be given prior to the time of
the adjourned meeting to the directors who were not present at the time of the
adjournment.
3.13 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the Board of Directors
under the provisions of the Restated Articles of Incorporation and these Bylaws
or otherwise may be taken without a meeting, if all members of the Board
individually or collectively consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the proceedings of the
Board. Such action by written consent shall have the same force and effect as a
unanimous vote of the Board of Directors.
3.14 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the Board of Directors. This Section 3.14 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
ARTICLE IV
COMMITTEES
4.1 EXECUTIVE COMMITTEE
EXECUTIVE COMMITTEE. In accordance with the provisions set forth in these
Bylaws and the Restated Articles of Incorporation, the Board of Directors may,
by resolution passed by the affirmative vote of at least sixty percent (60%) of
the whole Board of Directors, appoint from its
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membership, annually, an Executive Committee of two or more directors, which
shall include the Chief Executive Officer and the Chief Financial Officer of the
Corporation. The Board of Directors may designate in such resolution one or more
directors as alternate members of the Executive Committee, who may replace any
absent or disqualified member at any meeting of the Committee. The Executive
Committee, during the intervals between meetings of the Board of Directors,
shall have and there is hereby granted to it all of the authority and power of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation be affixed to papers
which may require it, except that the Executive Committee shall have authority
to act in the manner and to the extent provided in the resolution of the Board
and may have all the authority of the Board, except with respect to:
(a) approving or adopting, or recommending to the stockholders, any action
or matter expressly required by Delaware Corporation Law to be submitted to
stockholders for approval; or
(b) adopting, amending or repealing any bylaw of the Corporation.
The Executive Committee shall keep regular minutes of all business
transacted at its meetings, and all action of the Executive Committee shall be
reported to the Board of Directors at its next meeting. The minutes of the
Executive Committee shall be placed in the minute book of the Corporation.
Members of the Executive Committee shall receive such compensation as may be set
forth in the resolution appointing such member and shall be reimbursed for
reasonable expenses actually incurred by reason of membership on the Executive
Committee.
4.2 OTHER COMMITTEES OF DIRECTORS
(a) The Board of Directors may, by resolution adopted by a majority of the
authorized number of directors, designate one or more other committees, each
consisting of two (2) or more directors, to serve at the pleasure of the Board
of Directors. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent member at any meeting of the
committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors. Any such
committee shall have authority to act, in the manner and to the extent provided
in the resolution of the Board of Directors and may have all the authority of
the Board, except with respect to the limitations as set forth in Section 4.1.
(b) The Board of Directors may, by resolution adopted by a majority of the
authorized number of directors, appoint from its membership an Audit Committee,
a Compensation and Stock Option Committee and a Finance and Strategic Planning
Committee.
4.3 MEETINGS AND ACTIONS OF COMMITTEES
Meetings and actions of committees permitted by the provisions of the
Restated Articles of Incorporation shall be governed by, and held and taken in
accordance with each of the provisions of
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Article III of these Bylaws, with such changes in the context of those Bylaws as
are necessary to substitute the committee and its members for the Board of
Directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the Board of Directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the Board of Directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The Board of Directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these Bylaws and the Restated Articles of Incorporation.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a Chief Executive Officer, a
President, a Secretary, and a Chief Financial Officer. The corporation may also
have, at the discretion of the Board of Directors, a Chairman of the Board, a
Vice Chairman of the Board, one or more Vice Presidents, one or more Assistant
Secretaries, a Treasurer, one or more Assistant Treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 5.3 of
these Bylaws. Any number of offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Section 5.3 or Section 5.5 of these Bylaws,
shall be chosen by the Board and serve at the pleasure of the Board of
Directors, subject to the rights, if any, of an officer under any contract of
employment.
5.3 SUBORDINATE OFFICERS
The Board of Directors may appoint, or may empower the Chairman of the
Board or the President to appoint, such other officers as the business of the
corporation may require, each of whom shall hold office for such period, have
such authority, and perform such duties as are provided in these Bylaws or as
the Board of Directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, all officers serve at the pleasure of the Board of Directors and any
officer may be removed, either with or without cause, by the Board of Directors
at any regular or special meeting of the Board or, except in case of
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an officer chosen by the Board of Directors, by any officer upon whom such power
of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these Bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The Chairman of the Board, if such an officer be elected, shall, if
present, preside at meetings of the Board of Directors and exercise and perform
such other powers and duties as may from time to time be assigned by the Board
of Directors or as may be prescribed by these Bylaws or by law.
5.7 CHIEF EXECUTIVE OFFICER
Subject to such supervisory powers, if any, as may be given by the Board
of Directors to the Chairman of the Board, if there be such an officer, the
Chief Executive Officer shall have general supervision, direction, and control
of the business and the officers of the corporation. The Chief Executive Officer
shall preside at all meetings of the stockholders and, in the absence or
nonexistence of a Chairman of the Board, at all meetings of the Board of
Directors. The Chief Executive Officer shall have the general powers and duties
of management usually vested in the office of Chief Executive Officer of a
corporation, and shall have such other powers and duties as may be prescribed by
the Board of Directors or these Bylaws.
5.8 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the Board
of Directors to the Chief Executive Officer, if there be such an officer, the
President shall have general supervision, direction, and control of the business
and the officers of the corporation. The President shall preside at all meetings
of the stockholders and, in the absence or nonexistence of a Chief Executive
Officer, at all meetings of the Board of Directors. The President shall have the
general powers and duties of management usually vested in the office of
President of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or these Bylaws.
5.9 VICE PRESIDENTS
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In the absence or disability of the President, the Vice Presidents, if
any, in order of their rank as fixed by the Board of Directors or, if not
ranked, a Vice President designated by the Board of Directors, shall perform all
the duties of the President and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the President. The Vice Presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the Board of Directors, these Bylaws,
the President or the Chairman of the Board.
5.10 SECRETARY
The Secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the Board of Directors may
direct, a book of minutes of all meetings and actions of Directors, committees
of directors and stockholders. The minutes shall show the time and place of each
meeting, whether regular or special (and, if special, how authorized and the
notice given), the names of those present at directors' meetings or committee
meetings, the number of shares present or represented at stockholders' meetings,
and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each. the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the Board of Directors required to be given by law or by
these Bylaws. The Secretary shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors or by these Bylaws.
5.11 CHIEF FINANCIAL OFFICER
The Chief Financial Officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The Chief Financial Officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the Board of Directors. The Chief Financial Officer shall disburse
the funds of the corporation as may be ordered by the Board of Directors, shall
render to the President and directors, whenever they request it, an account of
all of his or her transactions as Chief Financial Officer and of the financial
condition of the corporation, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or these Bylaws.
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ARTICLE VI
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
6.1 INDEMNIFICATION: THIRD PARTY ACTIONS
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he or she is or was a director, officer, employee or agent, of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interest of the Corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in or not opposed to the best interest of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
6.2 INDEMNIFICATION: DERIVATIVE ACTIONS
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Corporation and, except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
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6.3 MANDATORY INDEMNIFICATION
To the extent that a director or officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 6.1 and 6.2 above or in
defense of any claim, issue or matter therein, he or she shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him or her in connection therewith.
6.4 AUTHORIZATION FOR INDEMNIFICATION
Any indemnification under Sections 6.1 and 6.2 above (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because he or she has met the applicable
standard of conduct set forth in Sections 6.1 and 6.2 above. Such determination
shall be made (1) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
6.5 ADVANCE PAYMENT OF EXPENSES
Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director or officer to repay such amount if it shall ultimately be
determined that he or she is not entitled to be indemnified by the Corporation
as authorized in this Article VI. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the Board of
Directors deems appropriate.
6.6 NON-EXCLUSIVITY
The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office, and shall continue, unless otherwise provided, when authorized or
ratified, as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
6.7 INSURANCE
The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation or is or was serving
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at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him or her and incurred by him or her in
any such capacity, or arising out of his or her status as such, whether or not
the Corporation would have the power to indemnify him or against such liability
under the provisions of this Article VI.
6.8 DEFINITIONS
For purposes of this Article VI, the following terms shall have the
following meanings:
(a) references to "the Corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees or agents so that any person who is
or was a director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise shall stand in the same position under the
provisions of this Article VI with respect to the resulting or surviving
corporation as he or she would have with respect to such constituent corporation
if its separate existence had continued;
(b) references to "other enterprises" shall include employee benefit
plans;
(c) references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan;
(d) references to "serving at the request of the Corporation" shall
include any service as a director, officer, employee or agent of the Corporation
which imposes duties on, or involves services by, such director, officer,
employee, or agent with respect to an employee benefit plan, its participants,
or beneficiaries; and
(e) a person who acted in good faith and in a manner he reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner "not opposed to
the interests of the Corporation" as referred to in this Article VI.
6.9 CONFLICTS
No indemnification or advance shall be made under this Article VI, except
where such indemnification or advance is mandated by law or the order, judgment
or decree of any court of competent jurisdiction, in any circumstance where it
appears:
(1) That it would be inconsistent with a provision of the Restated
Articles of Incorporation, these Bylaws, a resolution of the stockholders or an
agreement in effect at the time
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of the accrual of the alleged cause of the action asserted in the proceeding in
which the expenses were incurred or other amounts were paid, which prohibits or
otherwise limits indemnification; or
(2) That it would be inconsistent with any condition expressly imposed by
a court in approving a settlement.
6.10 RIGHT TO BRING SUIT
If a claim under this Article VI is not paid in full by the Corporation
within 90 days after a written claim has been received by the Corporation
(either because the claim is denied or because no determination is made), the
claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall also be entitled to be paid the expenses of prosecuting such
claim. The Corporation shall be entitled to raise as a defense to any such
action that the claimant has not met the standards of conduct that make it
permissible under Delaware Corporation Law for the Corporation to indemnify the
claimant for the claim. Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) to have made
a determination prior to the commencement of such action that indemnification of
the claimant is permissible in the circumstances because he or she has met the
applicable standard of conduct, if any, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met the applicable standard of conduct,
shall be a defense to such action or create a presumption for the purposes of
such action that the claimant has not met the applicable standard of conduct.
6.11 AMENDMENT, REPEAL OR MODIFICATION
Any amendment, repeal or modification of any provision of this Article VI
shall not adversely affect any right or protection of a director or agent of the
Corporation existing at the time of such amendment, repeal or modification.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER
The corporation shall keep either at its principal executive office or at
the office of its transfer agent or registrar (if either be appointed), as
determined by resolution of the Board of Directors, a record of its stockholders
listing the names and addresses of all stockholders and the number and class of
shares held by each stockholder.
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A stockholder or stockholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who hold at least one percent (1%) of such voting shares and have
filed a Schedule 14B with the United States Securities and Exchange Commission
relating to the election of directors, shall have an absolute right to do either
or both of the following (i) inspect and copy the record of stockholders' names,
addresses, and shareholdings during usual business hours upon five (5) days'
prior written demand upon the corporation, or (ii) obtain from the transfer
agent for the corporation, upon written demand and upon the tender of such
transfer agent's usual charges for such list (the amount of which charges shall
be stated to the stockholder by the transfer agent upon request), a list of the
stockholders' names and addresses who are entitled to vote for the election of
directors, and their shareholdings, as of the most recent record date for which
it has been compiled or as of a date specified by the stockholder subsequent to
the date of demand. The list shall be made available on or before the later of
five (5) business days after the demand is received or the date specified
therein as the date as of which the list is to be compiled.
The record of stockholders shall also be open-to inspection and copying by
any stockholder or holder of a voting trust certificate at any time during usual
business hours upon written demand on the corporation, for a purpose reasonably
related to the holder's interests as a stockholder or holder of a voting trust
certificate.
Any inspection and copying under this Section 7.1 may be made in person or
by an agent or attorney of the stockholder or holder of a voting trust
certificate making the demand.
7.2 MAINTENANCE AND INSPECTION OF BYLAWS
The corporation shall keep at its principal executive office or at its
principal business office the original or a copy of these Bylaws as amended to
date, which shall be open to inspection by the stockholders at all reasonable
times during office hours.
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
The accounting books and records and the minutes of proceedings of the
stockholders and the Board of Directors, and committees of the Board of
Directors shall be kept at such place or places as are designated by the Board
of Directors or, in absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept in written form, and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form.
The minutes and accounting books and records shall be open to inspection
upon the written demand on the corporation of any stockholder or holder of a
voting trust certificate at any reasonable time during usual business hours, for
a purpose reasonably related to such holder's interests as a stockholder or as
the holder of a voting trust certificate. Such inspection by a stockholder or
holder of a voting trust certificate may be made in person or by an agent or
attorney and the right of
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inspection includes the right to copy and make extracts. Such rights of
inspection shall extend to the records of each subsidiary corporation of the
corporation.
7.4 INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect and copy all books, records, and documents of every kind and to inspect
the physical properties of the corporation and each of its subsidiary
corporations, domestic or foreign. Such inspection by a director may be made in
person or by an agent or attorney and the right of inspection includes the right
to copy and make extracts.
7.5 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The Chairman of the Board, the Vice Chairman of the Board, the President,
any Vice President, the Chief Financial Officer, the Secretary or Assistant
Secretary of this corporation, or any other person authorized by the Board of
Directors or the President or a Vice President, is authorized to vote,
represent, and exercise on behalf of this corporation all rights incident to any
and all shares of any other corporation or corporations standing in the name of
this corporation. The authority herein granted may be exercised either by such
person directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive payment
of any dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action, other than with
respect to notice or voting at a stockholders meeting, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty (60) days
prior to any such action. Only stockholders of record at the close of business
on the record date are entitled to receive the dividend, distribution or
allotment of rights, or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date, except as otherwise provided in the Restated Articles of
Incorporation or Delaware Corporation Law.
If the Board of Directors does not so fix a record date, then the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the Board adopts the resolution relating thereto or
the sixtieth (60th) day prior to the date of that action, whichever is later.
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8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the Board of Directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The Board of Directors, except as otherwise provided in these Bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.4 CERTIFICATES FOR SHARES
A certificate or certificates for shares of the corporation shall be
issued to each stockholder when any of such shares are fully paid. The Board of
Directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the total amount of the
consideration to be paid for them and the amount actually paid. All certificates
shall be signed in the name of the corporation by the Chairman of the Board or
the Vice Chairman of the Board or the President or a Vice President and by the
Chief Financial Officer or the Treasurer or the Secretary or an Assistant
Secretary, certifying the number of shares and the class or series of shares
owned by the stockholder. Any or all of the signatures on the certificate may be
by facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on a certificate has ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if that person were an
officer, transfer agent or registrar at the date of issue.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation or its transfer agent or registrar and cancelled
at the same time. The Board of Directors may, in case any share certificate or
certificate for any other security is lost, stolen or destroyed (as evidenced by
a written affidavit or affirmation of such fact), authorize the issuance of
replacement certificates on such terms and conditions as the Board may require;
the Board may require indemnification of the corporation secured by a bond or
other adequate security sufficient to protect the corporation against any claim
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that may be made against it, including any expense or liability, on account of
the alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Code shall govern the construction of these
Bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
9.1 AMENDMENT BY STOCKHOLDERS
Except as otherwise provided in the Restated Articles of Incorporation or
in these Bylaws new Bylaws may be adopted or these Bylaws may be amended or
repealed by the vote or written consent of holders of a majority of the
outstanding shares entitled to vote; provided, however, that if the Restated
Articles of Incorporation of the corporation set forth the number of authorized
Directors of the corporation, then the authorized number of Directors may be
changed only by an amendment of the Restated Articles of Incorporation.
9.2 AMENDMENT BY DIRECTORS
Except as otherwise provided in the Restated Articles of Incorporation or
in these Bylaws, these Bylaws including amendments adopted by the stockholders
may be altered, amended or repealed by a majority vote of the whole Board of
Directors at any regular or special meeting of the Board of Directors provided
that the stockholders may from time to time specify particular provisions of the
Bylaws which shall not be amended by the Board of Directors. Notwithstanding the
foregoing, any alteration, amendment or repeal of Sections 2.3, 2.4, 2.7, 2.11,
2.12, 2.14, 3.2, 3.3, 3.4, 3.5, 3.8, 3.9, 4.1, Article VI or Article IX shall
require the affirmative vote of not less than sixty percent (60%) of the whole
Board of Directors.
9.3 RECORD OF AMENDMENTS
Whenever an amendment or new Bylaw is adopted, it shall be copied in the
book of minutes with the original Bylaws. If any Bylaw is repealed, the fact of
repeal, with the date of the meeting at which the repeal was enacted or written
consent was filed, shall be stated in said book.
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ARTICLE X
INTERPRETATION
Reference in these Bylaws to any provision of Delaware Corporation Law
shall be deemed to include all amendments thereof.
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EXHIBIT 4.1
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
AMERICAN MEDICAL PROVIDERS, INC.
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
We, Jack N. McCrary, Chairman, President and Chief Executive Officer, and
Wayne A. Bertsch, Senior Vice President and Chief Financial Officer, of American
Medical Providers, Inc. a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with provisions of
Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation of the said Corporation, the said Board of
Directors on February 17, 1998, adopted the following resolution creating a
series of 15,000,000 shares of Preferred Stock designated as Series A Junior
Participating Preferred Stock:
NOW THEREFORE BE IT RESOLVED, that a series of the Company's Preferred
Stock consisting of 15,000,000 shares of Preferred Stock be, and hereby is,
designated as Series A Junior Participating Preferred Stock, par value
$0.001 per share (the "Series A Preferred"), and that the Series A
Preferred shall have the designations, powers, preferences, rights and
qualifications, limitations and restrictions substantially as set forth in
the Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock (the "Series A Certificate") attached
hereto as EXHIBIT A.
That said Certificate states that the Board of Directors does hereby fix
and herein state and express such designations, powers, preferences and relative
and other special rights and qualifications, limitations and restrictions
thereof as follows (all terms used herein which are defined in the Certificate
of Incorporation shall be deemed to have the meanings provided therein).
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting such series shall be
15,000,000. Such number of shares of Series A Preferred Stock may be increased
or decreased by resolution of the Board of Directors; provided, that no decrease
shall reduce the number of shares of Series A Preferred Stock to a number less
than the number of shares of Series A Preferred Stock then outstanding plus the
number of shares of Series A Preferred Stock reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible or exercisable
into Series A Preferred Stock.
Section 2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of preferred stock ranking prior and superior to the shares of
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
dividends payable in cash in an amount per share (rounded to the nearest cent),
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions (other than a dividend payable in shares of the Class A Common
Stock, par value $0.001 per share, of the Corporation (the "Class A Common
Stock") or the Class B Common Stock, par value $0.001 per share of the
Corporation (the "Class B Common Stock") or a subdivision of the outstanding
shares of Class A Common Stock or Class B Common Stock (collectively, the
"Common Stock") (by reclassification or otherwise)), declared on the Common
Stock since the first issuance of any share or fraction of a share of Series A
Preferred Stock. In the event the Corporation shall at any time after February
17, 1998 (the "Rights Declaration Date") (i) declare any dividend on Common
Stock payable in shares of Common Stock, (ii) subdivide the outstanding
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Common Stock or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the amount to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event under the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the date of issue of such shares of
Series A Preferred Stock. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Preferred Stock in an amount less than
the total amount of such dividends shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
Section 3. VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of the stockholders of the Corporation. In
the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each case the number of votes per
share to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event shall be adjusted by multiplying such number by
a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(B) Except as otherwise provided herein or by law, the holders of shares
of Series A Preferred Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
(C) Except as otherwise provided herein or provided by law, the holders of
shares of Series A Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other distribution on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid or distributions made ratably on the Series
A Preferred Stock and all such stock ranking on a parity with respect to
the particular dividend or distribution in proportion to the total
amounts to which the holders of all such shares are then entitled;
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(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares
of any stock of the Corporation ranking junior (both as to dividends and
upon dissolution, liquidation or winding up) to the Series A Preferred
Stock;
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except in accordance with a purchase
or offer made in writing or by publication (as determined by the Board
of Directors) to all holders of such shares upon such terms as the Board
of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock unless, prior thereto, the holders
of shares of Series A Preferred Stock shall have received $100 per share, plus
an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall be made to the holders
of shares of Series A Preferred Stock unless, prior thereto, the holders of
shares of Common Stock shall have received an amount per share (the "Common
Stock Liquidation Amount") equal to the quotient obtained by dividing (i) the
Series A Liquidation Preference by (ii) 100 (as appropriately adjusted an set
forth in subparagraph C below to reflect such events as stock splits, stock
dividends and recapitalization with respect to the Common Stock) (such number in
clause (ii), the "Adjustment Number"). Following the payment of the full
amount of the Series A Liquidation Preference and the Common Stock Liquidation
Amount in respect of all outstanding shares of Series A Preferred Stock and
Common Stock, respectively, holders of Series A Preferred Stock and holders of
shares of Common Stock shall receive their ratable and proportionate share of
remaining assets to be distributed in the ratio of the Adjustment Number to 1
with respect to such Preferred Stock and Common Stock, on a per share basis,
respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if any, which
rank on a parity with the Series A Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of the Series A Preferred Stock and
the holders of such parity shares in proportion to their respective liquidation
preferences.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the
outstanding Common Stock into a smaller number of shares, (iv) reclassify the
Common Stock or (v) effect a recapitalization of the Common Stock, then in each
such case the Adjustment
3
<PAGE>
Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section 8. NO REDEMPTION. The shares of Series A Preferred Stock shall
not be redeemable.
Section 9. RANKING. The Series A Preferred Stock shall rank junior to all
other series of the Corporation's preferred stock, if any, as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise. Nothing in this Certificate shall limit the power of
the Board of Directors to create a new series of preferred stock ranking senior
to the Series A Preferred Stock in any respect.
Section 10. AMENDMENT. The Amended and Restated Certificate of
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the powers, preferences or special rights
of the Series A Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of two-thirds or more of the outstanding shares
of Series A Preferred Stock, voting separately as a class.
Section 11. FRACTIONAL SHARES. Series A Preferred Stock may be issued in
fractions of a share, which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury this 17th day of
February, 1998.
_____________________________________
Jack N. McCrary
Chairman, President and Chief
Executive Officer
Attest:
- ------------------------------------------------------
Wayne A. Bertsch, Senior Vice President
and Chief Financial Officer
4
EXHIBIT 4.2
AMERICAN MEDICAL
PROVIDERS INC.(TM)
NUMBER SHARES
A
CLASS A COMMON STOCK $.001 PAR VALUE
PER SHARE
THIS CERTIFICATE IS TRANSFERABLE
IN HOUSTON, TEXAS AND NEW YORK, NEW YORK CUSIP 02744Q 10 9
SEE REVERSE FOR
CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
This Certifies that
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF CLASS A
COMMON STOCK, $.001 PAR VALUE PER SHARE, OF
AMERICAN MEDICAL
PROVIDERS INC.(TM)
(a corporation organized under the laws of the State of Delaware and herein
referred to as the "Corporation"), transferable on the books of the Corporation
upon surrender of this certificate properly endorsed. This Certificate and the
shares represented hereby are issued and shall be subject to all of the terms,
conditions and limitations of the Articles of Incorporation and Bylaws of the
Corporation, including all amendments heretofore or hereafter made to such
Certificate of Incorporation and Bylaws, to all of which reference is made
hereby and to all of which the holder assents by acceptance hereof. The
Corporation is authorized to issue more than one class of stock and more than
one series of preferred stock. Upon the written request of the record holder of
this Certificate, a full statement of the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights will be furnished without charge.
This Certificate is not valid unless countersigned by the Transfer Agent
and registered by the Registrar of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused the facsimile signatures
of its duly authorized President and its duly authorized Secretary and its
facsimile seal to be hereunto affixed.
Dated: COUNTERSIGNED AND REGISTERED:
[SEAL]
TRANSFER AGENT AND REGISTRAR
BY
PRESIDENT SECRETARY AUTHORIZED SIGNATURE
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
EACH CLASS OF AUTHORIZED SHARES OF COMMON STOCK OF THE CORPORATION IS
IDENTICAL IN ALL RESPECTS EXCEPT THAT (I) THE CLASS A COMMON STOCK VOTES ONE
VOTE PER SHARE AND CLASS B COMMON STOCK VOTES TWO-THIRDS (2/3) OF A VOTE PER
SHARE, (II) THE CLASS B COMMON STOCK MAY BE CONVERTED INTO CLASS A COMMON STOCK
AT CERTAIN CONVERSION RATIOS AND UPON THE OCCURRENCE OF CERTAIN EVENTS AND (III)
EXCEPT IN CERTAIN CIRCUMSTANCES THE CLASS B COMMON STOCK HAS THE ABILITY TO
ELECT ONE MEMBER OF THE CORPORATION'S BOARD OF DIRECTORS AS A CLASS AND THE
CLASS A COMMON STOCK HAS THE ABILITY TO ELECT THE REMAINING MEMBERS OF THE BOARD
OF DIRECTORS, ALL AS SET FORTH IN THE CORPORATION'S AMENDED AND RESTATED
ARTICLES OF INCORPORATION, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THE CORPORATION AND IS AVAILABLE UPON WRITTEN REQUEST.
[THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND ARE "RESTRICTED
SECURITIES" AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SHARES MAY
NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO
THE SATISFACTION OF THE CORPORATION.]
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ___________ Custodian ____________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right Under Uniform Gifts to Minors
of survivorship and not as Act _________________________
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
For Value Received, ___________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF TRANSFEREE
[ ]_____________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address including zip code of transferee)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the Class A Common Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint ____________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ________________________________
X ____________________________________
NOTICE: THE SIGNATURE(S) TO (SIGNATURE)
THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME(S) AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN X ____________________________________
EVERY PARTICULAR, WITHOUT (SIGNATURE)
ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER. ------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
------------------------------------------------
SIGNATURE(S) GUARANTEED BY:
------------------------------------------------
EXHIBIT 4.3
AMERICAN MEDICAL
PROVIDERS INC.(TM)
NUMBER SHARES
B
CLASS B COMMON STOCK $.001 PAR VALUE
PER SHARE
THIS CERTIFICATE IS TRANSFERABLE
IN HOUSTON, TEXAS AND NEW YORK, NEW YORK CUSIP 02744Q 10 9
SEE REVERSE FOR
CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
This Certifies that
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF CLASS B
COMMON STOCK, $.001 PAR VALUE PER SHARE, OF
AMERICAN MEDICAL
PROVIDERS INC.(TM)
(a corporation organized under the laws of the State of Delaware and herein
referred to as the "Corporation"), transferable on the books of the Corporation
upon surrender of this certificate properly endorsed. This Certificate and the
shares represented hereby are issued and shall be subject to all of the terms,
conditions and limitations of the Articles of Incorporation and Bylaws of the
Corporation, including all amendments heretofore or hereafter made to such
Certificate of Incorporation and Bylaws, to all of which reference is made
hereby and to all of which the holder assents by acceptance hereof. The
Corporation is authorized to issue more than one class of stock and more than
one series of preferred stock. Upon the written request of the record holder of
this Certificate, a full statement of the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights will be furnished without charge.
This Certificate is not valid unless countersigned by the Transfer Agent
and registered by the Registrar of the Corporation.
IN WITNESS WHEREOF, the Corporation has caused the facsimile signatures
of its duly authorized President and its duly authorized Secretary and its
facsimile seal to be hereunto affixed.
Dated: COUNTERSIGNED AND REGISTERED:
[SEAL]
TRANSFER AGENT AND REGISTRAR
BY
PRESIDENT SECRETARY AUTHORIZED SIGNATURE
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
EACH CLASS OF AUTHORIZED SHARES OF COMMON STOCK OF THE CORPORATION IS
IDENTICAL IN ALL RESPECTS EXCEPT THAT (I) THE CLASS A COMMON STOCK VOTES ONE
VOTE PER SHARE AND CLASS B COMMON STOCK VOTES TWO-THIRDS (2/3) OF A VOTE PER
SHARE, (II) THE CLASS B COMMON STOCK MAY BE CONVERTED INTO CLASS A COMMON STOCK
AT CERTAIN CONVERSION RATIOS AND UPON THE OCCURRENCE OF CERTAIN EVENTS AND (III)
EXCEPT IN CERTAIN CIRCUMSTANCES, THE CLASS B COMMON STOCK HAS THE ABILITY TO
ELECT ONE MEMBER OF THE CORPORATION'S BOARD OF DIRECTORS AS A CLASS AND THE
CLASS A COMMON STOCK HAS THE ABILITY TO ELECT THE REMAINING MEMBERS OF THE BOARD
OF DIRECTORS, ALL AS SET FORTH IN THE CORPORATION'S AMENDED AND RESTATED
ARTICLES OF INCORPORATION, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THE CORPORATION AND IS AVAILABLE UPON WRITTEN REQUEST.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND ARE "RESTRICTED
SECURITIES" AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SHARES MAY
NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO
THE SATISFACTION OF THE CORPORATION.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM -- as tenants in common UNIF GIFT MIN ACT -- ___________ Custodian ____________
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right Under Uniform Gifts to Minors
of survivorship and not as Act _________________________
tenants in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
ASSIGNMENT
For Value Received, ___________________hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF TRANSFEREE
[ ]_____________________________________________________
________________________________________________________________________________
(Please print or typewrite name and address including zip code of transferee)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________Shares
of the Class B Common Stock represented by the within Certificate and do hereby
irrevocably constitute and appoint ____________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated ________________________________
X ____________________________________
NOTICE: THE SIGNATURE(S) TO (SIGNATURE)
THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME(S) AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN X ____________________________________
EVERY PARTICULAR, WITHOUT (SIGNATURE)
ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER. ------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
------------------------------------------------
SIGNATURE(S) GUARANTEED BY:
------------------------------------------------
EXHIBIT 5.1
[LETTERHEAD OF BAKER & HOSTETLER LLP]
February 17, 1998
American Medical Providers, Inc.
Suite 1550
3555 Timmons Lane
Houston, Texas 77027
Ladies and Gentlemen:
As counsel for American Medical Providers, Inc. (the "Company"), we are
familiar with the Registration Statement on Form S-4 (the "Registration
Statement") filed by the Company with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended, with respect to
2,000,000 shares of the Company's Class A Common Stock, par value $.001 per
share (the "Shares").
In connection with the foregoing, we have examined the Amended and Restated
Certificate of Incorporation of the Company, and such records of the corporate
proceedings of the Company and other documents and matters as we deem as
necessary to render this opinion.
Based upon such examination, we are of the opinion that:
1. The Company is a corporation duly organized and validly existing
under the laws of the State of Delaware.
2. The Shares have been duly authorized and, when issued and sold
in the manner contemplated by the Registration Statement, will be
validly issued, fully paid and non-assessable.
We consent to the filing of this opinion as Exhibit 5 to the Registration
Statement and to the reference to us under the caption "Legal Matters" in the
Prospectus that is a part of the Registration Statement.
Sincerely,
/s/ BAKER & HOSTETLER LLP
Baker & Hostetler LLP
EXHIBIT 10.1
AMERICAN MEDICAL PROVIDERS, INC.
FORM OF
1997 STOCK INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
The name of this plan is the American Medical Providers, Inc. 1997 Stock
Incentive Plan (the "Plan"). The Plan was adopted by the Company's Board of
Directors on _________, 1997, subject to the approval of the Stockholders of the
Company, which approval was obtained on , 1997. The purpose of the Plan is to
enable the Company to attract and retain highly qualified personnel who will
contribute to the Company's success by their ability, ingenuity and industry and
to provide incentives to the participating officers, directors, employees,
consultants and advisors that are linked directly to increases in stockholder
value and will therefore inure to the benefit of all stockholders of the
Company.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(1) "ADMINISTRATOR" means the Board, or if and to the extent the Board
does not administer the Plan, the Committee in accordance with Section 2.
(2) "BOARD" means the Board of Directors of the Company.
(3) "CODE" means the Internal Revenue Code of 1986, as amended from time
to time, or any successor thereto.
(4) "COMMITTEE" means a committee appointed by the Board and composed of
two or more members of the Board who qualify as (i) "Non-Employee Directors"
within the meaning of Rule 16b-3 promulgated by the Securities and Exchange
Commission (the "Commission") under the Securities Exchange Act of 1934 (the
"Exchange Act"), and as such Rule may be amended from time to time, or any
successor definition adopted by the Commission, and (ii) "outside directors"
within the meaning of Section 162(m) of the Code. If at any time or to any
extent the Board shall not administer the Plan, then the functions of the Board
specified in the Plan shall be exercised by the Committee.
(5) "COMPANY" means American Medical Providers, Inc., a Delaware
corporation (or any successor corporation).
(6) "DEFERRED STOCK" means an award made pursuant to Section 7 below of
the right to receive Stock at the end of a specified deferral period.
1
<PAGE>
(7) "DISABILITY" means the inability of a Participant to perform
substantially his duties and responsibilities to the Company by reason of a
physical or mental disability or infirmity (i) for a continuous period of six
months or (ii) at such earlier time as the Participant submits medical evidence
satisfactory to the Administrator that he has a physical or mental disability or
infirmity which will likely prevent him from returning to the performance of his
work duties for six months or longer. The date of such Disability shall be on
the last day of such six-month period or the day on which the Participant
submits such satisfactory medical evidence, as the case may be.
(9) "EFFECTIVE DATE" shall mean the date provided pursuant to Section 11.
(10) "ELIGIBLE EMPLOYEE" means an officer and/or employee of the Company
or any Subsidiary.
(11) "FAIR MARKET VALUE" means, as of any given date, with respect to any
awards granted hereunder, (A) if the Stock is publicly traded, the closing sale
price of the Stock on such date as reported in the Western Edition of the Wall
Street Journal, or the average of the closing price of the Stock on each day on
which the Stock was traded over a period of up to twenty trading days
immediately prior to such date, (B) the fair market value of the Stock as
determined in accordance with a method prescribed in the agreement evidencing
any award hereunder, or (C) the fair market value of the Stock as otherwise
determined by the Administrator in the good faith exercise of its discretion.
(12) "INCENTIVE STOCK OPTION" means any Stock Option intended to be
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
(13) "LIMITED STOCK APPRECIATION RIGHT" means a Stock Appreciation Right
that can be exercised only in the event of a "Change of Control" (as defined in
the award evidencing such Limited Stock Appreciation Right).
(14) "NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option, including any Stock Option that provides (as of the time
such option is granted) that it will not be treated as an Incentive Stock
Option.
(15) "PARENT CORPORATION" means any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company, if each of the
corporations in the chain (other than the Company) owns stock possessing 50% or
more of the combined voting power of all classes of stock in one of the other
corporations in the chain.
(16) "PARTICIPANT" means any Eligible Employee, director, consultant or
advisor to the Company selected by the Administrator, pursuant to the
Administrator's authority in Section 2 below, to receive grants of Stock
Options, Stock Appreciation Rights, Limited Stock
2
<PAGE>
Appreciation Rights, Restricted Stock awards, Deferred Stock awards,
Performance Shares or any combination of the foregoing.
(17) "PERFORMANCE SHARE" means an award of shares of Stock pursuant to
Section 7 that is subject to restrictions based upon the attainment of specified
performance objectives.
(18) "RESTRICTED STOCK" means an award granted pursuant to Section 7 of
shares of Stock subject to certain restrictions.
(19) "STOCK" means the common stock, $.001 par value per share, of the
Company.
(20) "STOCK APPRECIATION RIGHT" means the right pursuant to an award
granted under Section 6 to receive an amount equal to the difference between (A)
the Fair Market Value, as of the date such Stock Appreciation Right or portion
thereof is surrendered, of the shares of Stock covered by such right or such
portion thereof, and (B) the aggregate exercise price of such right or such
portion thereof.
(21) "STOCK OPTION" means any option to purchase shares of Stock granted
pursuant to Section 5.
(22) "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations (other than the last corporation) in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered in accordance with the requirements of Rule
16b-3 of the Exchange Act and Section 162(m) of the Code (but only to the extent
necessary to maintain qualification of the Plan under Rule 16b-3 of the Exchange
Act and Section 162(m) of the Code) by the Board or by the Committee which shall
be appointed by the Board and which shall serve at the pleasure of the Board.
Pursuant to the terms of the Plan, the Administrator shall have the power
and authority to grant to Eligible Employees, directors, consultants and
advisors to the Company, pursuant to the terms of the Plan: (a) Stock Options,
(b) Stock Appreciation Rights or Limited Stock Appreciation Rights, (c)
Restricted Stock, (d) Performance Shares, (c) Deferred Stock or (f) any
combination of the foregoing.
3
<PAGE>
In particular, the Administrator shall have the authority:
(a) to select those Eligible Employees, directors, consultants and
advisors of the Company who shall be Participants;
(b) to determine whether and to what extent Stock Options, Stock
Appreciation Rights, Limited Stock Appreciation Rights, Restricted Stock,
Deferred Stock, Performance Shares or a combination of the foregoing, are to be
granted hereunder to Participants;
(c) to determine the number of shares of Stock to be covered by each
such award granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder (including, but not limited
to, (x) the restrictions applicable to Restricted or Deferred Stock awards and
the conditions under which restrictions applicable to such Restricted or
Deferred Stock shall lapse, and (y) the performance goals and periods applicable
to the award of Performance Shares); and
(e) to determine the terms and conditions, not inconsistent with the
terms of the Plan, which shall govern all written instruments evidencing the
Stock Options, Stock Appreciation Rights, Limited Stock Appreciation Rights,
Restricted Stock, Deferred Stock, Performance Shares
or any combination of the foregoing.
The Administrator shall have the authority, in its discretion, to adopt,
alter and repeal such administrative rules, guidelines and practices governing
the Plan as it shall from time to time deem advisable; to interpret the terms
and provisions of the Plan and any award issued under the Plan (and any
agreements relating thereto); and to otherwise supervise the administration of
the Plan.
All decisions made by the Administrator pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and the
Participants.
SECTION 3. STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for issuance
under the Plan shall be 1,157,098. Such shares may consist, in whole or in part,
of authorized and unissued shares or treasury shares. The aggregate number of
shares of Stock as to which Stock Options, Stock Appreciation Rights, Restricted
Stock and Performance Shares may be granted to any individual during any
calendar year may not, subject to adjustment as provided in this Section 3,
exceed 80% of the shares of Stock reserved for the purposes of the Plan in
accordance with the provisions of this Section 3.
4
<PAGE>
Consistent with the provisions of Section 162(m) of the Code, as from time
to time applicable, to the extent that (i) a Stock Option expires or is
otherwise terminated without being exercised, or (ii) any shares of Stock
subject to any Restricted Stock, Deferred Stock or Performance Share award
granted hereunder are forfeited, such shares shall again be available for
issuance in connection with future awards under the Plan. If any shares of Stock
have been pledged as collateral for indebtedness incurred by a Participant in
connection with the exercise of a Stock Option and such shares are returned to
the Company in satisfaction of such indebtedness, such shares shall again be
available for issuance in connection with future awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, contribution of shares, exchange
of shares, change in corporate structure or other transaction affecting the
Stock, a substitution or adjustment shall be made in (i) the aggregate number of
shares reserved for issuance under the Plan, (ii) the kind, number and option
price of shares subject to outstanding Stock Options granted under the Plan, and
(iii) the kind, number and purchase price of shares issuable pursuant to awards
of Restricted Stock, Deferred Stock and Performance Shares, as may be determined
by the Administrator, in its sole discretion. Such other substitutions or
adjustments shall be made as may be determined by the Administrator, in its sole
discretion. An adjusted option price shall also be used to determine the amount
payable by the Company upon the exercise of any Stock Appreciation Right or
Limited Stock Appreciation Right associated with any Stock Option. In connection
with any event described in this paragraph, the Administrator may provide, in
its discretion, for the cancellation of any outstanding awards and payment in
cash or other property therefor.
SECTION 4. ELIGIBILITY.
Officers (including officers who are directors of the Company), directors,
employees of the Company, and consultants and advisors to the Company who are
responsible for or are in a position to contribute to the management, growth
and/or profitability of the business of the Company shall be eligible to be
granted Stock Options, Stock Appreciation Rights, Limited Stock Appreciation
Rights, Restricted Stock awards, Deferred Stock awards or Performance Shares
hereunder. However, only Eligible Employees of the Company and Subsidiaries
shall be eligible to receive grants of Incentive Stock Options. The Participants
under the Plan shall be selected from time to time by the Administrator, in its
sole discretion, from among the Eligible Employees, directors, consultants and
advisors to the Company recommended by the senior management of the Company, and
the Administrator shall determine, in its sole discretion, the number of shares
of Stock covered by each award.
SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone or in addition to other awards granted
under the Plan. Any Stock Option granted under the Plan shall be in such form as
the Administrator may from
5
<PAGE>
time to time approve, and the provisions of Stock Option awards need not be the
same with respect to each optionee. Recipients of Stock Options shall enter into
a subscription and/or award agreement with the Company, in such form as the
Administrator shall determine, which agreement shall set forth, among other
things, the exercise price of the option, the term of the option and provisions
regarding exercisability of the option granted thereunder.
The Stock Options granted under the Plan may be of two types: (i)Incentive
Stock Options and (ii)Non-Qualified Stock Options.
The Administrator shall have the authority to grant to any Eligible
Employee Incentive Stock Options, Non-Qualified Stock Options, or both types of
Stock Options (in each case with or without Stock Appreciation Rights or Limited
Stock Appreciation Rights). Directors, consultants and advisors may only be
granted Non-Qualified Stock Options (with or without Stock Appreciation Rights
or Limited Stock Appreciation Rights). To the extent that any Stock Option does
not qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option. The Company shall have no liability to a
Participant, or any other party, if a Stock Option (or any part thereof) which
is intended to be an Incentive Stock Option is not an Incentive Stock Option.
More than one option may be granted to the same optionee and be outstanding
concurrently hereunder.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall deem
desirable:
(1) OPTION PRICE. The option price per share of Stock purchasable under a
Stock Option shall be determined by the Administrator in its sole discretion at
the time of grant but shall not, in the case of Incentive Stock Options, be less
than 100% of the Fair Market Value of the Stock on such date and shall not, in
any event, be less than the par value (if any) of the Stock. If an employee owns
or is deemed to own (by reason of the attribution rules applicable under Section
424(d) of the Code) more than 10% of the combined voting power of all classes of
stock of the Company or any Parent Corporation and an Incentive Stock Option is
granted to such employee, the option price of such Incentive Stock Option (to
the extent required by the Code at the time of grant) shall be no less than 110%
of the Fair Market Value of the Stock on the date such Incentive Stock Option is
granted.
(2) OPTION TERM. The term of each Stock Option shall be fixed by the
Administrator, but no Stock Option shall be exercisable more than ten years
after the date such Stock Option is granted; PROVIDED, HOWEVER, that if an
employee owns or is deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10% of the combined voting power of all classes of
stock of the Company or any Parent Corporation and an Incentive Stock Option is
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granted to such employee, the term of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no more than five years from
the date of grant.
(3) EXERCISABILITY. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Administrator at or after grant. The Administrator may provide, in its
discretion, that any Stock Option shall be exercisable only in installments, and
the Administrator may waive such installment exercise provisions at any time in
whole or in part based on such factors as the Administrator may determine, in
its sole discretion, including but not limited to in connection with any "change
in control" of the Company, as defined in any stock option agreement.
(4) METHOD OF EXERCISE. Subject to Section 5(3) above, Stock Options may
be exercised in whole or in part at any time during the option period, by giving
written notice of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment in full of the purchase price in cash or its
equivalent as determined by the Administrator. As determined by the
Administrator, in its sole discretion, payment in whole or in part may also be
made (i) by means of any cashless exercise procedure approved by the
Administrator, (ii) in the form of unrestricted Stock already owned by the
optionee, or (iii) in the case of the exercise of a NonQualified Stock Option,
in the form of Restricted Stock or Performance Shares subject to an award
hereunder (based, in each case, on the Fair Market Value of the Stock on the
date the option is exercised); PROVIDED, HOWEVER, that in the case of an
Incentive Stock Option, the right to make payment in the form of already owned
shares may be authorized only at the time of grant. If payment of the option
exercise price of a Non-Qualified Stock Option is made in whole or in part in
the form of Restricted Stock or Performance Shares, the shares received upon the
exercise of such Stock Option (to the extent of the number of shares of
Restricted Stock or Performance Shares surrendered upon exercise of such Stock
Option) shall be restricted in accordance with the original terms of the
Restricted Stock or Performance Share award in question, except that the
Administrator may direct that such restrictions shall apply only to that number
of shares equal to the number of shares surrendered upon the exercise of such
option. An optionee shall generally have the right to dividends and any other
rights of a stockholder with respect to the Stock subject to the option only
after the optionee has given written notice of exercise, has paid in full for
such shares, and, if requested, has given the representation described in
paragraph (1) of Section 10.
The Administrator may require the voluntary surrender of all or a portion
of any Stock Option granted under the Plan as a condition precedent to the grant
of a new Stock Option. Subject to the provisions of the Plan, such new Stock
Option shall be exercisable at the price, during such period and on such other
terms and conditions as are specified by the Administrator at the time the new
Stock Option is granted; PROVIDED, HOWEVER, should the Administrator so require,
the number of shares subject to such new Stock Option shall not be greater than
the number of shares subject to the surrendered Stock Option. Consistent with
the provisions of Section 162(m), to the extent applicable, upon their
surrender, Stock Options shall be canceled and the shares previously subject to
such canceled Stock Options shall again be available for grants of Stock Options
and other awards hereunder.
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(5) LOANS. The Company may make loans available to Stock Option holders in
connection with the exercise of outstanding options granted under the Plan, as
the Administrshall (i) be evidenced by promissory notes entered into by the
Stock Option holders in favor of the Company, (ii) be subject to the terms and
conditions set forth in this Section 5(5) and such other terms and conditions,
not inconsistent with the Plan, as the Administrator shall determine, (iii) bear
interest, if any, at such rate as the Administrator shall determine, and (iv) be
subject to Board approval (or to approval by the Administrator to the extent the
Board may delegate such authority). In no event may the principal amount of any
such loan exceed the sum of (x) the exercise price less the par value (if any)
of the shares of Stock covered by the option, or portion thereof, exercised by
the holder, and (y) any federal, state, and local income tax attributable to
such exercise. The initial term of the loan, the schedule of payments of
principal and interest under the loan, the extent to which the loan is to be
with or without recourse against the holder with respect to principal or
interest and the conditions upon which the loan will become payable in the event
of the holder's termination of employment shall be determined by the
Administrator. Unless the Administrator determines otherwise, when a loan is
made, shares of Stock having a Fair Market Value at least equal to the principal
amount of the loan shall be pledged by the holder to the Company as security for
payment of the unpaid balance of the loan, and such pledge shall be evidenced by
a pledge agreement, the terms of which shall be determined by the Administrator,
in its discretion; PROVIDED; HOWEVER, that each loan shall comply with all
applicable laws, regulations and rules of the Board of Governors of the Federal
Reserve System and any other governmental agency having jurisdiction.
(6) NON-TRANSFERABILITY OF OPTIONS. Unless otherwise determined by the
Administrator subject to the limitations on transferability set forth in Rule
16b-3, no Stock Option shall be transferable by the optionee, and all Stock
Options shall be exercisable, during the optionee's lifetime, only by the
optionee. Notwithstanding the foregoing, an Incentive Stock Option shall not be
transferable except by will or the laws of descent and distribution, and shall
be exercisable, during the optionee's lifetime, only by the optionee.
(7) TERMINATION OF EMPLOYMENT OR SERVICE. If an optionee's employment with
or service as a director, consultant or advisor to the Company terminates by
reason of death, Disability or for any other reason, the Stock Option may
thereafter be exercised to the extent provided in the applicable subscription or
award agreement, or as otherwise determined by the Administrator, PROVIDED,
HOWEVER, that an optionee who has been granted an Incentive Stock Option and
whose employment has been terminated must exercise the Incentive Stock Option
within three months following such termination or within twelve months in the
event such termination is the result of optionee's disability.
(8) ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. To the extent that the
aggregate Fair Market Value (determined as of the date the Incentive Stock
Option is granted) of shares of Stock
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with respect to which Incentive Stock Options granted to an Optionee under this
Plan and all other option plans of the Company or its Parent Corporation become
exercisable for the first time by the Optionee during any calendar year exceeds
$100,000, such Stock Options shall be treated as Non-Qualified Stock Options.
SECTION 6. STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION RIGHTS.
(1) GRANT AND EXERCISE. Stock Appreciation Rights and Limited Stock
Appreciation Rights may be granted either alone ("Free Standing Rights") or in
conjunction with all or part of any Stock Option granted under the Plan
("Related Rights"). In the case of a Non-Qualified Stock Option, Related Rights
may be granted either at or after the time of the grant of such Stock Option. In
the case of an Incentive Stock Option, Related Rights may be granted only at the
time of the grant of the Incentive Stock Option.
A Related Right or applicable portion thereof granted in conjunction with
a given Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Stock Option, except that, unless
otherwise provided by the Administrator at the time of grant, a Related Right
granted with respect to less than the full number of shares covered by a related
Stock Option shall only be reduced if and to the extent that the number of
shares covered by the exercise or termination of the related Stock Option
exceeds the number of shares not covered by the Related Right.
A Related Right may be exercised by an optionee, in accordance with
paragraph (2) of this Section 6, by surrendering the applicable portion of the
related Stock Option. Upon such exercise and surrender, the optionee shall be
entitled to receive an amount determined in the manner prescribed in paragraph
(2) of this Section 6. Stock Options which have been so surrendered, in whole or
in part, shall no longer be exercisable to the extent the Related Rights have
been so exercised.
(2) TERMS AND CONDITIONS. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Administrator, including the
following:
(a) Stock Appreciation Rights that are Related Rights ("Related
Stock Appreciation Rights") shall be exercisable only at such time or times and
to the extent that the Stock Options to which they relate shall be exercisable
in accordance with the provisions of Section 5 and this Section 6 of the Plan;
PROVIDED, HOWEVER, that no Related Stock Appreciation Right shall be exercisable
during the first six months of its term, except that this additional limitation
shall not apply in the event of death or Disability of the optionee prior to the
expiration of such six-month period.
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(b) Upon the exercise of a Related Stock Appreciation Right, an
optionee shall be entitled to receive up to, but not more than, an amount in
cash or that number of shares of Stock (or in some combination of cash and
shares of Stock) equal in value to the excess of the Fair Market Value of one
share of Stock as of the date of exercise over the option price per share
specified in the related Stock Option multiplied by the number of shares of
Stock in respect of which the Related Stock Appreciation Right is being
exercised, with the Administrator having the right to determine the form of
payment.
(c) Related Stock Appreciation Rights shall be transferable only
when and to the extent that the underlying Stock Option would be transferable
under paragraph (6) of Section 5 of the Plan.
(d) Upon the exercise of a Related Stock Appreciation Right, the
Stock Option or part thereof to which such Related Stock Appreciation Right is
related shall be deemed to have been exercised for the purpose of the limitation
set forth in Section 3 of the Plan on the number of shares of Stock to be issued
under the Plan, but only to the extent of the number of shares issued under the
Related Stock Appreciation Right.
(e) A Related Stock Appreciation Right granted in connection with an
Incentive Stock Option may be exercised only if and when the Fair Market Value
of the Stock subject to the Incentive Stock Option exceeds the exercise price of
such Stock Option.
(f) Stock Appreciation Rights that are Free Standing Rights ("Free
Standing Stock Appreciation Rights") shall be exercisable at such time or times
and subject to such terms and conditions as shall be determined by the
Administrator at or after grant; PROVIDED, HOWEVER, that no Free Standing Stock
Appreciation Right shall be exercisable during the first six months of its term,
except that this limitation shall not apply in the event of death or Disability
of the recipient of the Free Standing Stock Appreciation Right prior to the
expiration of such six-month period.
(g) The term of each Free Standing Stock Appreciation Right shall be
fixed by the Administrator, but no Free Standing Stock Appreciation Right shall
be exercisable more than ten years after the date such right is granted.
(h) Upon the exercise of a Free Standing Stock Appreciation Right, a
recipient shall be entitled to receive up to, but not more than, an amount in
cash or that number of shares of Stock (or any combination of cash or shares of
Stock) equal in value to the excess of the Fair Market Value of one share of
Stock as of the date of exercise over the price per share specified in the Free
Standing Stock Appreciation Right (which price shall be no less than 100% of the
Fair Market Value of the Stock on the date of grant) multiplied by the number of
shares of Stock in respect to which the right is being exercised, with the
Administrator having the right to determine the form of payment.
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(i) Free Standing Stock Appreciation Rights shall be transferable
only when and to the extent that a Stock Option would be transferable under
paragraph (6) of Section 5 of the Plan.
(j) In the event of the termination of employment or service of a
Participant who has been granted one or more Free Standing Stock Appreciation
Rights, such rights shall be exercisable at such time or times and subject to
such terms and conditions as shall be determined by the Administrator at or
after grant.
(k) Limited Stock Appreciation Rights may only be exercised within
the 30-day period following a "Change of Control" (as defined by the
Administrator in the agreement evidencing such Limited Stock Appreciation Right)
and, with respect to Limited Stock Appreciation Rights that are Related Rights
("Related Limited Stock Appreciation Rights"), only to the extent that the Stock
Options to which they relate shall be exercisable in accordance with the
provisions of Section 5 and this Section 6 of the Plan; PROVIDED, HOWEVER, that
no Related Limited Stock Appreciation Right shall be exercisable during the
first six months of its term, except that this additional limitation shall not
apply in the event of death or Disability of the optionee prior to the
expiration of such six-month period.
(l) Upon the exercise of a Limited Stock Appreciation Right, the
recipient shall be entitled to receive an amount in cash equal in value to the
excess of the "Change of Control Price" (as defined in the agreement evidencing
such Limited Stock Appreciation Right) of one share of Stock as of the date of
exercise over (A) the option price per share specified in the related
Stock Option, or (B) in the case of a Limited Stock Appreciation Right which is
a Free Standing Stock Appreciation Right, the price per share specified in the
Free Standing Stock Appreciation Right, such excess to be multiplied by the
number of shares in respect of which the Limited Stock Appreciation Right shall
have been exercised.
SECTION 7. RESTRICTED STOCK, DEFERRED STOCK AND PERFORMANCE SHARES.
(1) GENERAL. Restricted Stock, Deferred Stock or Performance Share awards
may be issued either alone or in addition to other awards granted under the
Plan. The Administrator shall determine the persons to whom, and the time or
times at which, grants of Restricted Stock, Deferred Stock or Performance Share
awards shall be made; the number of shares to be awarded; the price, if any, to
be paid by the recipient of Restricted Stock, Deferred Stock or Performance
Share awards; the Restricted Period (as defined in paragraph (3) hereof)
applicable to Restricted Stock or Deferred Stock awards; the performance
objectives applicable to Performance Share or Deferred Stock awards; the date or
dates on which restrictions applicable to such Restricted Stock or Deferred
Stock awards shall lapse during such Restricted Period; and all other conditions
of the Restricted Stock, Deferred Stock and Performance Share awards. The
Administrator may also condition the grant of Restricted Stock, Deferred Stock
awards or Performance Shares upon the exercise of Stock Options, or upon such
other criteria as the
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Administrator may determine, in its sole discretion. The provisions of the same
with respect to each recipient. In the discretion of the Administrator, loans
may be made to Participants in connection with the purchase of Restricted Stock
under substantially the same terms and conditions as provided in Section 5(5)
with respect to the exercise of Stock Options.
(2) AWARDS AND CERTIFICATES. The prospective recipient of a Restricted
Stock, Deferred Stock or Performance Share award shall not have any rights with
respect to such award, unless and until such recipient has executed an agreement
evidencing the award (a "Restricted Stock Award Agreement," "Deferred Stock
Award Agreement" or "Performance Share Award Agreement," as appropriate) and
delivered a fully executed copy thereof to the Company, within a period of sixty
days (or such other period as the Administrator may specify) after the award
date. Except as otherwise provided below in this Section 7(2), (i) each
Participant who is awarded Restricted Stock or Performance Shares shall be
issued a stock certificate in respect of such shares of Restricted Stock or
Performance Shares; and (ii) such certificate shall be registered in the name of
the Participant, and shall bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such award.
The Company may require that the stock certificates evidencing Restricted
Stock or Performance Share awards hereunder be held in the custody of the
Company until the restrictions thereon shall have lapsed, and that, as a
condition of any Restricted Stock award or Performance Share award, the
Participant shall have delivered a stock power, endorsed in blank, relating to
the Stock covered by such award.
With respect to Deferred Stock awards, at the expiration of the Restricted
Period, stock certificates in respect of such shares of Deferred Stock shall be
delivered to the participant, or his legal representative, in a number equal to
the number of shares of Stock covered by the Deferred Stock award.
(3) RESTRICTIONS AND CONDITIONS. The Restricted Stock, Deferred Stock and
Performance Share awards granted pursuant to this Section 7 shall be subject to
the following restrictions and conditions:
(a) Subject to the provisions of the Plan and the Restricted Stock
Award Agreement, Deferred Stock Award Agreement or Performance Share Award
Agreement, as appropriate, governing such award, during such period as may be
set by the Administrator commencing on the grant date (the "Restricted Period"),
the Participant shall not be permitted to sell, transfer, pledge or assign
shares of Restricted Stock, Performance Shares or Deferred Stock awarded under
the Plan; PROVIDED, HOWEVER, that the Administrator may, in its sole discretion,
provide for the lapse of such restrictions in installments and may accelerate or
waive such restrictions in whole or in part, based on such factors and such
circumstances as the Administrator may determine, in its sole discretion,
including, but not limited to, the attainment of certain performance related
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goals, the Participant's termination of employment or service, death or
Disability or the occurrence of a "Change of Control" as defined in the
agreement evidencing such award.
(b) Except as provided in paragraph (3)(a) of this Section 7, the
Participant shall generally have, with respect to the shares of Restricted Stock
or Performance Shares, all of the rights of a stockholder with respect to such
stock during the Restricted Period. The Participant shall generally not have the
rights of a stockholder with respect to stock subject to Deferred Stock awards
during the Restricted period; PROVIDED, HOWEVER, that dividends declared during
the Restricted period with respect to the number of shares covered by a Deferred
Stock award shall be paid to the Participant. Certificates for shares of
unrestricted Stock shall be delivered to the Participant promptly after, and
only after, the Restricted Period shall expire without forfeiture in respect of
such shareistrator, in its sole discretion, shall otherwise determine.
(c) The rights of holders of Restricted Stock, Deferred Stock and
Performance Share awards upon termination of employment or service for any
reason during the Restricted Period shall be set forth in the Restricted Stock
Award Agreement, Deferred Stock Award Agreement or Performance Share Award
Agreement, as appropriate, governing such awards.
SECTION 8. AMENDMENT AND TERMINATION.
The Board may amend, alter, suspend or discontinue the Plan in any respect
at any time. Board approval must be accompanied by (i) shareholder approval in
those cases in which amendment, alteration or discontinuation requires
shareholder approval under applicable law or regulations or the requirements of
the principal exchange or interdealer quotation system on which the Common Stock
is listed or quoted and (ii) affected Participant's approval if the amendment,
alteration or discontinuation would adversely affect the Participant's rights
under any outstanding award.
The Administrator may amend the terms of any award theretofore granted,
prospectively and retroactively, but, subject to Section 3 above, no such
amendment shall impair the rights of any holder without his or her consent.
SECTION 9. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a Participant by the
Company, nothing contained herein shall give any such Participant any rights
that are greater than those of a general creditor of the Company.
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SECTION 10. GENERAL PROVISIONS.
(1) The Company may require any person to whom an award is granted, or any
person to whom an award is transferred in accordance with the Plan, as a
condition of exercising or acquiring stock under any award, (1) to give written
assurances satisfactory to the Company as to such person's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the award; and (2) to give written assurances satisfactory
to the Company stating that such person is acquiringtion of selling or otherwise
distributing the stock. The foregoing requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (i) the issuance of the
shares upon the exercise or acquisition of stock under the award has been
registered under a then currently effective registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), or (ii) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws.
All certificates for shares of Stock delivered under the Plan shall be
subject to such stock transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations and other
requirements of the Commission, any stock exchange upon which the Stock is then
listed, and any applicable federal or state securities law, and the
Administrator may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions.
(2) Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan shall
not confer upon any employee, consultant or advisor of the Company any right to
continued employment or service with the Company, as the case may be, nor shall
it interfere in any way with the right of the Company to terminate the
employment or service of any of its employees, consultants or advisors at any
time.
(3) Each Participant shall, no later than the date as of which the value
of an award first becomes includible in the gross income of the Participant for
federal income tax purposes, pay to
the Company, or make arrangements satisfactory to the Administrator regarding
payment of, by law to be withheld with respect to the award.
The obligations of the Company under the Plan shall be conditional on the making
of such payments or arrangements, and the Company shall, to the extent permitted
by law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the Participant.
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(4) No member of the Board or the Administrator, nor any officer or
employee of the Company acting on behalf of the Board or the Administrator,
shall be personally liable for any action, determination, or interpretation
taken or made in good faith with respect to the Plan, and all members of the
Board or the Administrator and each and any officer or employee of the Company
acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.
(5) During the terms of any award made hereunder, the Company shall keep
available at all times the number of shares of stock required to satisfy such
award.
(6) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares hereunder; provided, however, that this undertaking shall
not require the Company to register under the Securities Act either the Plan,
any award made hereunder or any stock issued or issuable pursuant to any such
award. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such award unless and until such authority is obtained.
SECTION 11. EFFECTIVE DATE OF PLAN.
The Plan became effective (the "Effective Date") on ___________, 1997, the
date the Company's stockholders formally approved the Plan.
SECTION 12. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Limited Stock Appreciation
Right, Restricted Stock, Deferred Stock or Performance Share award shall be
granted pursuant to the Plan on or after the tenth anniversary of the Effective
Date, but awards theretofore granted may extend beyond that date.
15
EXHIBIT 10.2
ANKLE & FOOT CENTERS OF AMERICA, L.L.C.
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of November 17, 1997 between Ankle & Foot Centers of
America, L.L.C. a Delaware limited liability corporation (the "Company"), and
Jack N. McCrary, (the "Executive"), and joined into for the purposes
hereinafter stated by American Medical Providers, Inc., a Delaware Corporation
("AMP").
In consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Executive and the
Executive hereby agrees to serve the Company on the terms and conditions set
forth herein. In addition, the Executive and the Company hereby agree that
subject to and effective as of either of the following to occur: (a) the closing
of the proposed Initial Public Offering ("IPO") of American Medical Providers,
Inc., (formerly Podiatric Newco, Inc., ("AMP"), or (b) the sale or merger by
AMP of substantially all of the assets of AMP or by the Company's shareholders
of a controlling interest in AMP's stock, other than in connection with the IPO,
this Employment Agreement (the "Agreement") shall be assumed by "AMP")
and/or such company into which AMP is merged or by whom AMP is otherwise
acquired. Upon either of the events in (a) or (b) above, this Employment
Agreement shall supersede that certain letter agreement regarding employment
between the Company and Executive, dated as of N/A (the "Prior Agreement"),
and the Prior Agreement shall thereupon automatically terminate without further
obligation by either Executive or the Company. Upon AMP's assumption of this
Agreement, all references to the Company herein shall thereafter refer to AMP.
2. TERM OF EMPLOYMENT: DUTIES. From the period commencing on the date
hereof and ending immediately prior to the Effective Time (as defined in the S-1
registration filed by "AMP" in connection with its IPO (or in the event of a
sale or merger ("Sale or Merger") of the Company, as defined in the definitive
agreement associated therewith) the employment of the Executive shall be
governed by the terms and conditions set forth in the Prior Agreement. The term
of this Agreement (the "Term"), and Executive's employment with the Company
hereunder, shall commence at the Effective Time and, unless earlier terminated
in accordance with the terms hereof, shall continue until the fifth anniversary
of the Effective Time (such initial term of the Agreement referred to as the
"Initial Term"); PROVIDED, HOWEVER, that the Term shall automatically be
renewed for successive, additional five year periods at the end of the Initial
Term and each renewal term thereafter, unless either the Company or the
Executive provides at least one year's notice to the other of its intention not
to renew the Term; and PROVIDED, FURTHER, that if the "IPO", Sale, or Merger,
is terminated in accordance with its terms prior to the Effective Time or the
"IPO," the Sale or Merger is abandoned or otherwise does not close, (x) this
Agreement shall automatically terminate without further obligation by either
party hereto, (y) the terms and conditions set forth in this Agreement shall not
apply and (z) the employment of the Executive shall continue to be governed by
the terms and conditions set forth in the Prior Agreement.
During the Term, the Executive shall be employed as the President, and
Chief Executive Officer of the Company, and serve as Chairman of the Company's
Executive Committee, reporting to the Board of Directors of the Company, serving
the Board of Directors of the Company (the "Board") with the traditional
duties, responsibilities and authority of such office companies similar in size
to the Company including the duties authorized as is set forth on Exhibit B
attached hereto. Executive shall during the term hereof serve as a member of the
Board of Directors and will serve as its Chairman. The Executive agrees that he
shall perform his duties hereunder faithfully and to the best of his abilities
and in furtherance of the business of the Company and its subsidiaries and shall
devote substantially all of his business time, energy and attention to the
business of the Company and its subsidiaries. Notwithstanding the above, the
Company acknowledges and agrees that Executive will be permitted to devote a
reasonable amount of business time, energy, and attention to pursuit of
activities on behalf of the entities described on Exhibit 2, attached hereto and
pursue other business and personal endeavors that do not reasonably interfere
with his duties under this Agreement.
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3. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. During the Term, the Company shall pay to the executive
an initial annual base salary, (the "Base Salary") as set forth on Exhibit A,
payable in accordance with the Company's normal payroll practices or as the
Company and the Executive may otherwise agree. The Base Salary shall be reviewed
by the Company annually and shall be subject to discretionary increase by the
Company from time to time, but shall not be decreased from the rate in effect at
any time and from time to time during the Term.
(b) ANNUAL PERFORMANCE BONUS. Executive shall be entitled to participate
in the Company's Executive Officer Performance Bonus Plan or any similar or
successor annual bonus plan of the Company, (the "Performance Bonus Plan") and
to receive an annual performance bonus upon the achievement of one or more
annual performance goals, (the "Performance Goals") in accordance with the
terms of the Performance Bonus Plan; PROVIDED, that Executive's annual target
bonus under the Performance Bonus Plan (the "Annual Target Bonus") shall not
be less than 75% of the Base Salary in effect at the time the Performance Goals
for such plan year are established.
(c) LONG-TERM INCENTIVE. The Executive shall be eligible to participate
in any long-term incentive compensation and/or stock option plans maintained
from time to time by the Company. In addition, pursuant to prior action of the
Stock Option Committee of the Board, Executive has previously been granted an
option, (the "Market Option") to purchase One Hundred Twenty-Five Thousand
(125,000) shares of the Company common stock, 001 par value, (the "Common
Stock") at an exercise price equal to the price to the public in connection
with AMP's IPO, with a term of 10 years from the date of grant. The Market
Option will vest twenty-five (25%) per annum on each of the first through fourth
anniversaries of the Effective Time; PROVIDED, that the Market Option will not
become exercisable in whole or in part in the event the Market Option is
terminated in accordance with its terms prior to the Effective Time or if the
IPO, Sale or Merger is abandoned or otherwise does not close; and PROVIDED,
FURTHER, that the Market Option shall be subject to the terms of the American
Medical Providers, Inc., 1997 Stock Incentive Plan and the stock option
agreement to be entered into in connection with the grant of the Market Option.
(d) BENEFITS. PERQUISITES AND EXPENSES. During the Term, the Executive
shall be eligible to participate in employee benefit and fringe benefit plans
and programs generally available to the executive officers of the Company and
such additional benefits as the Board may from time to time provide. In
addition, Executive shall be entitled to receive the personal benefits described
on Exhibit A hereto. Executive shall be entitled to reimbursement for business
expenses, including travel and entertainment; PROVIDED, that such reimbursement
shall be limited to reasonable and necessary expenses incurred by Executive in
connection with the performance of duties on behalf of the Company subject to:
(i) timely submission of a properly executed Company expense report form
accompanied by appropriate supporting documentation, and (ii) compliance with
Company policies and procedures governing business expense reimbursement and
reporting based upon principles and guidelines established by the Audit
Committee of the Board, including periodic audits by the Internal Audit
Department of the Company and/or the Audit Committee of the Board.
(e) RETIREMENT BENEFITS. The Executive shall be entitled to participate
in any Supplemental Executive Retirement Plan or any similar or successor plan,
(the "SERP") and in any tax qualified and any other supplemental pension plans
should such plans be generally available to the executive officers of the
Company.
4. TERMINATION OF EXECUTIVE. Prior to the expiration of the Term and
subject to the payment of the amounts required under Section 5, the Executive's
employment with the Company may be terminated, (a) by the Company for Cause, (as
defined herein) or without Cause, (b) by the Executive for or without Good
Reason (as defined herein), (c) by reason of the Executive's death or
Disability, (as defined herein) or (d) by the mutual written consent of the
parties hereto. For purposes of this Agreement:
(i) "Cause" means; (A) conviction of, plea of guilty, or voluntary
settlement of embezzlement, theft, or fraud involving the Company; (B)
actions which have had or will likely have a material
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adverse financial effect on the Company as a whole for an extended period
of time, where appropriate evidence exists that such actions are directly
attributable to them; (i) gross management negligence or repeated
ineptitude of the Executive and/or; (ii) deliberate refusal of the
Executive to follow the instructions or directions of the Board; (C)
conviction of or a plea of guilty or NOLO CONTENDERE to a felony, other
than a felony involving a moving violation; (D) violation of the
non-compete or confidentiality provisions of this Agreement, PROVIDED that
no such violation will be deemed to have occurred if, within 30 days
following receipt by Executive of a notice from the Board identifying the
violation, the Executive, (i) cures the violation, and (ii) establishes
that the violation was unintentional and not reasonably likely to result in
harm to the Company, in each case to the reasonable satisfaction of the
Board; (E) material incapacitation or repeated absence from work due to
reckless and self-abusive behavior or conduct, such as alcoholism and/or
drug abuse, which renders Executive incapable of performing his duties;
PROVIDED, that physical or mental disability due to injury or disease shall
not be grounds for termination for Cause; (F) gross insubordination or
persistent refusal to follow reasonable instructions; or (G) inability to
perform the duties of the Executive's office or consistent failure to
perform in accordance with reasonable expectations due to incompetence, or
due to repeated and unexcused absence from work having a material adverse
effect on the Company provided that mere failure to achieve performance
targets or expectations (including without limitation, those set forth in
the Performance Bonus Plan) shall not in and of itself constitute Cause
hereunder.
For purposes of this Agreement, the Board shall have 60 days to
terminate the Executive for Cause following the date on which the Board
discovers the existence of a specific set of facts that, in the aggregate,
then constitute Cause, after which period no Cause with respect to such
specific set of facts shall be deemed to exist; PROVIDED. that the
repetition or reoccurrence of the same or a similar set of facts shall
constitute separate ground for termination for Cause.
(ii) "Disability" means the Executive's absence from the full-time
performance of his duties with the Company for one hundred eighty (180)
continuous days or more within any period of 12 consecutive months as a
result of the Executive's incapacity due to mental or physical illness;
PROVIDED, that during any period prior to the termination of Executive's
employment by reason of Disability in which Executive is absent from the
full-time performance of his duties with the Company due to Disability, the
Company shall continue to pay Executive his Base Salary at the rate in
effect at the commencement of such period of Disability;
(iii) "Good Reason" means, without the Executive's express written
consent, the occurrence of any of the following events:
(A) a reduction by the Company in the Executive's Base Salary or
Annual Target Bonus in effect from time to time; (B) a material
reduction in the aggregate level of participation in and/or compensation
and benefit opportunities under all other compensation and employee
benefit plans in which Executive is entitled to participate from time to
time; PROVIDED, HOWEVER,that changes affecting the participation in or
benefits under such plans (other than the Performance Bonus Plan, any
SERP and the benefits described in Exhibit (A)) with respect to
similarly situated executives of the Company shall not constitute Good
Reason hereunder; (C) a reduction in the Executive's titles, duties or
authority with the Company; (D) notification by the Company of its
intention to renew this Agreement pursuant to the provisions of Section
2; (E) the termination of the Executive's employment by the executive
for any reason within 12 months following a Change in Control (as
defined herein); (F) relocation of the Company's Corporate offices by
more than 25 miles from its present location at 3555 Timmons Lane,
Houston, Texas 77027; (G) failure of Executive to be elected to the
Board of Directors of the Company or to be elected its Chairman; (H)
encroachment by the Board on the Executives right to manage the Company
as set forth on Exhibit B; or (1) a change in who Executives reports to
occurs.
(iv) "Change in Control," means the occurrence of any one of the
following events:
(A) any "person", (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the
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Exchange Act) becomes an Acquiring Person, (as such term is defined in
the Company's Shareholder Protection Rights Agreement to be adopted at
the Effective Time) or any person that is not bound by the Shareholder
Agreement of the Company to be entered into in connection with the
Merger, (the "Shareholder Agreement") becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing 25% or more of the undiluted
total voting power of the Company's then outstanding securities eligible
to vote for the election of members of the Board, (the "Company Voting
Securities"); PROVIDED, HOWEVER, that no event described in the
immediately preceding clause shall be deemed to constitute a Change in
Control by virtue of any of the following: (i) an acquisition of Company
Voting Securities by the Company and/or one or more direct or indirect
majority-owned subsidiaries of the Company, (ii) an acquisition of
Company Voting Securities by any employee benefit plan sponsored or
maintained by the Company or any corporation controlled by the Company,
(iii) an acquisition by any underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) any acquisition by
the Executive or any "group", (as such term is defined in Rule 3d-5
under the Exchange Act) of persons including the Executive; or
(B) Individuals who, at the beginning of any period of twenty-four
(24) consecutive months, constitute the Board, (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof;
PROVIDED, HOWEVER, that any person becoming a director subsequent to the
beginning of such twenty-four (24) month period, whose election, or
nomination for election, by the Company's shareholders was approved by
either, (i) the Board consistent with the terms of the Shareholder
Agreement, during the period the Shareholder Agreement is in effect, or
(ii) a vote of at least 60% of the directors comprising the Incumbent
Board (either by a specific vote or by approval of the proxy statement
of the Company in which such person is named as a nominee for director,
without objection to such nomination) shall be, for purposes of this
paragraph (B), considered as though such person were a member of the
Incumbent Board; PROVIDED, FURTHER, that no individual initially elected
or nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors of any other
actual or threatened solicitation of proxies or consents by or on behalf
of any person other than the Board shall be deemed to be a member of the
Incumbent Board; or
(C) there is consummated a merger or consolidation of the Company
or a subsidiary thereof with or into any other corporation other than a
merger or consolidation which would result in the holders of the voting
securities of the Company outstanding immediately prior thereto holding
securities which, in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, represent immediately after such merger or consolidation at
least 60% of the combined voting power of the then outstanding voting
securities of either the Company or the other entity which survives such
merger or consolidation or any parent of such other entity; or
(D) the stockholders of the Company approve, (i) a plan of
complete liquidation or dissolution of the Company, or (ii) an agreement
for the sale or disposition by the Company of all or substantially all
the Company's assets.
5. PAYMENTS UPON TERMINATION OF EXECUTIVE.
(a) If the employment of the Executive shall be terminated other than by
reason of death or Disability, (i) by the Company (other than for Cause), or
(ii) by the Executive for Good Reason, then the Company shall pay or provide to
the Executive, (or the Executive's beneficiary or estate):
(1) within thirty (30) days following the date of such termination of
employment ("Termination Date"), a lump-sum cash amount equal to the sum of,
(i) the Executive's unpaid Base Salary through the Termination Date, (ii) any
accrued but unpaid annual bonus under the Performance Bonus Plan in respect of
the annual bonus period preceding the bonus period in which the Termination Date
occurs, (iii) any unpaid reimbursable business expenses properly incurred
through the Termination Date, and (iv) a bonus payment equal to the Executive's
Annual Target Bonus in the year of termination, multiplied by a fraction the
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numerator of which is the number of months in the bonus year of termination in
which the Executive has worked at least one day and the denominator of which is
12;
(2) within thirty (30) days following the Termination Date, a lump-sum
cash amount equal to the greater of; (A) the Executive's then Base Salary
payable over the remainder of the Term plus a bonus equal to the Executive's
Annual Target Bonus in the year of termination multiplied by a fraction the
numerator of which is the number of complete months remaining in the Term and
the denominator of which is 12, or (B) 3.0 times the sum of: (i) the Executive's
annual rate of Base Salary as of the Termination Date plus, (ii) the Annual
Target Bonus for the year in which the Termination Date occurs, (in each such
case, Executive's Base Salary and Annual Target Bonus being determined without
taking into account any reductions thereto constituting Good Reason).
(3) for a period terminating on the earlier of; (A) the commencement of
the provision of substantially equivalent benefits by a new employer; or (B) the
later of, (i) the last day of the Term, or (ii) twenty-four (24) months
following the Termination Date, the Company shall continue to keep in full force
and effect, (or otherwise provide) all policies of medical, accident, disability
and life insurance with respect to the Executive and his dependents with
substantially the same level of coverage, upon substantially the same terms and
otherwise substantially to the same extent as such policies shall have been in
effect immediately prior to the Termination Date, and, as applicable, the
Company and the Executive shall share the costs of the continuation of such
insurance coverage in the same proportion as such costs were shared immediately
prior to the date of termination;
(4) for purposes of determining final average compensation, (or making any
similar calculation) and years of service, (for purposes of eligibility, vesting
and benefit accrual) under any tax-qualified of supplemental defined benefit
retirement plan, (including without limitation any SERP) Executive shall be
deemed to have remained employed by the Company hereunder until the end of the
Term and to have received his then current Base Salary and Annual Target Bonus
through the end of the Term; PROVIDED, that to the extent such benefits cannot
be accrued under and paid from any tax-qualified pension plan, such benefits
shall be accrued under and paid from any SERP or other supplemental plan.
(5) all options to purchase Common Stock held by the Executive shall
immediately become fully vested and exercisable and shall remain exercisable
until the later of; (A) the date that is 24 months following the Termination
Date; and (B) the expiration of the stated term of such options; and
(b) If the employment of the Executive shall be terminated, (i) by reason
of the Executive's death or Disability, (ii) by the Company for Cause, (iii) by
the Executive without Good Reason, or (iv) by the mutual written consent of the
parties hereto, (each a "Non-qualifying Termination"), then the Company shall
pay to the Executive (or the Executive's beneficiary or estate) within thirty
(30) days following the Termination Date a lump-sum cash amount equal to the sum
of the Executive's unpaid Base Salary through the Termination Date plus any
bonus payments which have been earned or become payable, to the extent not
theretofore paid, plus any unpaid reimbursable business expenses properly
incurred through the Termination Date. In addition, Executive (or the
Executive's beneficiary or estate) shall have no less than ninety days following
the termination of his employment pursuant to a Non-qualifying Termination to
exercise any outstanding options to the extent vested and exercisable as of the
Termination Date. If the employment of the Executive shall be terminated, by
reason of the Executive's death or Disability, for a period terminating on the
earlier of; (A) the commencement of the provision of substantially equivalent
benefits by a new employer; or (B) the later of, (i) the last day of the Term,
or (ii) twenty-four (24) months following the Termination Date, the Company
shall continue to keep in full force and effect, (or otherwise provide) all
policies of medical, accident, disability and life insurance with respect to the
Executive and his dependents with substantially the same level of coverage, upon
substantially the same terms and otherwise substantially to the same extent as
such policies shall have been in effect immediately prior to the Termination
Date, and, as applicable, the Company and the Executive shall share the costs of
the continuation of such insurance coverage in the same proportion as such costs
were shared immediately prior to the Termination Date;
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6. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Notwithstanding anything in this Agreement to the contrary, in the
event that any payment or distribution by the Company, by any affiliate of the
Company or by any person whose actions result in a change in control of the
Company, (to the extent the Company approves of the arrangements pursuant to
which the payment by such person is made to the Executive) to or for the benefit
of the Executive, (whether paid or payable or distributed or distributable
pursuant to the terms of the Agreement or otherwise, but determined without
regard to any additional payments required under this Section 6), (a
"Payment") would be subject to the excise tax imposed by Section 4999 of the
Code, or any interest or penalties are incurred by the Executive with respect to
such excise tax, such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax") then the
Executive shall be entitled to receive an additional payment, (a "Gross-Up
Payment") in an amount such that, after payment by the Executive of all taxes,
(including any interest or penalties imposed with respect to such taxes)
including, without limitation, any income and employment taxes and Excise Tax,
imposed upon the Gross-Up Payment but before deduction for any federal, state or
local income or other tax upon the Payments, the Executive will retain a net
amount equal to the sum of, (i) the Payments, and (ii) an amount equal to the
product of any deductions, (or portions thereof) disallowed because of the
inclusion of the Gross-Up Payment in the Executive's adjusted gross income for
federal income tax purposes and the highest applicable marginal rate of federal
income taxation for the calendar year in which the Gross-Up Payment is to be
made. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to, (1) pay applicable federal income taxes at the
highest applicable marginal rate of federal income taxation (including
surcharges) for the calendar year in which the Gross-Up Payment is to be made,
(2) pay applicable state and local income taxes at the highest applicable
marginal rate of taxation, (including surcharges) for the calendar year in which
the Gross-Up Payment is to be made, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes, and (3) have otherwise allowable deductions for federal income tax
purposes at least equal to those disallowed because of the inclusion of the
Gross-Up Payment in the Executive's adjusted gross income.
(b) Subject to the provisions of Section 6(a), all determinations required
to be made under this Section 6, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination shall be made by the public
accounting firm that is retained by the Company as of the date immediately prior
to the change in control, (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within fifteen
(15) business days of the receipt of notice from the Company or the Executive
that there has been a Payment, or such earlier time as is requested by the
Company, (collectively, the "Determination"). In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the change in control, the Executive may appoint another nationally
recognized public accounting firm reasonably acceptable to the Company to make
the determinations required hereunder, (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All reasonable fees and expenses
of the Accounting Firm shall be borne solely by the Company and, subject to
applicable law and obligation to the Company's stockholders, the Company shall
enter into any agreement reasonably requested by the Accounting Firm that is
generally recognized as standard in connection with the performance of the
services hereunder. The Gross-Up Payment under this Section 6 with respect to
any Payment shall be made no later than thirty (30) days following the date of
such Payment. If the Accounting Firm determines that no Excise Tax is payable by
the Executive, it shall furnish the Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on the
Executive's applicable federal income tax return should not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of uncertainty in the application of Section 4999 of the Code at the time of the
Determination, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made ("Underpayment") or Gross-Up
Payments are made by the Company which should not have been made,
("Overpayment") consistent with the calculations required to be made
hereunder. In the event that the Executive thereafter is required to make
payment of any additional Excise Tax, the Accounting Firm shall
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determine the amount of the Underpayment that has occurred and any such
Underpayment, (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the
benefit of the Executive. In the event the amount of the Gross-Up Payment
exceeds the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment, (together with interest at the rate provided in
Section 1274(b)(2) of the Code) shall be promptly paid by the Executive to or
for the benefit of the Company. The Executive shall cooperate, to the extent his
reasonable expenses in connection therewith are reimbursed by the Company, with
any reasonable requests by the Company in connection with any contests or
disputes with the Internal Revenue Service in connection with the Excise Tax.
7. WITHHOLDING TAXES. The Company shall have the right to withhold from
any and all payments due to the Executive, (or his beneficiary or estate)
hereunder all taxes which, by applicable federal, state, local or other law, the
Company is required to withhold therefrom.
8. SUCCESSORS: BINDING AGREEMENT.
(a) This Agreement is personal in nature and none of the parties hereto
shall, without the consent of the other, assign, or transfer this Agreement or
any rights or obligations hereunder; PROVIDED, that in the event of the merger,
consolidation, transfer or sale of substantially all of the assets of the
Company with or to any other individual or entity, this Agreement shall, subject
to the provisions hereof, be binding upon and inure to the benefit of such
successor and such successor shall discharge and perform all the promises,
covenants, duties and obligations of the Company hereunder, all references
herein to the "Company" shall refer to such successor.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amounts remain payable to the Executive hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to such person or persons appointed in writing by the
Executive to receive such amounts or, if no person is so appointed, to the
Executive's estate.
9. RESOLUTION OF DISPUTES; LEGAL FEES: NO MITIGATION.
(a) Except as provided in Sections 10 and 11, all disputes hereunder shall
be settled by final, binding arbitration, conducted before a panel of three (3)
arbitrators in Texas in accordance with the rules of the American Arbitration
Association then in effect. Judgment on the arbitration award may be entered in
any court having jurisdiction. The Company shall bear the expenses of such
arbitration.
(b) If any contest or dispute shall arise under this Agreement involving
termination of the Executive's employment with the Company or involving the
failure or refusal of the Company to perform fully in accordance with the terms
hereof, the Company shall advance and reimburse the Executive, on a current
basis, all legal fees and expenses, if any, incurred by the Executive in
connection with such contest or dispute; PROVIDED,that the Executive agrees to
return any advanced or reimbursed expenses to the extent the arbitrators, (or
the court, in the case of a dispute described in Section 10 or 11) determine
that the Company has prevailed as to the material issues raised in determination
of the dispute.
(c) The Company's obligation to make any payments provided for in this
Agreement to the Executive and otherwise to perform its obligations hereunder
shall not be affected by any setoff, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement, and such amounts shall not be
reduced whether or not the Executive obtains other employment.
10. NON-COMPETITION.
(a) DISCLOSURE. The Executive has disclosed to the Board, in writing, all
heathcare-related interests, investments, or business activities, whether as
proprietor, stockholder, partner, co-venturer, director, officer, employee,
independent contractor, agent, consultant, or in any other capacity or manner
whatsoever. The
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Executive shall notify the Board, in writing, of any changes in or additions to
such interests, activities or investments permitted in accordance with terms of
this Agreement, within 15 days of such change or addition.
(b) PROHIBITED ACTIVITY. Without the written consent of a majority of the
Independent Directors, the Executive may not engage in any of the following
actions during the period that is; (A) prior to the Executive's termination of
employment with the Company; (B) within two years following the termination of
his employment with the Company during the Initial Term is such termination is
by the Company for Cause or by the Executive other than for Good Reason; and (C)
within one year following his termination of employment during the Term but
after the Initial Term of such termination is by the Company for Cause or by the
Executive other than Good Reason.
(i) own, either directly or indirectly, any interest in any business that
competes with the "Primary Business" in which the Company or any subsidiary or
affiliate is engaged, within a radius of 20 miles from any site, facility, or
location which is owned, managed or operated by or affiliated with the Company
or any of its subsidiaries and affiliates, including Podiatric Physician
practices of any kind. For purposes of this Agreement, "Primary Business"
shall mean the delivery of Podiatric healthcare services in markets where the
Company or its subsidiaries own, operate or manage Physician Practices or
Ambulatory Surgery Centers. These Podiatric healthcare services can include but
are not limited to; (A) individual Podiatric Physician Practices and/or
Podiatric physician-based organizations such as primary care and specialty
clinics, Podiatric Physician-hospital organizations ("PMOs") or medical
service organizations ("MSOs"), or Podiatric Physician medical groups; and (B)
ambulatory programs such as home health care, ambulatory surgery, occupational
and sports medicine centers, and other diagnostic, rehabilitative and treatment
services for Podiatric patients. Some of these services, sites and facilities
may be located in satellite areas for the purpose of extending the Physician
Practice's geographic service area and to serve as access points and/or referral
sources for either the local delivery system or the Physician Practice's
geographic service area and to serve as access points and/or referral sources
for either the local delivery system or the Physician Practice's. The Board may
modify, from time to time, the definition of Primary Business to include any
additional Podiatric business or service in which the Company may engage during
the Term or to exclude any business or service in which the Company ceases to
engage. The definition of "Primary Business" may also be modified to include
any Podiatric business or service into which, as of the Termination Date, the
Company definitively intends to expand, regardless of whether such expansion
actually occurs after the Executive's termination. For purposes of the preceding
sentence, the date on which a modification of the definition of "Primary
Business" shall be effective shall be the date on which the Executive is
provided written notice of such modification, (the "Notice Date") PROVIDED,
HOWEVER,that no such modification as to which notice is provided on or after the
Termination Date shall be effective against the Executive; and PROVIDED,
FURTHER, that no such modification shall be effective with respect to any
interests, investments or business activities engaged in by Executive prior to
the Notice Date of such modification and properly disclosed prior to such Notice
Date pursuant to Section 10(a);
(ii) participate or serve, either directly or indirectly, whether as a
proprietor, stockholder, partner, co-venturer, director, officer, employee,
independent contractor, agent, consultant, or in any other capacity or manner
whatsoever in any business or service activity that competes with the Primary
Business;
(iii) directly or indirectly, solicit or recruit any individual employed
by the Company, its subsidiaries or affiliates for the purpose of being employed
by him or by any competitor of the Company on whose behalf he is acting as an
agent, representative or employee, or convey any confidential information or
trade secrets regarding other employees of the Company, its subsidiaries or
affiliates to any other person; or
(iv) directly or indirectly, influence or attempt to influence customers
of the Company or any of its subsidiaries or affiliates to direct their business
to any competitor of the Company; PROVIDED, HOWEVER, that neither, (i) the
"beneficial ownership" by Executive, either individually or as a member of a
"group," as such terms are used in Rule 13d under the Exchange Act, as a
passive investment, of not more than five percent (5%) of the voting stock of
any publicly held corporation, nor (ii) the beneficial ownership by
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Executive of any interest described in the first sentence of Section 10(a) and
properly and timely disclosed in accordance with the terms therewith, shall
alone constitute a violation of this Agreement.
In the event that the Executive engages in the conduct proscribed by this
Section 10, the Executive agrees to repay any lump-sum severance amount received
pursuant to Section 5 of this Agreement, and all outstanding stock options held
by the Executive shall expire as of the date of the Executive's commencement of
such proscribed conduct. It is further expressly agreed that the Company will or
would suffer irreparable injury if Executive were to compete with the Company or
any subsidiary or affiliate in violation of this Agreement and that the Company
would by reason of such competition be entitled to preliminary or injunctive
relief in a court of appropriate jurisdiction, and Executive further consents
and stipulates to the entry of such preliminary or injunctive relief in such a
court prohibiting Executive from competing with the Company or any subsidiary or
affiliate in violation of this Agreement upon an appropriate finding by such
court that Executive has violated this Section 10.
(c) UNENFORCEABLE PROVISIONS. It is the desire and the intent of the
parties that the provisions of this Section 10 shall be enforceable to the
fullest extent permissible under applicable law and public policy. Accordingly,
if this Section 10 or any portion thereof shall be adjudicated to be invalid or
unenforceable whether because of the duration and scope of the covenants set
forth herein or otherwise, the length and scope of the restrictions set forth in
this Section 10 shall be reduced to the extent necessary so that this covenant
may be enforced to the fullest extent possible under applicable law.
11. CONFIDENTIAL INFORMATION. The Executive acknowledges that in his
employment hereunder, and during prior periods of employment with the Company
and/or its subsidiaries, he has occupied and will continue to occupy a position
of trust and confidence. The Executive shall not, except as may be required to
perform his duties hereunder or as required by applicable law, until the
expiration of the applicable periods described in Section 10(b) or until such
information shall have become public other than by the Executive's unauthorized
disclosure, disclose to others or use, whether directly or indirectly, any
Confidential Information regarding the Company, its subsidiaries and affiliates.
"Confidential Information" shall mean information about the Company, its
subsidiaries and affiliates, and their respective clients and customers that is
not publicly disclosed by the Company or otherwise generally available to
members of the public seeking such information and that was learned by the
Executive in the course of his employment by the Company, its subsidiaries and
affiliates, including, (without limitation) any proprietary knowledge, trade
secrets, data, formulae, information and client and customer lists and all
papers, resumes, and records, (including computer records) of the documents
containing such Confidential Information. The Executive acknowledges that such
Confidential Information is specialized, unique in nature and of great value to
the Company, its subsidiaries and affiliates, and that such information gives
the Company, its subsidiaries and affiliates a competitive advantage. The
Executive agrees to deliver or return to the Company, at the Company's request
at any time or upon termination or expiration of his employment or as soon
thereafter as possible, all documents, computer tapes and disks, records, lists,
data, drawings, prints, notes and written information, (and all copies thereof)
furnished by the Company, its subsidiaries or affiliates or prepared by the
Executive during the term of his employment by the Company, its subsidiaries and
affiliates.
In the event that the Executive engages in any conduct proscribed by this
Section 11, the Executive agrees to repay any lump-sum severance amount received
pursuant to Section 5 of this Agreement, and all outstanding stock options held
by the Executive shall expire as of the date of the Executive's commencement of
such proscribed conduct. It is further expressly agreed that the Company will or
would suffer irreparable injury if Executive were to disclose or threaten to
disclose Confidential Information regarding the Company or any subsidiary or
affiliate in violation of this Agreement or otherwise fail to comply with the
provisions of this Section 11, and that the Company would, by reason of such
disclosure or threatened disclosure or other failure to comply, be entitled to
preliminary or permanent injunctive relief in a court of appropriate
jurisdiction, and Executive further consents and stipulates to the entry of such
preliminary or permanent injunctive relief in such a court prohibiting Executive
from disclosing Confidential Information in violation of this Agreement or
otherwise requiring Executive to comply with the provisions of this Section 11
upon an appropriate finding by such court that Executive has violated this
Section 11.
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12. NOTICE. For the purposes of this Agreement, any notices, demands and
all other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given upon; (A) transmitter's confirmation of
a receipt of a facsimile transmission; (B) confirmed delivery by a standard
overnight carrier; or (C) the expiration of five business days after the day
when mailed by certified or registered mail, postage prepaid, addressed as
follows, (or at such other address as the parties hereto shall specify by like
notice);
If to Executive: Jack N. McCrary
3555 Timmons Lane, Suite 1550
Houston, TX 77027
If to Company: American Medical Providers, Inc.
3555 Timmons Lane, Suite 1550
Houston, Texas 77027
Attention: Chief Executive Officer
13. AMENDMENT WAIVER. No provisions of this Agreement may be waived,
modified or discharged unless such waiver, modification or discharge is agreed
to in a written document signed by the Executive and such officer of the
Company, as may be specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
14. ENTIRE AGREEMENT. This Agreement and Exhibit A hereto set forth the
entire agreement of the parties hereto in respect of the subject matter
contained herein and supersede all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto.
15. GOVERNING LAW: VENUE: VALIDITY. The interpretation, construction and
performance of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Texas without regard to the
principle of conflicts of laws and, at the election of the Executive, the venue
of any dispute arising under this Agreement shall be Texas. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which other
provisions shall remain in full force and effect.
16. HEADINGS. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
17. SEVERABILITY. In the event that a court of competent jurisdiction
determines that any portion of this Agreement is in violation of any statute or
public policy, only the portions of this Agreement that violate such statute or
public policy shall be stricken. All portions of this Agreement that do not
violate any statute or public policy shall continue in full force and effect.
Further, any court order striking any portion of this Agreement shall modify the
stricken terms as narrowly as possible to give as much effect as possible to the
intentions of the parties under this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day of December, 1997.
Ankle and Foot Centers of America,
LLC.
By: /s/WAYNE A. BERTSCH
Name: Wayne A. Bertsch
Title:
Executive: /s/JACK N. McCRARY
Joined into for the purpose hereabove stated by American Medical Providers,
Inc., this day of December, 1997.
By: /s/WAYNE A. BERTSCH
Name: Wayne A. Bertsch
Title:
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EXHIBIT A
COMPENSATION AND LEAVE POLICIES
BASE COMPENSATION
Commencing with the Initial Public Offering (the "IPO") Date (the "IPO
Date") of AMP, (or the Sale Merger of AMP's Shares other than the IPO ("Sale
or Merger Date"), Executive shall be paid by the Company a base salary of not
less than Three Hundred Thousand Dollars, ($300,000.00) per annum. In the event
that AMP successfully completes its IPO or there is a Sale or Merger, (other
than the IPO) AFCA will pay to Executive the sum of $300,000 for services
rendered prior to the IPO Date, (or the Sale or Merger Date, if appropriate) and
AMP will reimburse AFCE therefor as part of the IPO or Sale or Merger.
INVENTIVE COMPENSATION
Executive shall participate in the Company's Executive Officers Performance
Plan with his annual "Target Bonus" not being less than 75% of his Base
Salary.
LEAVE-VACATION AND HOLIDAYS
Executive shall be entitled to leave of six (6) weeks per annum, to be
taken in accordance with Employer's regular vacation policies. Executive shall
be entitled to at least nine (9) paid holidays per annum in accordance with
Employer regular paid holidays policies.
BENEFITS
Health Insurance including major medical for personal, family and
dependents at no cost to Executive.
Life Insurance equivalent to four times Executive salary.
Disability insurance equivalent to 60% of Base Salary upon permanent
disability.
OTHER PAYMENTS:
Executive shall be reimbursed up to $5,000 for the cost of an annual health
examination.
Executive shall receive a minimum of $1,000 per month as an automobile
allowance.
Executive shall be reimbursed up to $300.00 per month for membership dues.
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EXHIBIT B
AMERICAN MEDICAL PROVIDERS, INC
("PARENT")
SUMMARY OF TERMS OF
EMPLOYMENT AGREEMENTS
(SUBJECT TO NEGOTIATIONS WITH
NAMED EXECUTIVES)
MANAGEMENT DUTIES AND AUTHORITY: Mr. McCrary shall serve as a member of
and Chairman of the Parent Board of Directors, as President and chief Executive
Officer of Parent, ("CEO") and Chairman of the Executive Committee of the
Parent Board, ("Chairman").
EXCLUSIVE AUTHORITIES: In his capacity as CEO, Mr. McCrary shall, subject
to the oversight of the Parent Board, have exclusive authority and
responsibility for managing the day to day operations of Parent and its
subsidiaries, including the exclusive right to authorize Parent to engage in the
following actions:
1. relocation of the corporate offices of Parent;
2. any transaction involving capital expenditures up to $5 million
provided there is cash on hand at the Parent for such expenditure;
3. the determination of the compensation of and employment and
corporate policies applicable to employees of Parent and its subsidiaries
to the extent that such determination is consistent with a budget that has
been approved by the Parent Board and implementation of the corporate
budget and controlling corporate expenses;
4. approval of the selection of the senior lender participants and
agent bank in any corporate financing; and
5. presentation of proposals of the executive officers of Parent to
the Parent Board or any Committee thereof.
RESTRICTIONS ON MANAGEMENT AUTHORITY: Mr. McCrary shall not be permitted
to use any of his authority as CEO and Chairman to cause Parent to engage any of
the following activities without first obtaining the consent of the Parent
Board:
-- issuing debt obligations of Parent, except with respect to
acquisitions of physician's practices, and provided that the total
consideration in debt, cash, and stock is less that $10.0 million dollars.
-- issuing any equity securities of Parent, except with respect to
acquisitions of physicians practices, and provided that the total
consideration in debt, cash, and stock is less than $10.0 million dollars;
-- materially changing Parent's business strategy;
-- amending Parent's corporate charter or bylaws;
-- entering into a transaction, (other than an acquisition of a
business) involving the expenditure by Parent of more than $5 million, ($10
million in the case of construction and renovation projects or real estate
acquisitions);
-- approving Parent's annual operating and capital budget; or
-- making an acquisition of any business involving an expenditure by
Parent of more than $10 million.
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In addition, Mr. McCrary shall not be permitted, (other than in his
capacity as Chairman Executive Committee) to cause Parent to engage in the
following activities without the approval of the Parent Board or the Executive
Committee;
-- entering into transactions over the course of a fiscal year
involving expenditures by Parent of more than $20 million, except with
respect to acquisitions of physician practices or related ancillary
businesses;
-- making any acquisition involving an expenditure by Parent of more
than $10.0 million;
-- materially changing Parent's business strategy; or
-- determining the compensation, (including long-term incentive
compensation) of or employment policies specifically applicable to the
executive officers of Parent.
RESIDUAL MANAGEMENT AUTHORITY: Any other duties, authority and
responsibilities that are not explicitly reserved for the Parent Board or the
Executive Committee shall be reserved for Mr. McCrary.
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EXHIBIT 10.3
ANKLE & FOOT CENTERS OF AMERICA, L.L.C.
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of November 17, 1997 between Ankle & Foot Centers of
America, L.L.C. a Delaware limited liability corporation (the "Company"), and
Wayne A. Bertsch, (the "Executive"), and joined into for the purposes
hereinafter stated by American Medical Providers, Inc., a Delaware Corporation
("AMP").
In consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Executive and the
Executive hereby agrees to serve the Company on the terms and conditions set
forth herein. In addition, the Executive and the Company hereby agree that
subject to and effective as of either of the following to occur: (a) the closing
of the proposed Initial Public Offering ("IPO") of American Medical Providers,
Inc., (formerly Podiatric Newco, Inc., ("AMP"), or (b) the sale or merger by
AMP of substantially all of the assets of AMP or by the Company's shareholders
of a controlling interest in AMP's stock, other than in connection with the IPO,
this Employment Agreement (the "Agreement") shall be assumed by "AMP")
and/or such company into which AMP is merged or by whom AMP is otherwise
acquired. Upon either of the events in (a) or (b) above, this Employment
Agreement shall supersede that certain letter agreement regarding employment
between the Company and Executive, dated as of August 12, 1996 (the "Prior
Agreement"), and the Prior Agreement shall thereupon automatically terminate
without further obligation by either Executive or the Company. Upon AMP's
assumption of this Agreement, all references to the Company herein shall
thereafter refer to AMP.
2. TERM OF EMPLOYMENT: DUTIES. From the period commencing on the date
hereof and ending immediately prior to the Effective Time (as defined in the S-1
registration filed by "AMP" in connection with its IPO (or in the event of a
sale or merger ("Sale or Merger") of the Company, as defined in the definitive
agreement associated therewith) the employment of the Executive shall be
governed by the terms and conditions set forth in the Prior Agreement. The term
of this Agreement (the "Term"), and Executive's employment with the Company
hereunder, shall commence at the Effective Time and, unless earlier terminated
in accordance with the terms hereof, shall continue until the third anniversary
of the Effective Time (such initial term of the Agreement referred to as the
"Initial Term"); PROVIDED, HOWEVER, that the Term shall automatically be
renewed for successive, additional three year periods at the end of the Initial
Term and each renewal term thereafter, unless either the Company or the
Executive provides at least one year's notice to the other of its intention not
to renew the Term; and PROVIDED, FURTHER, that if the "IPO", Sale, or Merger,
is terminated in accordance with its terms prior to the Effective Time or the
"IPO," the Sale or Merger is abandoned or otherwise does not close, (x) this
Agreement shall automatically terminate without further obligation by either
party hereto, (y) the terms and conditions set forth in this Agreement shall not
apply and (z) the employment of the Executive shall continue to be governed by
the terms and conditions set forth in the Prior Agreement.
During the Term, the Executive shall be employed as the Senior Vice
President, and Chief Financial Officer of the Company, and serve as member of
the Company's Executive Committee, reporting to the President and Chief
Executive Officer of the Company with the traditional duties, responsibilities
and authority of such office in companies similar in size to the Company.
Executive shall during the term hereof serve as a member of the Board of
Directors. The Executive agrees that he shall perform his duties hereunder
faithfully and to the best of his abilities and in furtherance of the business
of the Company and its subsidiaries and shall devote substantially all of his
business time, energy and attention to the business of the Company and its
subsidiaries.
3. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. During the Term, the Company shall pay to the executive
an initial annual base salary, (the "Base Salary") as set forth on Exhibit A,
payable in accordance with the Company's normal payroll practices or as the
Company and the Executive may otherwise agree. The Base Salary shall be
<PAGE>
reviewed by the Company annually and shall be subject to discretionary increase
by the Company from time to time, but shall not be decreased from the rate in
effect at any time and from time to time during the Term.
(b) ANNUAL PERFORMANCE BONUS. Executive shall be entitled to participate
in the Company's Executive Officer Performance Bonus Plan or any similar or
successor annual bonus plan of the Company, (the "Performance Bonus Plan") and
to receive an annual performance bonus upon the achievement of one or more
annual performance goals, (the "Performance Goals") in accordance with the
terms of the Performance Bonus Plan; PROVIDED, that Executive's annual target
bonus under the Performance Bonus Plan (the "Annual Target Bonus") shall not
be less than 60% of the Base Salary in effect at the time the Performance Goals
for such plan year are established.
(c) LONG-TERM INCENTIVE. The Executive shall be eligible to participate
in any long-term incentive compensation and/or stock option plans maintained
from time to time by the Company. In addition, pursuant to prior action of the
Stock Option Committee of the Board, Executive has previously been granted an
option, (the "Market Option") to purchase Sixty-Five Thousand (65,000) shares
of the Company common stock, 001 par value, (the "Common Stock") at an
exercise price equal to the price to the public in connection with AMP's IPO,
with a term of 10 years from the date of grant. The Market Option will vest
twenty-five (25%) per annum on each of the first through fourth anniversaries of
the Effective Time; PROVIDED, that the Market Option will not become exercisable
in whole or in part in the event the Market Option is terminated in accordance
with its terms prior to the Effective Time or if the IPO, Sale or Merger is
abandoned or otherwise does not close; and PROVIDED, FURTHER, that the Market
Option shall be subject to the terms of the American Medical Providers, Inc.,
1997 Stock Incentive Plan and the stock option agreement to be entered into in
connection with the grant of the Market Option.
(d) BENEFITS. PERQUISITES AND EXPENSES. During the Term, the Executive
shall be eligible to participate in employee benefit and fringe benefit plans
and programs generally available to the executive officers of the Company and
such additional benefits as the Board may from time to time provide. In
addition, Executive shall be entitled to receive the personal benefits described
on Exhibit A hereto. Executive shall be entitled to reimbursement for business
expenses, including travel and entertainment; PROVIDED, that such reimbursement
shall be limited to reasonable and necessary expenses incurred by Executive in
connection with the performance of duties on behalf of the Company subject to:
(i) timely submission of a properly executed Company expense report form
accompanied by appropriate supporting documentation, and (ii) compliance with
Company policies and procedures governing business expense reimbursement and
reporting based upon principles and guidelines established by the Audit
Committee of the Board, including periodic audits by the Internal Audit
Department of the Company and/or the Audit Committee of the Board.
(e) RETIREMENT BENEFITS. The Executive shall be entitled to participate
in any Supplemental Executive Retirement Plan or any similar or successor plan,
(the "SERP") and in any tax qualified and any other supplemental pension plans
should such plans be generally available to the executive officers of the
Company.
4. TERMINATION OF EXECUTIVE. Prior to the expiration of the Term and
subject to the payment of the amounts required under Section 5, the Executive's
employment with the Company may be terminated, (a) by the Company for Cause, (as
defined herein) or without Cause, (b) by the Executive for or without Good
Reason (as defined herein), (c) by reason of the Executive's death or
Disability, (as defined herein) or (d) by the mutual written consent of the
parties hereto. For purposes of this Agreement:
(i) "Cause" means; (A) conviction of, plea of guilty, or voluntary
settlement of embezzlement, theft, or fraud involving the Company; (B)
actions which have had or will likely have a material adverse financial
effect on the Company as a whole for an extended period of time, where
appropriate evidence exists that such actions are directly attributable to
the; (i) gross management negligence or repeated ineptitude of the
Executive and/or; (ii) deliberate refusal of the Executive to follow the
instructions or directions of the Board; (C) conviction of or a plea of
guilty or NOLO CONTENDERE to a felony, other than a felony involving a
moving violation; (D) violation of the non-compete or
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confidentiality provisions of this Agreement, PROVIDED that no such
violation will be deemed to have occurred if, within 30 days following
receipt by Executive of a notice from the Board identifying the violation,
the Executive, (i) cures the violation, and (ii) establishes that the
violation was unintentional and not reasonably likely to result in harm to
the Company, in each case to the reasonable satisfaction of the Board; (E)
material incapacitation or repeated absence from work due to reckless and
self-abusive behavior or conduct, such as alcoholism and/or drug abuse,
which renders Executive incapable of performing his duties; PROVIDED, that
physical or mental disability due to injury or disease shall not be grounds
for termination for Cause; (F) gross insubordination or persistent refusal
to follow reasonable instructions; or (G) inability to perform the duties
of the Executive's office or consistent failure to perform in accordance
with reasonable expectations due to incompetence, or due to repeated and
unexcused absence from work having a material adverse effect on the Company
provided that mere failure to achieve performance targets or expectations
(including without limitation, those set forth in the Performance Bonus
Plan) shall not in and of itself constitute Cause hereunder.
For purposes of this Agreement, the Board shall have 60 days to
terminate the Executive for Cause following the date on which the Board
discovers the existence of a specific set of facts that, in the aggregate,
then constitute Cause, after which period no Cause with respect to such
specific set of facts shall be deemed to exist; PROVIDED. that the
repetition or reoccurrence of the same or a similar set of facts shall
constitute separate ground for termination for Cause.
(ii) "Disability" means the Executive's absence from the full-time
performance of his duties with the Company for one hundred eighty (180)
days or more within any period of 12 consecutive months as a result of the
Executive's incapacity due to mental or physical illness; PROVIDED, that
during any period prior to the termination of Executive's employment by
reason of Disability in which Executive is absent from the full-time
performance of his duties with the Company due to Disability, the Company
shall continue to pay Executive his Base Salary at the rate in effect at
the commencement of such period of Disability;
(iii) "Good Reason" means, without the Executive's express written
consent, the occurrence of any of the following events:
(A) a reduction by the Company in the Executive's Base Salary or
Annual Target Bonus in effect from time to time; (B) a material
reduction in the aggregate level of participation in and/or compensation
and benefit opportunities under all other compensation and employee
benefit plans in which Executive is entitled to participate from time to
time; PROVIDED, HOWEVER,that changes affecting the participation in or
benefits under such plans (other than the Performance Bonus Plan, any
SERP and the benefits described in Exhibit (A)) with respect to
similarly situated executives of the Company shall not constitute Good
Reason hereunder; (C) a reduction in the Executive's titles, duties or
authority with the Company; (D) notification by the Company of its
intention to renew this Agreement pursuant to the provisions of Section
2; (E) the termination of the Executive's employment by the executive
for any reason within 12 months following a Change in Control (as
defined herein); (F) relocation of the Company's Corporate offices by
more than 25 miles from its present location at 3555 Timmons Lane,
Houston, Texas 77027; (G) failure of Executive to be elected to the
Board of Directors of the Company; (H) a change in who Executive reports
to occurs or (I) the termination, for any reason, other than death or
disability of the Employment of Jack N. McCrary as President and Chief
Executive Officer.
(iv) "Change in Control," means the occurrence of any one of the
following events:
(A) any "person", (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) becomes an
Acquiring Person, (as such term is defined in the Company's Shareholder
Protection Rights Agreement to be adopted at the Effective Time) or any
person that is not bound by the Shareholder Agreement of the Company to
be entered into in connection with the Merger, (the "Shareholder
Agreement") becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing
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25% or more of the undiluted total voting power of the Company's then
outstanding securities eligible to vote for the election of members of
the Board, (the "Company Voting Securities"); PROVIDED, HOWEVER, that
no event described in the immediately preceding clause shall be deemed
to constitute a Change in Control by virtue of any of the following: (i)
an acquisition of Company Voting Securities by the Company and/or one or
more direct or indirect majority-owned subsidiaries of the Company, (ii)
an acquisition of Company Voting Securities by any employee benefit plan
sponsored or maintained by the Company or any corporation controlled by
the Company, (iii) an acquisition by any underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) any
acquisition by the Executive or any "group", (as such term is defined
in Rule 3d-5 under the Exchange Act) of persons including the Executive;
or
(B) Individuals who, at the beginning of any period of twenty-four
(24) consecutive months, constitute the Board, (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof;
PROVIDED, HOWEVER, that any person becoming a director subsequent to the
beginning of such twenty-four (24) month period, whose election, or
nomination for election, by the Company's shareholders was approved by
either, (i) the Board consistent with the terms of the Shareholder
Agreement, during the period the Shareholder Agreement is in effect, or
(ii) a vote of at least 60% of the directors comprising the Incumbent
Board (either by a specific vote or by approval of the proxy statement
of the Company in which such person is named as a nominee for director,
without objection to such nomination) shall be, for purposes of this
paragraph (B), considered as though such person were a member of the
Incumbent Board; PROVIDED, FURTHER, that no individual initially elected
or nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors of any other
actual or threatened solicitation of proxies or consents by or on behalf
of any person other than the Board shall be deemed to be a member of the
Incumbent Board; or
(C) there is consummated a merger or consolidation of the Company
or a subsidiary thereof with or into any other corporation other than a
merger or consolidation which would result in the holders of the voting
securities of the Company outstanding immediately prior thereto holding
securities which, in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, represent immediately after such merger or consolidation at
least 60% of the combined voting power of the then outstanding voting
securities of either the Company or the other entity which survives such
merger or consolidation or any parent of such other entity; or
(D) the stockholders of the Company approve, (i) a plan of
complete liquidation or dissolution of the Company, or (ii) an agreement
for the sale or disposition by the Company of all or substantially all
the Company's assets.
5. PAYMENTS UPON TERMINATION OF EXECUTIVE.
(a) If the employment of the Executive shall be terminated other than by
reason of death or Disability, (i) by the Company (other than for Cause), or
(ii) by the Executive for Good Reason, then the Company shall pay or provide to
the Executive, (or the Executive's beneficiary or estate):
(1) within thirty (30) days following the date of such termination of
employment ("Termination Date"), a lump-sum cash amount equal to the sum of,
(i) the Executive's unpaid Base Salary through the Termination Date, (ii) any
accrued but unpaid annual bonus under the Performance Bonus Plan in respect of
the annual bonus period preceding the bonus period in which the Termination Date
occurs, (iii) any unpaid reimbursable business expenses properly incurred
through the Termination Date, and (iv) a bonus payment equal to the Executive's
Annual Target Bonus in the year of termination, multiplied by a fraction the
numerator of which is the number of months in the bonus year of termination in
which the Executive has worked at least one day and the denominator of which is
12;
(2) within thirty (30) days following the Termination Date, a lump-sum
cash amount equal to the greater of; (A) the Executive's then Base Salary
payable over the remainder of the Term plus a bonus equal
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to the Executive's Annual Target Bonus in the year of termination multiplied by
a fraction the numerator of which is the number of complete months remaining in
the Term and the denominator of which is 12, or (B) 2.0 times the sum of: (i)
the Executive's annual rate of Base Salary as of the Termination Date plus, (ii)
the Annual Target Bonus for the year in which the Termination Date occurs, (in
each such case, Executive's Base Salary and Annual Target Bonus being determined
without taking into account any reductions thereto constituting Good Reason).
(3) for a period terminating on the earlier of; (A) the commencement of
the provision of substantially equivalent benefits by a new employer; or (B) the
later of, (i) the last day of the Term, or (ii) twenty-four (24) months
following the Termination Date, the Company shall continue to keep in full force
and effect, (or otherwise provide) all policies of medical, accident, disability
and life insurance with respect to the Executive and his dependents with
substantially the same level of coverage, upon substantially the same terms and
otherwise substantially to the same extent as such policies shall have been in
effect immediately prior to the Termination Date, and, as applicable, the
Company and the Executive shall share the costs of the continuation of such
insurance coverage in the same proportion as such costs were shared immediately
prior to the date of termination;
(4) for purposes of determining final average compensation, (or making any
similar calculation) and years of service, (for purposes of eligibility, vesting
and benefit accrual) under any tax-qualified of supplemental defined benefit
retirement plan, (including without limitation any SERP) Executive shall be
deemed to have remained employed by the Company hereunder until the end of the
Term and to have received his then current Base Salary and Annual Target Bonus
through the end of the Term; PROVIDED, that to the extent such benefits cannot
be accrued under and paid from any tax-qualified pension plan, such benefits
shall be accrued under and paid from any SERP or other supplemental plan.
(5) all options to purchase Common Stock held by the Executive shall
immediately become fully vested and exercisable and shall remain exercisable
until the later of; (A) the date that is 24 months following the Termination
Date; and (B) the expiration of the stated term of such options; and
(b) If the employment of the Executive shall be terminated, (i) by reason
of the Executive's death or Disability, (ii) by the Company for Cause, (iii) by
the Executive without Good Reason, or (iv) by the mutual written consent of the
parties hereto, (each a "Non-qualifying Termination"), then the Company shall
pay to the Executive (or the Executive's beneficiary or estate) within thirty
(30) days following the Termination Date a lump-sum cash amount equal to the sum
of the Executive's unpaid Base Salary through the Termination Date plus any
bonus payments which have been earned or become payable, to the extent not
theretofore paid, plus any unpaid reimbursable business expenses properly
incurred through the Termination Date. In addition, Executive (or the
Executive's beneficiary or estate) shall have no less than ninety days following
the termination of his employment pursuant to a Non-qualifying Termination to
exercise any outstanding options to the extent vested and exercisable as of the
Termination Date. If the employment of the Executive shall be terminated, by
reason of the Executive's death or Disability, for a period terminating on the
earlier of; (A) the commencement of the provision of substantially equivalent
benefits by a new employer; or (B) the later of, (i) the last day of the Term,
or (ii) twenty-four (24) months following the Termination Date, the Company
shall continue to keep in full force and effect, (or otherwise provide) all
policies of medical, accident, disability and life insurance with respect to the
Executive and his dependents with substantially the same level of coverage, upon
substantially the same terms and otherwise substantially to the same extent as
such policies shall have been in effect immediately prior to the Termination
Date, and, as applicable, the Company and the Executive shall share the costs of
the continuation of such insurance coverage in the same proportion as such costs
were shared immediately prior to the Termination Date;
6. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) Notwithstanding
anything in this Agreement to the contrary, in the event that any payment or
distribution by the Company, by any affiliate of the Company or by any person
whose actions result in a change in control of the Company, (to the extent the
Company approves of the arrangements pursuant to which the payment by such
person is made to the Executive) to or for the benefit of the Executive,
(whether paid or payable or distributed or distributable pursuant to the terms
of the Agreement or otherwise, but determined without regard to any additional
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payments required under this Section 6), (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code, or any interest or penalties are
incurred by the Executive with respect to such excise tax, such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax") then the Executive shall be entitled to
receive an additional payment, (a "Gross-Up Payment") in an amount such that,
after payment by the Executive of all taxes, (including any interest or
penalties imposed with respect to such taxes) including, without limitation, any
income and employment taxes and Excise Tax, imposed upon the Gross-Up Payment
but before deduction for any federal, state or local income or other tax upon
the Payments, the Executive will retain a net amount equal to the sum of, (i)
the Payments, and (ii) an amount equal to the product of any deductions, (or
portions thereof) disallowed because of the inclusion of the Gross-Up Payment in
the Executive's adjusted gross income for federal income tax purposes and the
highest applicable marginal rate of federal income taxation for the calendar
year in which the Gross-Up Payment is to be made. For purposes of determining
the amount of the Gross-Up Payment, the Executive shall be deemed to, (1) pay
applicable federal income taxes at the highest applicable marginal rate of
federal income taxation (including surcharges) for the calendar year in which
the Gross-Up Payment is to be made, (2) pay applicable state and local income
taxes at the highest applicable marginal rate of taxation, (including
surcharges) for the calendar year in which the Gross-Up Payment is to be made,
net of the maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes, and (3) have otherwise allowable
deductions for federal income tax purposes at least equal to those disallowed
because of the inclusion of the Gross-Up Payment in the Executive's adjusted
gross income.
(b) Subject to the provisions of Section 6(a), all determinations required
to be made under this Section 6, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination shall be made by the public
accounting firm that is retained by the Company as of the date immediately prior
to the change in control, (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within fifteen
(15) business days of the receipt of notice from the Company or the Executive
that there has been a Payment, or such earlier time as is requested by the
Company, (collectively, the "Determination"). In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the change in control, the Executive may appoint another nationally
recognized public accounting firm reasonably acceptable to the Company to make
the determinations required hereunder, (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All reasonable fees and expenses
of the Accounting Firm shall be borne solely by the Company and, subject to
applicable law and obligation to the Company's stockholders, the Company shall
enter into any agreement reasonably requested by the Accounting Firm that is
generally recognized as standard in connection with the performance of the
services hereunder. The Gross-Up Payment under this Section 6 with respect to
any Payment shall be made no later than thirty (30) days following the date of
such Payment. If the Accounting Firm determines that no Excise Tax is payable by
the Executive, it shall furnish the Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on the
Executive's applicable federal income tax return should not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of uncertainty in the application of Section 4999 of the Code at the time of the
Determination, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made ("Underpayment") or Gross-Up
Payments are made by the Company which should not have been made,
("Overpayment") consistent with the calculations required to be made
hereunder. In the event that the Executive thereafter is required to make
payment of any additional Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment,
(together with interest at the rate provided in Section 1274(b)(2)(B) of the
Code) shall be promptly paid by the Company to or for the benefit of the
Executive. In the event the amount of the Gross-Up Payment exceeds the amount
necessary to reimburse the Executive for his Excise Tax, the Accounting Firm
shall determine the amount of the Overpayment that has been made and any such
Overpayment, (together with interest at the rate provided in Section 1274(b)(2)
of the Code) shall be promptly paid by the Executive to or for the benefit of
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the Company. The Executive shall cooperate, to the extent his reasonable
expenses in connection therewith are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.
7. WITHHOLDING TAXES. The Company shall have the right to withhold from
any and all payments due to the Executive, (or his beneficiary or estate)
hereunder all taxes which, by applicable federal, state, local or other law, the
Company is required to withhold therefrom.
8. SUCCESSORS: BINDING AGREEMENT.
(a) This Agreement is personal in nature and none of the parties hereto
shall, without the consent of the other, assign, or transfer this Agreement or
any rights or obligations hereunder; PROVIDED, that in the event of the merger,
consolidation, transfer or sale of substantially all of the assets of the
Company with or to any other individual or entity, this Agreement shall, subject
to the provisions hereof, be binding upon and inure to the benefit of such
successor and such successor shall discharge and perform all the promises,
covenants, duties and obligations of the Company hereunder, all references
herein to the "Company" shall refer to such successor.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amounts remain payable to the Executive hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to such person or persons appointed in writing by the
Executive to receive such amounts or, if no person is so appointed, to the
Executive's estate.
9. RESOLUTION OF DISPUTES; LEGAL FEES: NO MITIGATION.
(a) Except as provided in Sections 10 and 11, all disputes hereunder shall
be settled by final, binding arbitration, conducted before a panel of three (3)
arbitrators in Texas in accordance with the rules of the American Arbitration
Association then in effect. Judgment on the arbitration award may be entered in
any court having jurisdiction. The Company shall bear the expenses of such
arbitration.
(b) If any contest or dispute shall arise under this Agreement involving
termination of the Executive's employment with the Company or involving the
failure or refusal of the Company to perform fully in accordance with the terms
hereof, the Company shall advance and reimburse the Executive, on a current
basis, all legal fees and expenses, if any, incurred by the Executive in
connection with such contest or dispute; PROVIDED, that the Executive agrees to
return any advanced or reimbursed expenses to the extent the arbitrators, (or
the court, in the case of a dispute described in Section 10 or 11) determine
that the Company has prevailed as to the material issues raised in determination
of the dispute.
(c) The Company's obligation to make any payments provided for in this
Agreement to the Executive and otherwise to perform its obligations hereunder
shall not be affected by any setoff, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement, and such amounts shall not be
reduced whether or not the Executive obtains other employment.
10. NON-COMPETITION.
(a) DISCLOSURE. The Executive has disclosed to the Board, in writing, all
heathcare-related interests, investments, or business activities, whether as
proprietor, stockholder, partner, co-venturer, director, officer, employee,
independent contractor, agent, consultant, or in any other capacity or manner
whatsoever. The Executive shall notify the Board, in writing, of any changes in
or additions to such interests, activities or investments permitted in
accordance with the terms of this Agreement, within 15 days of such change or
addition.
(b) PROHIBITED ACTIVITY. Without the written consent of a majority of the
Independent Directors, the Executive may not engage in any of the following
actions during the period that is; (A) prior to the Executive's termination of
employment with the Company; (B) within two years following the termination
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of his employment with the Company during the Initial Term if such termination
is by the Company for Cause or by the Executive other than for Good Reason; and
(C) within one year following his termination of employment during the Term but
after the Initial Term if such termination is by the Company for Cause or by the
Executive other than Good Reason.
(i) own, either directly or indirectly, any interest in any business that
competes with the "Primary Business" in which the Company or any subsidiary or
affiliate is engaged, within a radius of 20 miles from any site, facility, or
location which is owned, managed or operated by or affiliated with the Company
or any of its subsidiaries and affiliates, including Podiatric Physician
practices of any kind. For purposes of this Agreement, "Primary Business"
shall mean the delivery of Podiatric healthcare services in markets where the
Company or its subsidiaries own, operate or manage Physician Practices or
Ambulatory Surgery Centers. These Podiatric healthcare services can include but
are not limited to; (A) individual Podiatric Physician Practices and/or
Podiatric physician-based organizations such as primary care and specialty
clinics, Podiatric Physician-hospital organizations ("PMOs") or medical
service organizations ("MSOs"), or Podiatric Physician medical groups; and (B)
ambulatory programs such as home health care, ambulatory surgery, occupational
and sports medicine centers, and other diagnostic, rehabilitative and treatment
services for Podiatric patients. Some of these services, sites and facilities
may be located in satellite areas for the purpose of extending the Physician
Practice's geographic service area and to serve as access points and/or referral
sources for either the local delivery system or the Physician Practice's
geographic service area and to serve as access points and/or referral sources
for either the local delivery system or the Physician Practice's. The Board may
modify, from time to time, the definition of Primary Business to include any
additional Podiatric business or service in which the Company may engage during
the Term or to exclude any business or service in which the Company ceases to
engage. The definition of "Primary Business" may also be modified to include
any Podiatric business or service into which, as of the Termination Date, the
Company definitively intends to expand, regardless of whether such expansion
actually occurs after the Executive's termination. For purposes of the preceding
sentence, the date on which a modification of the definition of "Primary
Business" shall be effective shall be the date on which the Executive is
provided written notice of such modification, (the "Notice Date") PROVIDED,
HOWEVER, that no such modification as to which notice is provided on or after
the Termination Date shall be effective against the Executive; and PROVIDED,
FURTHER, that no such modification shall be effective with respect to any
interests, investments or business activities engaged in by Executive prior to
the Notice Date of such modification and properly disclosed prior to such Notice
Date pursuant to Section 10(a);
(ii) participate or serve, either directly or indirectly, whether as a
proprietor, stockholder, partner, co-venturer, director, officer, employee,
independent contractor, agent, consultant, or in any other capacity or manner
whatsoever in any business or service activity that competes with the Primary
Business;
(iii) directly or indirectly, solicit or recruit any individual employed
by the Company, its subsidiaries or affiliates for the purpose of being employed
by him or by any competitor of the Company on whose behalf he is acting as an
agent, representative or employee, or convey any confidential information or
trade secrets regarding other employees of the Company, its subsidiaries or
affiliates to any other person; or
(iv) directly or indirectly, influence or attempt to influence customers
of the Company or any of its subsidiaries or affiliates to direct their business
to any competitor of the Company; PROVIDED, HOWEVER, that neither, (i) the
"beneficial ownership" by Executive, either individually or as a member of a
"group," as such terms are used in Rule 13d under the Exchange Act, as a
passive investment, of not more than five percent (5%) of the voting stock of
any publicly held corporation, nor (ii) the beneficial ownership by Executive of
any interest described in the first sentence of Section 10(a) and properly and
timely disclosed in accordance with the terms therewith, shall alone constitute
a violation of this Agreement.
In the event that the Executive engages in the conduct proscribed by this
Section 10, the Executive agrees to repay any lump-sum severance amount received
pursuant to Section 5 of this Agreement, and all outstanding stock options held
by the Executive shall expire as of the date of the Executive's commencement of
such proscribed conduct. It is further expressly agreed that the Company will or
would suffer irreparable injury if Executive were to compete with the Company or
any subsidiary or affiliate in violation
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of this Agreement and that the Company would by reason of such competition be
entitled to preliminary or injunctive relief in a court of appropriate
jurisdiction, and Executive further consents and stipulates to the entry of such
preliminary or injunctive relief in such a court prohibiting Executive from
competing with the Company or any subsidiary or affiliate in violation of this
Agreement upon an appropriate finding by such court that Executive has violated
this Section 10.
(c) UNENFORCEABLE PROVISIONS. It is the desire and the intent of the
parties that the provisions of this Section 10 shall be enforceable to the
fullest extent permissible under applicable law and public policy. Accordingly,
if this Section 10 or any portion thereof shall be adjudicated to be invalid or
unenforceable whether because of the duration and scope of the covenants set
forth herein or otherwise, the length and scope of the restrictions set forth in
this Section 10 shall be reduced to the extent necessary so that this covenant
may be enforced to the fullest extent possible under applicable law.
11. CONFIDENTIAL INFORMATION. The Executive acknowledges that in his
employment hereunder, and during prior periods of employment with the Company
and/or its subsidiaries, he has occupied and will continue to occupy a position
of trust and confidence. The Executive shall not, except as may be required to
perform his duties hereunder or as required by applicable law, until the
expiration of the applicable periods described in Section 10(b) or until such
information shall have become public other than by the Executive's unauthorized
disclosure, disclose to others or use, whether directly or indirectly, any
Confidential Information regarding the Company, its subsidiaries and affiliates.
"Confidential Information" shall mean information about the Company, its
subsidiaries and affiliates, and their respective clients and customers that is
not publicly disclosed by the Company or otherwise generally available to
members of the public seeking such information and that was learned by the
Executive in the course of his employment by the Company, its subsidiaries and
affiliates, including, (without limitation) any proprietary knowledge, trade
secrets, data, formulae, information and client and customer lists and all
papers, resumes, and records, (including computer records) of the documents
containing such Confidential Information. The Executive acknowledges that such
Confidential Information is specialized, unique in nature and of great value to
the Company, its subsidiaries and affiliates, and that such information gives
the Company, its subsidiaries and affiliates a competitive advantage. The
Executive agrees to deliver or return to the Company, at the Company's request
at any time or upon termination or expiration of his employment or as soon
thereafter as possible, all documents, computer tapes and disks, records, lists,
data, drawings, prints, notes and written information, (and all copies thereof)
furnished by the Company, its subsidiaries or affiliates or prepared by the
Executive during the term of his employment by the Company, its subsidiaries and
affiliates.
In the event that the Executive engages in any conduct proscribed by this
Section 11, the Executive agrees to repay any lump-sum severance amount received
pursuant to Section 5 of this Agreement, and all outstanding stock options held
by the Executive shall expire as of the date of the Executive's commencement of
such proscribed conduct. It is further expressly agreed that the Company will or
would suffer irreparable injury if Executive were to disclose or threaten to
disclose Confidential Information regarding the Company or any subsidiary or
affiliate in violation of this Agreement or otherwise fail to comply with the
provisions of this Section 11, and that the Company would, by reason of such
disclosure or threatened disclosure or other failure to comply, be entitled to
preliminary or permanent injunctive relief in a court of appropriate
jurisdiction, and Executive further consents and stipulates to the entry of such
preliminary or permanent injunctive relief in such a court prohibiting Executive
from disclosing Confidential Information in violation of this Agreement or
otherwise requiring Executive to comply with the provisions of this Section 11
upon an appropriate finding by such court that Executive has violated this
Section 11.
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12. NOTICE. For the purposes of this Agreement, any notices, demands and
all other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given upon; (A) transmitter's confirmation of
a receipt of a facsimile transmission; (B) confirmed delivery by a standard
overnight carrier; or (C) the expiration of five business days after the day
when mailed by certified or registered mail, postage prepaid, addressed as
follows, (or at such other address as the parties hereto shall specify by like
notice):
If to Executive: Wayne A. Bertsch
3555 Timmons Lane, Suite 1550
Houston, TX 77027
If to Company: Ankle and Foot Centers of America,
LLC.
or American Medical Providers, Inc.
3555 Timmons Lane, Suite 1550
Houston, Texas 77027
Attention: Chief Executive Officer
13. AMENDMENT WAIVER. No provisions of this Agreement may be waived,
modified or discharged unless such waiver, modification or discharge is agreed
to in a written document signed by the Executive and such officer of the
Company, as may be specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
14. ENTIRE AGREEMENT. This Agreement and Exhibit A hereto set forth the
entire agreement of the parties hereto in respect of the subject matter
contained herein and supersede all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto.
15. GOVERNING LAW: VENUE: VALIDITY. The interpretation, construction and
performance of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Texas without regard to the
principle of conflicts of laws and, at the election of the Executive, the venue
of any dispute arising under this Agreement shall be Texas. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which other
provisions shall remain in full force and effect.
16. HEADINGS. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
17. SEVERABILITY. In the event that a court of competent jurisdiction
determines that any portion of this Agreement is in violation of any statute or
public policy, only the portions of this Agreement that violate such statute or
public policy shall be stricken. All portions of this Agreement that do not
violate any statute or public policy shall continue in full force and effect.
Further, any court order striking any portion of this Agreement shall modify the
stricken terms as narrowly as possible to give as much effect as possible to the
intentions of the parties under this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day of December, 1997.
Ankle and Foot Centers of America,
LLC.
By: /s/JACK N. McCRARY
Name: JACK N. McCRARY
Title:
Executive: /s/ WAYNE A. BERTSCH
Wayne A. Bertsch
Joined into for the purpose hereabove stated by American Medical Providers,
Inc., this day of December, 1997.
By: /s/JACK N. McCRARY
Name: JACK N. McCRARY
Title: __Chairman, President and Chief Executive Officer
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EXHIBIT A
COMPENSATION AND LEAVE POLICIES
BASE COMPENSATION
Commencing with the Initial Public Offering (the "IPO") Date (the "IPO
Date") of AMP, (or the Sale Merger of AMP's Shares other than the IPO ("Sale
or Merger Date"), Executive shall be paid by the Company a base salary of not
less than One Hundred Eighty Thousand Dollars, ($180,000.00) per annum.
INCENTIVE COMPENSATION
Executive shall participate in the Company's Executive Officers Performance
Plan with his annual "Target Bonus" not being less than 60% of his Base
Salary.
LEAVE-VACATION AND HOLIDAYS
Executive shall be entitled to leave of four (4) weeks per annum, to be
taken in accordance with Employer's regular vacation policies. Executive shall
be entitled to at least nine (9) paid holidays per annum in accordance with
Employer regular paid holidays policies.
BENEFITS
Health Insurance including major medical for personal, family and
dependents at customary rates for family coverage.
Life Insurance equivalent to three times Executive salary.
Disability insurance equivalent to 60% of Base Salary upon permanent
disability.
OTHER PAYMENTS:
Executive shall receive a minimum of $800 per month as an automobile
allowance.
Executive shall be reimbursed up to $250.00 per month for membership dues.
Executive shall be reimbursed for expenses of "continuing education"
including such reasonable travel as is required in connection therewith.
12
EXHIBIT 10.4
ANKLE & FOOT CENTERS OF AMERICA, L.L.C.
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of November 17, 1997 between Ankle & Foot Centers of
America, L.L.C. a Delaware limited liability corporation (the "Company"), and
Randy E. Johnson, (the "Executive"), and joined into for the purposes
hereinafter stated by American Medical Providers, Inc., a Delaware Corporation
("AMP").
In consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Executive and the
Executive hereby agrees to serve the Company on the terms and conditions set
forth herein. In addition, the Executive and the Company hereby agree that
subject to and effective as of either of the following to occur: (a) the closing
of the proposed Initial Public Offering ("IPO") of American Medical Providers,
Inc., (formerly Podiatric Newco, Inc., ("AMP"), or (b) the sale or merger by
AMP of substantially all of the assets of AMP or by the Company's shareholders
of a controlling interest in AMP's stock, other than in connection with the IPO,
this Employment Agreement (the "Agreement") shall be assumed by "AMP")
and/or such company into which AMP is merged or by whom AMP is otherwise
acquired. Upon either of the events in (a) or (b) above, this Employment
Agreement shall supersede that certain letter agreement regarding employment
between the Company and Executive, dated as of August 5, 1996 (the "Prior
Agreement"), and the Prior Agreement shall thereupon automatically terminate
without further obligation by either Executive or the Company. Upon AMP's
assumption of this Agreement, all references to the Company herein shall
thereafter refer to AMP.
2. TERM OF EMPLOYMENT: DUTIES. From the period commencing on the date
hereof and ending immediately prior to the Effective Time (as defined in the S-1
registration filed by "AMP" in connection with its IPO (or in the event of a
sale or merger ("Sale or Merger") of the Company, as defined in the definitive
agreement associated therewith) the employment of the Executive shall be
governed by the terms and conditions set forth in the Prior Agreement. The term
of this Agreement (the "Term"), and Executive's employment with the Company
hereunder, shall commence at the Effective Time and, unless earlier terminated
in accordance with the terms hereof, shall continue until the third anniversary
of the Effective Time (such initial term of the Agreement referred to as the
"Initial Term"); PROVIDED, HOWEVER, that the Term shall automatically be
renewed for successive, additional three year periods at the end of the Initial
Term and each renewal term thereafter, unless either the Company or the
Executive provides at least one year's notice to the other of its intention not
to renew the Term; and PROVIDED, FURTHER, that if the "IPO", Sale, or Merger,
is terminated in accordance with its terms prior to the Effective Time or the
"IPO," the Sale or Merger is abandoned or otherwise does not close, (x) this
Agreement shall automatically terminate without further obligation by either
party hereto, (y) the terms and conditions set forth in this Agreement shall not
apply and (z) the employment of the Executive shall continue to be governed by
the terms and conditions set forth in the Prior Agreement.
During the Term, the Executive shall be employed as the Senior Vice
President, Regional Operations Officer of the Company, reporting to the
President and Chief Executive Officer of the Company, with the traditional
duties, responsibilities and authority of such office of companies similar in
size to the Company. The Executive agrees that he shall perform his duties
hereunder faithfully and to the best of his abilities and in furtherance of the
business of the Company and its subsidiaries and shall devote substantially all
of his business time, energy and attention to the business of the Company and
its subsidiaries.
3. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. During the Term, the Company shall pay to the Executive
an initial annual base salary, (the "Base Salary") as set forth on Exhibit A,
payable in accordance with the Company's normal payroll practices or as the
Company and the Executive may otherwise agree. The Base Salary shall be reviewed
by the Company annually and shall be subject to discretionary increase by the
Company from
<PAGE>
time to time, but shall not be decreased from the rate in effect at any time and
from time to time during the Term.
(b) ANNUAL PERFORMANCE BONUS. Executive shall be entitled to participate
in the Company's Executive Officer Performance Bonus Plan or any similar or
successor annual bonus plan of the Company, (the "Performance Bonus Plan") and
to receive an annual performance bonus upon the achievement of one or more
annual performance goals, (the "Performance Goals") in accordance with the
terms of the Performance Bonus Plan; PROVIDED, that Executive's annual target
bonus under the Performance Bonus Plan (the "Annual Target Bonus") shall not
be less than 60% of the Base Salary in effect at the time the Performance Goals
for such plan year are established.
(c) LONG-TERM INCENTIVE. The Executive shall be eligible to participate
in any long-term incentive compensation and/or stock option plans maintained
from time to time by the Company. In addition, pursuant to prior action of the
Stock Option Committee of the Board, Executive has previously been granted an
option, (the "Market Option") to purchase Sixty-Five Thousand (65,000) shares
of the Company common stock, 001 par value, (the "Common Stock") at an
exercise price equal to the price to the public in connection with AMP's IPO,
with a term of 10 years from the date of grant. The Market Option will vest
twenty-five (25%) per annum on each of the first through fourth anniversaries of
the Effective Time; PROVIDED, that the Market Option will not become exercisable
in whole or in part in the event the Market Option is terminated in accordance
with its terms prior to the Effective Time or if the IPO, Sale or Merger is
abandoned or otherwise does not close; and PROVIDED, FURTHER, that the Market
Option shall be subject to the terms of the American Medical Providers, Inc.,
1997 Stock Incentive Plan and the stock option agreement to be entered into in
connection with the grant of the Market Option.
(d) BENEFITS. PERQUISITES AND EXPENSES. During the Term, the Executive
shall be eligible to participate in employee benefit and fringe benefit plans
and programs generally available to the executive officers of the Company and
such additional benefits as the Board may from time to time provide. In
addition, Executive shall be entitled to receive the personal benefits described
on Exhibit A hereto. Executive shall be entitled to reimbursement for business
expenses, including travel and entertainment; PROVIDED, that such reimbursement
shall be limited to reasonable and necessary expenses incurred by Executive in
connection with the performance of duties on behalf of the Company subject to:
(i) timely submission of a properly executed Company expense report form
accompanied by appropriate supporting documentation, and (ii) compliance with
Company policies and procedures governing business expense reimbursement and
reporting based upon principles and guidelines established by the Audit
Committee of the Board, including periodic audits by the Internal Audit
Department of the Company and/or the Audit Committee of the Board.
(e) RETIREMENT BENEFITS. The Executive shall be entitled to participate
in any Supplemental Executive Retirement Plan or any similar or successor plan,
(the "SERP") and in any tax qualified and any other supplemental pension plans
should such plans be generally available to the executive officers of the
Company.
4. TERMINATION OF EXECUTIVE. Prior to the expiration of the Term and
subject to the payment of any amounts required under Section 5, the Executive's
employment with the Company may be terminated, (a) by the Company for Cause, (as
defined herein) or without Cause, (b) by the Executive for or without Good
Reason (as defined herein), (c) by reason of the Executive's death or
Disability, (as defined herein) or (d) by the mutual written consent of the
parties hereto. For purposes of this Agreement:
(i) "Cause" means; (A) conviction of, plea of guilty, or voluntary
settlement of embezzlement, theft, or fraud involving the Company; (B)
actions which have had or will likely have a material adverse financial
effect on the Company as a whole for an extended period of time, where
appropriate evidence exists that such actions are directly attributable to
them; (i) gross management negligence or repeated ineptitude of the
Executive and/or; (ii) deliberate refusal of the Executive to follow the
instructions or directions of the Board; (C) conviction of or a plea of
guilty or NOLO CONTENDERE to a felony, other than a felony involving a
moving violation; (D) violation of the non-compete or confidentiality
provisions of this Agreement, PROVIDED that no such violation will be
deemed to have
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occurred if, within 30 days following receipt by Executive of a notice from
the Board identifying the violation, the Executive, (i) cures the
violation, and (ii) establishes that the violation was unintentional and
not reasonably likely to result in harm to the Company, in each case to the
reasonable satisfaction of the Board; (E) material incapacitation or
repeated absence from work due to reckless and self-abusive behavior or
conduct, such as alcoholism and/or drug abuse, which renders Executive
incapable of performing his duties; PROVIDED, that physical or mental
disability due to injury or disease shall not be grounds for termination
for Cause; (F) gross insubordination or persistent refusal to follow
reasonable instructions; or (G) inability to perform the duties of the
Executive's office or consistent failure to perform in accordance with
reasonable expectations due to incompetence, or due to repeated and
unexcused absence from work having a material adverse effect on the Company
provided that mere failure to achieve performance targets or expectations
(including without limitation, those set forth in the Performance Bonus
Plan) shall not in and of itself constitute Cause hereunder.
For purposes of this Agreement, the Board shall have 60 days to
terminate the Executive for Cause following the date on which the Board
discovers the existence of a specific set of facts that, in the aggregate,
then constitute Cause, after which period no Cause with respect to such
specific set of facts shall be deemed to exist; PROVIDED, that the
repetition or reoccurrence of the same or a similar set of facts shall
constitute separate ground for termination for Cause.
(ii) "Disability" means the Executive's absence from the full-time
performance of his duties with the Company for one hundred eighty (180)
days or more within any period of 12 consecutive months as a result of the
Executive's incapacity due to mental or physical illness; PROVIDED, that
during any period prior to the termination of Executive's employment by
reason of Disability in which Executive is absent from the full-time
performance of his duties with the Company due to Disability, the Company
shall continue to pay Executive his Base Salary at the rate in effect at
the commencement of such period of Disability;
(iii) "Good Reason" means, without the Executive's express written
consent, the occurrence of any of the following events:
(A) a reduction by the Company in the Executive's Base Salary or
Annual Target Bonus in effect from time to time; (B) a material
reduction in the aggregate level of participation in and/or compensation
and benefit opportunities under all other compensation and employee
benefit plans in which Executive is entitled to participate from time to
time; PROVIDED, HOWEVER,that changes affecting the participation in or
benefits under such plans (other than the Performance Bonus Plan, any
SERP and the benefits described in Exhibit (A)) with respect to
similarly situated executives of the Company shall not constitute Good
Reason hereunder; (C) a reduction in the Executive's titles, duties or
authority with the Company; (D) notification by the Company of its
intention not to renew this Agreement pursuant to the provisions of
Section 2; (E) the termination of the Executive's employment by the
executive for any reason within 12 months following a Change in Control
(as defined herein); (F) relocation of the Company's Corporate offices
by more than 25 miles from its present location at 3555 Timmons Lane,
Houston, Texas 77027; (G) a change in who Executive reports to occurs
or; (H) the termination, for any reason, other than death or disability
of the Employment of Jack N. McCrary as President and Chief Executive
Officer.
(iv) "Change in Control," means the occurrence of any one of the
following events:
(A) any "person", (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) becomes an
Acquiring Person, (as such term is defined in the Company's Shareholder
Protection Rights Agreement to be adopted at the Effective Time) or any
person that is not bound by the Shareholder Agreement of the Company to
be entered into in connection with the Merger, (the "Shareholder
Agreement") becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing 25% or more of the undiluted total voting power of
the Company's then outstanding securities eligible to vote for the
election of members of the Board, (the "Company Voting Securities");
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PROVIDED, HOWEVER, that no event described in the immediately preceding
clause shall be deemed to constitute a Change in Control by virtue of
any of the following: (i) an acquisition of Company Voting Securities by
the Company and/or one or more direct or indirect majority-owned
subsidiaries of the Company, (ii) an acquisition of Company Voting
Securities by any employee benefit plan sponsored or maintained by the
Company or any corporation controlled by the Company, (iii) an
acquisition by any underwriter temporarily holding securities pursuant
to an offering of such securities, or (iv) any acquisition by the
Executive or any "group", (as such term is defined in Rule 3d-5 under
the Exchange Act) of persons including the Executive; or
(B) Individuals who, at the beginning of any period of twenty-four
(24) consecutive months, constitute the Board, (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof;
PROVIDED, HOWEVER, that any person becoming a director subsequent to the
beginning of such twenty-four (24) month period, whose election, or
nomination for election, by the Company's shareholders was approved by
either, (i) the Board consistent with the terms of the Shareholder
Agreement, during the period the Shareholder Agreement is in effect, or
(ii) a vote of at least 60% of the directors comprising the Incumbent
Board (either by a specific vote or by approval of the proxy statement
of the Company in which such person is named as a nominee for director,
without objection to such nomination) shall be, for purposes of this
paragraph (B), considered as though such person were a member of the
Incumbent Board; PROVIDED, FURTHER, that no individual initially elected
or nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors of any other
actual or threatened solicitation of proxies or consents by or on behalf
of any person other than the Board shall be deemed to be a member of the
Incumbent Board; or
(C) there is consummated a merger or consolidation of the Company
or a subsidiary thereof with or into any other corporation other than a
merger or consolidation which would result in the holders of the voting
securities of the Company outstanding immediately prior thereto holding
securities which, in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, represent immediately after such merger or consolidation at
least 60% of the combined voting power of the then outstanding voting
securities of either the Company or the other entity which survives such
merger or consolidation or any parent of such other entity; or
(D) the stockholders of the Company approve, (i) a plan of
complete liquidation or dissolution of the Company, or (ii) an agreement
for the sale or disposition by the Company of all or substantially all
the Company's assets.
5. PAYMENTS UPON TERMINATION OF EXECUTIVE.
(a) If the employment of the Executive shall be terminated other than by
reason of death or Disability, (i) by the Company (other than for Cause), or
(ii) by the Executive for Good Reason, then the Company shall pay or provide to
the Executive, (or the Executive's beneficiary or estate):
(1) within thirty (30) days following the date of such termination of
employment ("Termination Date"), a lump-sum cash amount equal to the sum of,
(i) the Executive's unpaid Base Salary through the Termination Date, (ii) any
accrued but unpaid annual bonus under the Performance Bonus Plan in respect of
the annual bonus period preceding the bonus period in which the Termination Date
occurs, (iii) any unpaid reimbursable business expenses properly incurred
through the Termination Date, and (iv) a bonus payment equal to the Executive's
Annual Target Bonus in the year of termination, multiplied by a fraction the
numerator of which is the number of months in the bonus year of termination in
which the Executive has worked at least one day and the denominator of which is
12;
(2) within thirty (30) days following the Termination Date, a lump-sum
cash amount equal to the greater of; (A) the Executive's then Base Salary
payable over the remainder of the Term plus a bonus equal to the Executive's
Annual Target Bonus in the year of termination multiplied by a fraction the
numerator of which is the number of complete months remaining in the Term and
the denominator of which is 12, or (B)
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2.0 times the sum of: (i) the Executive's annual rate of Base Salary as of the
Termination Date plus, (ii) the Annual Target Bonus for the year in which the
Termination Date occurs, (in each such case, Executive's Base Salary and Annual
Target Bonus being determined without taking into account any reductions thereto
constituting Good Reason).
(3) for a period terminating on the earlier of; (A) the commencement of
the provision of substantially equivalent benefits by a new employer; or (B) the
later of, (i) the last day of the Term, or (ii) twenty-four (24) months
following the Termination Date, the Company shall continue to keep in full force
and effect, (or otherwise provide) all policies of medical, accident, disability
and life insurance with respect to the Executive and his dependents with
substantially the same level of coverage, upon substantially the same terms and
otherwise substantially to the same extent as such policies shall have been in
effect immediately prior to the Termination Date, and, as applicable, the
Company and the Executive shall share the costs of the continuation of such
insurance coverage in the same proportion as such costs were shared immediately
prior to the date of termination;
(4) for purposes of determining final average compensation, (or making any
similar calculation) and years of service, (for purposes of eligibility, vesting
and benefit accrual) under any tax-qualified or supplemental defined benefit
retirement plan, (including without limitation any SERP) Executive shall be
deemed to have remained employed by the Company hereunder until the end of the
Term and to have received his then current Base Salary and Annual Target Bonus
through the end of the Term; PROVIDED, that to the extent such benefits cannot
be accrued under and paid from any tax-qualified pension plan, such benefits
shall be accrued under and paid from any SERP or other supplemental plan.
(5) all options to purchase Common Stock held by the Executive shall
immediately become fully vested and exercisable and shall remain exercisable
until the later of; (A) the date that is 24 months following the Termination
Date; and (B) the expiration of the stated term of such options; and
(b) If the employment of the Executive shall be terminated, (i) by reason
of the Executive's death or Disability, (ii) by the Company for Cause, (iii) by
the Executive without Good Reason, or (iv) by the mutual written consent of the
parties hereto, (each a "Non-qualifying Termination"), then the Company shall
pay to the Executive (or the Executive's beneficiary or estate) within thirty
(30) days following the Termination Date a lump-sum cash amount equal to the sum
of the Executive's unpaid Base Salary through the Termination Date plus any
bonus payments which have been earned or become payable, to the extent not
theretofore paid, plus any unpaid reimbursable business expenses properly
incurred through the Termination Date. In addition, Executive (or the
Executive's beneficiary or estate) shall have no less than ninety days following
the termination of his employment pursuant to a Non-qualifying Termination to
exercise any outstanding options to the extent vested and exercisable as of the
Termination Date. If the employment of the Executive shall be terminated, by
reason of the Executive's death or Disability, for a period terminating on the
earlier of; (A) the commencement of the provision of substantially equivalent
benefits by a new employer; or (B) the later of, (i) the last day of the Term,
or (ii) twenty-four (24) months following the Termination Date, the Company
shall continue to keep in full force and effect, (or otherwise provide) all
policies of medical, accident, disability and life insurance with respect to the
Executive and his dependents with substantially the same level of coverage, upon
substantially the same terms and otherwise substantially to the same extent as
such policies shall have been in effect immediately prior to the Termination
Date, and, as applicable, the Company and the Executive shall share the costs of
the continuation of such insurance coverage in the same proportion as such costs
were shared immediately prior to the Termination Date;
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6. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Notwithstanding anything in this Agreement to the contrary, in the
event that any payment or distribution by the Company, by any affiliate of the
Company or by any person whose actions result in a change in control of the
Company, (to the extent the Company approves of the arrangements pursuant to
which the payment by such person is made to the Executive) to or for the benefit
of the Executive, (whether paid or payable or distributed or distributable
pursuant to the terms of the Agreement or otherwise, but determined without
regard to any additional payments required under this Section 6), (a
"Payment") would be subject to the excise tax imposed by Section 4999 of the
Code, or any interest or penalties are incurred by the Executive with respect to
such excise tax, (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax") then
the Executive shall be entitled to receive an additional payment, (a "Gross-Up
Payment") in an amount such that, after payment by the Executive of all taxes,
(including any interest or penalties imposed with respect to such taxes)
including, without limitation, any income and employment taxes and Excise Tax,
imposed upon the Gross-Up Payment but before deduction for any federal, state or
local income or other tax upon the Payments, the Executive will retain a net
amount equal to the sum of, (i) the Payments, and (ii) an amount equal to the
product of any deductions, (or portions thereof) disallowed because of the
inclusion of the Gross-Up Payment in the Executive's adjusted gross income for
federal income tax purposes and the highest applicable marginal rate of federal
income taxation for the calendar year in which the Gross-Up Payment is to be
made. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to, (1) pay applicable federal income taxes at the
highest applicable marginal rates of federal income taxation (including
surcharges) for the calendar year in which the Gross-Up Payment is to be made,
(2) pay applicable state and local income taxes at the highest applicable
marginal rate of taxation, (including surcharges) for the calendar year in which
the Gross-Up Payment is to be made, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes, and (3) have otherwise allowable deductions for federal income tax
purposes at least equal to those disallowed because of the inclusion of the
Gross-Up Payment in the Executive's adjusted gross income.
(b) Subject to the provisions of Section 6(a), all determinations required
to be made under this Section 6, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by the public
accounting firm that is retained by the Company as of the date immediately prior
to the change in control, (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within fifteen
(15) business days of the receipt of notice from the Company or the Executive
that there has been a Payment, or such earlier time as is requested by the
Company, (collectively, the "Determination"). In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the change in control, the Executive may appoint another nationally
recognized public accounting firm reasonably acceptable to the Company to make
the determinations required hereunder, (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All reasonable fees and expenses
of the Accounting Firm shall be borne solely by the Company and, subject to
applicable law and obligations to the Company's stockholders, the Company shall
enter into any agreement reasonably requested by the Accounting Firm that is
generally recognized as standard in connection with the performance of the
services hereunder. The Gross-Up Payment under this Section 6 with respect to
any Payment shall be made no later than thirty (30) days following the date of
such Payment. If the Accounting Firm determines that no Excise Tax is payable by
the Executive, it shall furnish the Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on the
Executive's applicable federal income tax return should not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of uncertainty in the application of Section 4999 of the Code at the time of the
Determination, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made ("Underpayment") or Gross-Up
Payments are made by the Company which should not have been made,
("Overpayment") consistent with the calculations required to be made
hereunder. In the event that the Executive thereafter is required to make
payment of any additional Excise Tax, the Accounting Firm shall
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determine the amount of the Underpayment that has occurred and any such
Underpayment, (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the
benefit of the Executive. In the event the amount of the Gross-Up Payment
exceeds the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment, (together with interest at the rate provided in
Section 1274(b)(2) of the Code) shall be promptly paid by the Executive to or
for the benefit of the Company. The Executive shall cooperate, to the extent his
reasonable expenses in connection therewith are reimbursed by the Company, with
any reasonable requests by the Company in connection with any contests or
disputes with the Internal Revenue Service in connection with the Excise Tax.
7. WITHHOLDING TAXES. The Company shall have the right to withhold from
any and all payments due to the Executive, (or his beneficiary or estate)
hereunder all taxes which, by applicable federal, state, local or other law, the
Company is required to withhold therefrom.
8. SUCCESSORS: BINDING AGREEMENT.
(a) This Agreement is personal in nature and none of the parties hereto
shall, without the consent of the other, assign, or transfer this Agreement or
any rights or obligations hereunder; PROVIDED, that in the event of the merger,
consolidation, transfer or sale of substantially all of the assets of the
Company with or to any other individual or entity, this Agreement shall, subject
to the provisions hereof, be binding upon and inure to the benefit of such
successor and such successor shall discharge and perform all the promises,
covenants, duties and obligations of the Company hereunder, all references
herein to the "Company" shall refer to such successor.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amounts remain payable to the Executive hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to such person or persons appointed in writing by the
Executive to receive such amounts or, if no person is so appointed, to the
Executive's estate.
9. RESOLUTION OF DISPUTES; LEGAL FEES: NO MITIGATION.
(a) Except as provided in Sections 10 and 11, all disputes hereunder shall
be settled by final, binding arbitration, conducted before a panel of three (3)
arbitrators in Texas in accordance with the rules of the American Arbitration
Association then in effect. Judgment on the arbitration award may be entered in
any court having jurisdiction. The Company shall bear the expenses of such
arbitration.
(b) If any contest or dispute shall arise under this Agreement involving
termination of the Executive's employment with the Company or involving the
failure or refusal of the Company to perform fully in accordance with the terms
hereof, the Company shall advance and reimburse the Executive, on a current
basis, all legal fees and expenses, if any, incurred by the Executive in
connection with such contest or dispute; PROVIDED,that the Executive agrees to
return any advanced or reimbursed expenses to the extent the arbitrators, (or
the court, in the case of a dispute described in Section 10 or 11) determine
that the Company has prevailed as to the material issues raised in determination
of the dispute.
(c) The Company's obligation to make any payments provided for in this
Agreement to the Executive and otherwise to perform its obligations hereunder
shall not be affected by any setoff, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement, and such amounts shall not be
reduced whether or not the Executive obtains other employment.
10. NON-COMPETITION.
(a) DISCLOSURE. The Executive has disclosed to the Board, in writing, all
heathcare-related interests, investments, or business activities, whether as
proprietor, stockholder, partner, co-venturer, director, officer, employee,
independent contractor, agent, consultant, or in any other capacity or manner
whatsoever. The
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Executive shall notify the Board, in writing, of any changes in or additions to
such interests, activities or investments permitted in accordance with terms of
this Agreement, within 15 days of such change or addition.
(b) PROHIBITED ACTIVITY. Without the written consent of a majority of the
Independent Directors, the Executive may not engage in any of the following
actions during the period that is; (A) prior to the Executive's termination of
employment with the Company; (B) within two years following the termination of
his employment with the Company during the Initial Term if such termination is
by the Company for Cause or by the Executive other than for Good Reason; and (C)
within one year following his termination of employment during the Term but
after the Initial Term if such termination is by the Company for Cause or by the
Executive other than Good Reason.
(i) own, either directly or indirectly, any interest in any business that
competes with the "Primary Business" in which the Company or any subsidiary or
affiliate is engaged, within a radius of 20 miles from any site, facility, or
location which is owned, managed or operated by or affiliated with the Company
or any of its subsidiaries and affiliates, including Podiatric Physician
practices of any kind. For purposes of this Agreement, "Primary Business"
shall mean the delivery of Podiatric healthcare services in markets where the
Company or its subsidiaries own, operate or manage Physician Practices or
Ambulatory Surgery Centers. These Podiatric healthcare services can include but
are not limited to; (A) individual Podiatric Physician Practices and/or
Podiatric physician-based organizations such as primary care and specialty
clinics, Podiatric Physician-hospital organizations ("PMOs") or medical
service organizations ("MSOs"), or Podiatric Physician medical groups; and (B)
ambulatory programs such as home health care, ambulatory surgery, occupational
and sports medicine centers, and other diagnostic, rehabilitative and treatment
services for Podiatric patients. Some of these services, sites and facilities
may be located in satellite areas for the purpose of extending the Physician
Practice's geographic service area and to serve as access points and/or referral
sources for either the local delivery system or the Physician Practice's
geographic service area and to serve as access points and/or referral sources
for either the local delivery system or the Physician Practice's. The Board may
modify, from time to time, the definition of Primary Business to include any
additional Podiatric business or service activity in which the Company may
engage during the Term or to exclude any business or service in which the
Company ceases to engage. The definition of "Primary Business" may also be
modified to include any Podiatric business or service into which, as of the
Termination Date, the Company definitively intends to expand, regardless of
whether such expansion actually occurs after the Executive's termination. For
purposes of the preceding sentence, the date on which a modification of the
definition of "Primary Business" shall be effective shall be the date on which
the Executive is provided written notice of such modification, (the "Notice
Date") PROVIDED, HOWEVER,that no such modification as to which notice is
provided on or after the Termination Date shall be effective against the
Executive; and PROVIDED, FURTHER, that no such modification shall be effective
with respect to any interests, investments or business activities engaged in by
Executive prior to the Notice Date of such modification and properly disclosed
prior to such Notice Date pursuant to Section 10(a);
(ii) participate or serve, either directly or indirectly, whether as a
proprietor, stockholder, partner, co-venturer, director, officer, employee,
independent contractor, agent, consultant, or in any other capacity or manner
whatsoever in any business or service activity that competes with the Primary
Business;
(iii) directly or indirectly, solicit or recruit any individual employed
by the Company, its subsidiaries or affiliates for the purpose of being employed
by him or by any competitor of the Company on whose behalf he is acting as an
agent, representative or employee, or convey any confidential information or
trade secrets regarding other employees of the Company, its subsidiaries or
affiliates to any other person; or
(iv) directly or indirectly, influence or attempt to influence customers
of the Company or any of its subsidiaries or affiliates to direct their business
to any competitor of the Company; PROVIDED, HOWEVER, that neither, (i) the
"beneficial ownership" by Executive, either individually or as a member of a
"group," as such terms are used in Rule 13d under the Exchange Act, as a
passive investment, of not more than five percent (5%) of the voting stock of
any publicly held corporation, nor (ii) the beneficial ownership by
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Executive of any interest described in the first sentence of Section 10(a) and
properly and timely disclosed in accordance with the terms therewith, shall
alone constitute a violation of this Agreement.
In the event that the Executive engages in the conduct proscribed by this
Section 10, the Executive agrees to repay any lump-sum severance amount received
pursuant to Section 5 of this Agreement, and all outstanding stock options held
by the Executive shall expire as of the date of the Executive's commencement of
such proscribed conduct. It is further expressly agreed that the Company will or
would suffer irreparable injury if Executive were to compete with the Company or
any subsidiary or affiliate in violation of this Agreement and that the Company
would by reason of such competition be entitled to preliminary or injunctive
relief in a court of appropriate jurisdiction, and Executive further consents
and stipulates to the entry of such preliminary or injunctive relief in such a
court prohibiting Executive from competing with the Company or any subsidiary or
affiliate in violation of this Agreement upon an appropriate finding by such
court that Executive has violated this Section 10.
(c) UNENFORCEABLE PROVISIONS. It is the desire and the intent of the
parties that the provisions of this Section 10 shall be enforceable to the
fullest extent permissible under applicable law and public policy. Accordingly,
if this Section 10 or any portion thereof shall be adjudicated to be invalid or
unenforceable whether because of the duration and scope of the covenants set
forth herein or otherwise, the length and scope of the restrictions set forth in
this Section 10 shall be reduced to the extent necessary so that this covenant
may be enforced to the fullest extent possible under applicable law.
11. CONFIDENTIAL INFORMATION. The Executive acknowledges that in his
employment hereunder, and during prior periods of employment with the Company
and/or its subsidiaries, he has occupied and will continue to occupy a position
of trust and confidence. The Executive shall not, except as may be required to
perform his duties hereunder or as required by applicable law, until the
expiration of the applicable periods described in Section 10(b) or until such
information shall have become public other than by the Executive's unauthorized
disclosure, disclose to others or use, whether directly or indirectly, any
Confidential Information regarding the Company, its subsidiaries and affiliates.
"Confidential Information" shall mean information about the Company, its
subsidiaries and affiliates, and their respective clients and customers that is
not publicly disclosed by the Company or otherwise generally available to
members of the public seeking such information and that was learned by the
Executive in the course of his employment by the Company, its subsidiaries and
affiliates, including, (without limitation) any proprietary knowledge, trade
secrets, data, formulae, information and client and customer lists and all
papers, resumes, and records, (including computer records) of the documents
containing such Confidential Information. The Executive acknowledges that such
Confidential Information is specialized, unique in nature and of great value to
the Company, its subsidiaries and affiliates, and that such information gives
the Company, its subsidiaries and affiliates a competitive advantage. The
Executive agrees to deliver or return to the Company, at the Company's request
at any time or upon termination or expiration of his employment or as soon
thereafter as possible, all documents, computer tapes and disks, records, lists,
data, drawings, prints, notes and written information, (and all copies thereof)
furnished by the Company, its subsidiaries or affiliates or prepared by the
Executive during the term of his employment by the Company, its subsidiaries and
affiliates.
In the event that the Executive engages in any conduct proscribed by this
Section 11, the Executive agrees to repay any lump-sum severance amount received
pursuant to Section 5 of this Agreement, and all outstanding stock options held
by the Executive shall expire as of the date of the Executive's commencement of
such proscribed conduct. It is further expressly agreed that the Company will or
would suffer irreparable injury if Executive were to disclose or threaten to
disclose Confidential Information regarding the Company or any subsidiary or
affiliate in violation of this Agreement or otherwise fail to comply with the
provisions of this Section 11, and that the Company would, by reason of such
disclosure or threatened disclosure or other failure to comply, be entitled to
preliminary or permanent injunctive relief in a court of appropriate
jurisdiction, and Executive further consents and stipulates to the entry of such
preliminary or permanent injunctive relief in such a court prohibiting Executive
from disclosing Confidential Information in violation of this Agreement or
otherwise requiring Executive to comply with the provisions of this Section 11
upon an appropriate finding by such court that Executive has violated this
Section 11.
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12. NOTICE. For the purposes of this Agreement, any notices, demands and
all other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given upon; (A) transmitter's confirmation of
a receipt of a facsimile transmission; (B) confirmed delivery by a standard
overnight carrier; or (C) the expiration of five business days after the day
when mailed by certified or registered mail, postage prepaid, addressed as
follows, (or at such other address as the parties hereto shall specify by like
notice);
If to Executive: Randy E. Johnson
3555 Timmons Lane, Suite 1550
Houston, TX 77027
If to Company: Ankle and Foot Centers of America,
LLC
or American Medical Providers, Inc.
3555 Timmons Lane, Suite 1550
Houston, Texas 77027
Attention: Chief Executive Officer
13. AMENDMENT WAIVER. No provisions of this Agreement may be waived,
modified or discharged unless such waiver, modification or discharge is agreed
to in a written document signed by the Executive and such officer of the
Company, as may be specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
14. ENTIRE AGREEMENT. This Agreement and Exhibit A hereto set forth the
entire agreement of the parties hereto in respect of the subject matter
contained herein and supersede all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto.
15. GOVERNING LAW: VENUE: VALIDITY. The interpretation, construction and
performance of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Texas without regard to the
principle of conflicts of laws and, at the election of the Executive, the venue
of any dispute arising under this Agreement shall be Texas. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which other
provisions shall remain in full force and effect.
16. HEADINGS. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
17. SEVERABILITY. In the event that a court of competent jurisdiction
determines that any portion of this Agreement is in violation of any statute or
public policy, only the portions of this Agreement that violate such statute or
public policy shall be stricken. All portions of this Agreement that do not
violate any statute or public policy shall continue in full force and effect.
Further, any court order striking any portion of this Agreement shall modify the
stricken terms as narrowly as possible to give as much effect as possible to the
intentions of the parties under this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day of December, 1997.
Ankle and Foot Centers of America,
LLC.
By: /s/JACK N. McCRARY
Name: Jack N. McCrary
Title:
Executive:RANDY E. JOHNSON
Randy E. Johnson
Joined into for the purpose here above stated by American Medical
Providers, Inc., this day of December, 1997.
By: /s/JACK N. McCRARY
Name: Jack N. McCrary
Title:
11
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EXHIBIT A
COMPENSATION AND LEAVE POLICIES
BASE COMPENSATION
Commencing with the Initial Public Offering (the "IPO") Date (the "IPO
Date") of AMP, (or the Sale Merger of AMP's Shares other than the IPO ("Sale
or Merger Date"), Executive shall be paid by the Company a base salary of not
less than One Hundred Eighty Thousand Dollars, ($180,000.00) per annum.
INVENTIVE COMPENSATION
Executive shall participate in the Company's Executive Officers Performance
Plan with his annual "Target Bonus" not being less than 60% of his Base
Salary.
LEAVE-VACATION AND HOLIDAYS
Executive shall be entitled to leave of four (4) weeks per annum, to be
taken in accordance with Employer's regular vacation policies. Executive shall
be entitled to at least nine (9) paid holidays per annum in accordance with
Employer regular paid holidays policies.
BENEFITS
Health Insurance including major medical for personal, at no cost to
Executive family and dependents at customary rates for family coverage.
Life Insurance equivalent to three times Executive salary.
Disability insurance equivalent to 60% of Base salary upon permanent
disability.
OTHER PAYMENTS:
Executive shall be reimbursed up to $1,000 for the cost of an annual
physical.
Executive shall receive a minimum of $800 per month as an automobile
allowance.
Executive shall be reimbursed up to $250.00 per month for membership dues.
Executive shall be reimbursed for expenses of "continuing education"
including such reasonable travel, as is required in connection therewith.
12
EXHIBIT 10.5
FORM OF
MANAGEMENT SERVICES AGREEMENT
Dated as of the ____________ day of ___________, 1997
by and between
AMERICAN MEDICAL PROVIDERS, INC.
and
---------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1 Definitions....................................................... 1
Section 1.1 Definitions............................................... 1
ARTICLE 2 Relationship of the Parties....................................... 8
ARTICLE 3 Services to be Provided by Administrator.......................... 9
Section 3.1 Overall Function.......................................... 9
Section 3.2 General Administrative Services........................... 9
Section 3.3 Facilities................................................ 11
(a) Premises..................................................... 11
(b) Personal Property............................................ 12
(c) Expenses..................................................... 12
(d) Disposition.................................................. 12
Section 3.4 Acquisition and Assistance................................ 12
Section 3.5 Financial Planning and Budgeting.......................... 12
Section 3.6 Inventory and Supplies.................................... 13
Section 3.7 Marketing, Advertising and Public Relations............... 13
Section 3.8 Personnel................................................. 13
Section 3.9 Provider and Payor Relationships.......................... 14
Section 3.10 Quality Assurance......................................... 14
Section 3.11 Other Consulting and Advisory Services.................... 14
Section 3.12 Events Excusing Performance............................... 14
ARTICLE 4 Obligations of the Group Practice................................. 15
Section 4.1 Employment of Physician Employees; Distributions to
Physicians Stockholders.................................. 15
Section 4.2 Professional Services..................................... 15
Section 4.3 Medical Practices......................................... 15
Section 4.4 Group Practice's Internal Matters......................... 16
Section 4.5 Group Practice Board Meetings............................. 16
Section 4.6 Name...................................................... 16
Section 4.7 Compliance with Laws...................................... 16
Section 4.8 Ancillary Operations...................................... 17
Section 4.9 Premises and Personal Property............................ 17
Section 4.10 Group Practice Employee Benefit Plans..................... 18
ARTICLE 5 Joint Planning Board.............................................. 19
(i)
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ARTICLE 6 Restrictive Covenants and Liquidated Damages...................... 20
Section 6.1 Restrictive Covenants of the Group Practice............... 20
(a) Noncompetition............................................... 20
(b) Acknowledgment of Proprietary Interest....................... 21
(c) Covenant Not-to-Divulge Confidential and Proprietary
Information................................................. 21
(d) Return of Materials to Administrator......................... 21
(e) Return of Materials to the Group Practice.................... 21
Section 6.2 Restrictive Covenants and Liquidated Damages Provisions... 22
Section 6.3 Enforcement of Physician Agreements....................... 22
(a) Enforceability of Liquidated Damages Provisions.............. 22
(b) Enforcement of Restrictive Covenants and Other Provisions.... 23
Section 6.4 Remedies.................................................. 23
ARTICLE 7 Financial and Security Arrangements............................... 24
Section 7.1 Service Fees.............................................. 24
(a) Management of Professional Services.......................... 24
Section 7.2 Payments.................................................. 24
Section 7.3 Repayment................................................. 24
Section 7.4 Security Agreement........................................ 24
Section 7.5 Performance Incentive/Reduction........................... 25
ARTICLE 8 Records........................................................... 25
ARTICLE 9 Insurance and Indemnity........................................... 26
Section 9.1 Insurance to be Maintained by the Group Practice.......... 26
Section 9.2 Insurance to be Maintained by Administrator............... 26
Section 9.3 Continuing Liability Insurance Coverage................... 26
Section 9.4 Additional Insured........................................ 26
Section 9.5 Indemnification........................................... 26
Section 9.6 Guaranty.................................................. 27
ARTICLE 10 Term and Termination............................................. 27
Section 10.1 Term of Agreement......................................... 27
Section 10.2 Extended Term............................................. 27
Section 10.3 Termination by the Group Practice......................... 27
Section 10.4 Termination by Administrator.............................. 28
Section 10.5 Effective Date of Termination............................. 28
Section 10.6 Effect Upon Termination................................... 28
ARTICLE 11 General Provisions............................................... 29
Section 11.1 Assignment................................................ 29
Section 11.2 Amendments................................................ 29
Section 11.3 Waiver of Provisions...................................... 29
Section 11.4 Additional Documents...................................... 30
(ii)
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Section 11.5 Attorneys' Fees........................................... 30
Section 11.6 Contract Modifications for Prospective Legal Events....... 30
Section 11.7 Parties In Interest; No Third Party Beneficiaries......... 30
Section 11.8 Entire Agreement.......................................... 30
Section 11.9 Severability.............................................. 30
Section 11.10 Governing Law............................................. 31
Section 11.11 No Waiver; Remedies Cumulative............................ 31
Section 11.12 Arbitration and Mediation................................. 31
(a) Mediation.................................................... 31
(b) Binding Arbitration.......................................... 32
Section 11.13 Communications............................................ 33
Section 11.14 Captions.................................................. 33
Section 11.15 Gender and Number......................................... 33
Section 11.16 Reference to Agreement.................................... 33
Section 11.17 Notice.................................................... 33
Section 11.18 Counterparts.............................................. 34
Section 11.19 Defined Terms............................................. 34
(iii)
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FORM OF
MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement (this "Agreement"), dated as of
_________________, 1997, is by and among American Medical Providers, Inc., a
Delaware corporation, ("AMP"), and its affiliates (collectively,
"Administrator") and ______________________ a [STATE] PROFESSIONAL LIMITED
LIABILITY COMPANY (the "Group Practice").
WITNESSETH:
WHEREAS, the Group Practice will conduct a podiatric medical practice in
the ____________________ area and will provide professional podiatric care and
products to the general public; and
WHEREAS, Administrator is in the business of owning certain assets of
medical practices and providing consulting, administrative, and other support
services to and furnishing medical practices with the necessary facilities,
equipment, non-physician personnel, supplies and non-physician support staff
services; and
WHEREAS, the Group Practice desires to obtain the services of
Administrator in performing functions so as to permit the Group Practice to
devote its efforts on a concentrated and continuous basis to the rendering of
medical services to its patients; and
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 1
Definitions
SECTION 1.1 DEFINITIONS. For the purposes of this Agreement, the
following definitions shall apply:
(a) "ACCOUNTING CENTER" shall mean the separate accounting centers
within the Group Practice established for a subgroup of the Group Practice,
consisting of a single or multiple Physicians in accordance with the Physician
Engagement Agreements.
(b) "ACQUISITIONS" shall mean the acquisition transactions described in
the Acquisition Agreements.
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(c) "ACQUISITION AGREEMENTS" shall mean the Business Purchase Agreement,
the Physician Employment Agreement, and the Physician Engagement Agreement of
even date herewith by and between Administrator and (1) the Group Practice, (2)
the Physician Stockholders, (3) the Physician Employees and/or (4) the
predecessor employers of Physician Stockholders.
(d) "ACQUISITION CONSIDERATION" shall mean the AMP Common Stock and
other consideration furnished pursuant to the Acquisition Agreements by AMP in
connection with the Acquisition.
(e) "ACQUISITION EFFECTIVE DATE" shall mean the date the Acquisition is
effective pursuant to the terms of the Acquisition Agreements.
(f) "ADJUSTMENTS" shall mean any adjustments for uncollectible accounts,
discounts, Medicare and Medicaid disallowances, 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.
(g) "ADMINISTRATOR EXPENSE" shall mean, pursuant to GAAP applied on a
consistent basis for each Accounting Center of the Group Practice:
(i) Any corporate overhead charges of Administrator and other
items incurred by Administrator that are not incurred specifically for
the purpose of providing services to the Group Practice or are not
directly attributable to the Group Practice as reasonably determined by
Administrator, including, without limitation, salaries and benefits of
executive officers of Administrator, except as otherwise provided for in
the definition of Group Practice Expenses;
(ii) Any amortization of any intangible asset resulting from the
Acquisition;
(iii) Any depreciation attributable to increases in the book
value of tangible depreciable assets resulting from the Acquisition;
(iv) Any legal and accounting expenses incurred by Administrator
in connection with the Acquisition;
(v) All taxes of Administrator, including but not limited to
state and federal income taxes and franchise taxes; but excluding state
and federal employee taxes related to employees who provide services for
the Group Practice, property taxes on assets used by the Group Practice
and other taxes specifically included in Group Practice Expenses.
(vi) Any expenses, whether for premiums or otherwise, related to
disability or life insurance for any Physician where the beneficiary
thereof is Administrator.
(vii) Any other expenses specifically included in "Administrator
Expenses" in this Agreement.
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(h) "AFFILIATE" with respect to any person shall mean a person that
directly or indirectly through one or more intermediaries controls, or is
controlled by or is under common control with, such person. Neither
Administrator nor the Group Practice is deemed to be an Affiliate of the other.
(i) "AMP COMMON STOCK" shall mean the common stock, par value $0.01 per
share, of AMP.
(j) "AMP GROUP" shall mean Administrator and its Affiliates and all
professional associations or corporations or other entities for which
Administrator, AMP, or their Affiliates provide management services.
(k) "ANCILLARY EMPLOYEES" shall mean those individuals who are employed
by or otherwise under contract or associated with Administrator to provide
services in the ancillary areas of the Group Practice's practice.
(l) "ANCILLARY EXPENSES" shall mean, pursuant to GAAP applied on a
consistent basis for each Accounting Center of the Group Practice, all operating
and non-operating expenses of Administrator incurred in the operation of
Ancillary Services on behalf of the Group Practice pursuant to this Agreement,
and all operating and non-operating expenses of the Group Practice incurred by
the Group Practice in the operation of Ancillary Services on behalf of the Group
Practice, including, without limitation, all expenses normally included within
the definition of Group Practice Expenses and specifically including all costs
associated with Ancillary Employees.
(m) "ANCILLARY REVENUE" for any month shall mean, all fees and income of
each Accounting Center of the Group Practice that, pursuant to GAAP applied on a
consistent basis, should be recorded each month (net of adjustments) by or on
behalf of the Group Practice from the provision of Ancillary Services to the
patients of the Group Practice.
(n) "ANCILLARY SERVICES" shall mean any and all services, products or
other fee generating activities provided to the patients of the Group Practice
and not resulting from direct professional medical services or incident to such
professional medical services by Physician Stockholders, Physician Employees or
Physician Extender Employees of the Group Practice.
(o) "ANNUAL CONTRIBUTION" shall mean for any given calendar year an
amount equal to the aggregate Group Practice Revenues for such calendar year
less the aggregate Group Practice Expenses for such year.
(p) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(q) "CONFIDENTIAL AND PROPRIETARY INFORMATION" shall have the meaning
set forth in Section 6.
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(r) "CURRENT PHYSICIAN RESTRICTIVE COVENANTS" shall have the meaning set
forth in Section 6.2.
(s) "DESIGNATED HEALTH SERVICES" shall have the meaning assigned to such
term in Stark.
(t) "DISPUTE" shall have the meaning set forth in Section 11.12.
(u) "ERISA" shall have the meaning set forth in Section 4.10(c).
(v) "EXCLUDED GROUP PRACTICE EXPENSES" shall mean, pursuant to GAAP
applied on a consistent basis, for each Accounting Center of the Group Practice:
(i) any salaries or other distributions made to Physicians,
whether for professional fee income or otherwise, and any expenses
related thereto, including payroll and other taxes associated therewith;
(ii) any federal, state or other income taxes applicable to the
Group Practice;
(iii) any expenses, whether for premiums or otherwise, related
to disability or life insurance for any Physician where the beneficiary
thereof has been named by the Physician,
(iv) all costs, expenses and liabilities incurred by the Group
Practice or Administrator for professional liability insurance,
(v) any expenses described in any Physician Employment Agreement
for a Physician Employee,
(vi) any expenses described in any Physician Engagement
Agreement for a Physician Stockholder,
(vii) expenses related to professional meetings, seminars and
dues and professional licensing fees related to the business of the
Group Practice;
(viii) any contributions to any Group Practice Plan for the
benefit of any Physician, and
(ix) any other expenses specifically included in "Excluded Group
Practice Expenses" in this Agreement.
(w) "FUTURE PHYSICIAN RESTRICTIVE COVENANTS" shall have the meaning set
forth in Section 6.2.
(x) "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 the Securities
and Exchange Commission or in such other statements by such other entity
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<PAGE>
or other practices and procedures as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of the
date of determination. For purposes of this Agreement, GAAP shall be applied on
an accrual basis.
(y) "GROUP PRACTICE" shall include the Group Practice as defined in the
first paragraph of this Agreement and all Accounting Centers, satellite
locations and related businesses of such Group Practice.
(z) "GROUP PRACTICE EXPENSES" shall mean, pursuant to GAAP applied on a
consistent basis, for each Accounting Center of the Group Practice, all
operating and non-operating expenses of Administrator incurred specifically for
and directly attributable to the operation of the Group Practice pursuant to
this Agreement, and all operating and non-operating expenses of the Group
Practice incurred by the Group Practice in the operation of the Group Practice,
including, without limitation:
(i) Salaries, benefits and other direct costs of all employees
of Administrator who perform services for the Group Practice (other than
Group Practice Physician Employees), including, without limitation,
federal and state employee taxes and costs of workers' compensation.
(ii) Direct costs of all employees or consultants of
Administrator engaged to provide services at or in connection with the
Group Practice or who actually provide services at or in connection with
the Group Practice for improved performance, such as quality assurance,
materials management, purchasing, charge and coding analysis, physician
recruitment and business office consultant; provided, however, only the
portion of expenses related to such employee or consultant, without
mark-up, that is allocable to work performed at or for the benefit of
the Group Practice shall be included in Group Practice Expenses.
(iii) The obligations of Administrator, including capital costs,
depreciation and amortization, leases or subleases for assets which are
leased or utilized for the benefit of the Group Practice, including,
without limitation, any subleases between any Affiliates included in
Administrator, provided that the rent payable under such subleases shall
not exceed the rent payable by such Affiliate.
(iv) Personal and intangible property taxes assessed against
Administrator's or its Affiliate's assets which are leases or utilized
for the benefit of the Group Practice, commencing on the date of this
Agreement.
(v) Interest expense on indebtedness (1) assumed by
Administrator as a result of the Acquisition or (2) funds expended by
Administrator (a) to finance or refinance obligations assumed by
Administrator at the time of the Acquisition and/or (b) in connection
with making advances and capital available to the Group Practice and in
providing other services pursuant to this Agreement.
5
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(vi) Any provider tax assessed against the Group Practice by the
State and any sales and use taxes assessed against the Group Practice
related to Group Practice operations or assessed against Administrator
related to services provided hereunder.
(vii) All expenses specifically included in "Group Practice
Expenses" in this Agreement.
(viii) All expenses, whether for premiums or otherwise, related
to life insurance for any Group Practice Physician Stockholder where the
beneficiary thereof is the Group Practice.
(ix) Other expenses incurred by Administrator in providing
services for the direct benefit of the Group Practice and in carrying
out its obligations under this Agreement.
Provided, however, that, notwithstanding anything contained herein,
Administrator Expenses, Ancillary Expenses and Excluded Group Practice Expenses
shall not be included in Group Practice Expenses.
(aa) "GROUP PRACTICE FUNDS" shall indicate for the relevant period an
amount equal to Group Practice Revenues less than the sum of Group Practice
Expenses and the Service Fees, for each Accounting Center of the Group Practice.
(ab) "GROUP PRACTICE PLAN" shall have the meaning set forth in Section
4.10(a).
(ac) "GROUP PRACTICE REVENUES" for any month shall mean all fees and
income of each Accounting Center of the Group Practice that, pursuant to GAAP
applied on a consistent basis, should be recorded each month (net of
Adjustments) by or on behalf of the Group Practice, including, without
limitation, the fees generated as a result of professional medical services
furnished to patients by Physician Employees, including Physician Extender
Employees, and other fees or income generated in their capacity as
professionals, whether rendered in an inpatient or outpatient setting,
including, but not limited to, medical director fees or technical fees from
medical ancillary services and consulting fees, but shall not include (i) any
income or revenue received by any Group Practice Physician Employee individually
from the activities listed in Schedule A to the applicable Physician Employment
Agreement or Physician Engagement Agreement, (ii) liquidated damages received by
the Group Practice or the Administrator pursuant to Section 6.2 or 6.3, or (iii)
Ancillary Group Practice Revenues as defined herein.
(ad) "IRS" shall mean the Internal Revenue Service.
(ae) "JOINT PLANNING BOARD" shall mean a six (6) member joint board
established pursuant to Article 5.
(af) "LD CAUSES OF ACTION" shall have the meaning set forth in Section
6.3(a).
(ag) "LIQUIDATED DAMAGES" shall have the meaning set forth in Section
6.3(a).
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(ah) "LIQUIDATED DAMAGES PROVISIONS" shall have the meaning set forth in
Section 6.2.
(ai) "MANAGED CARE CONTRACTS" shall have the meaning set forth in
Section 3.9.
(aj) "MANAGED CARE PAYORS" shall have the meaning set forth in Section
3.9.
(ak) "MEDICAL WASTE" includes, but is not limited to, (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, pollutants material or contaminants 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.
(al) "MEDICAL WASTE LAWS" shall mean the following, including
regulations promulgated and orders issued thereunder, all as may be amended from
time to time: (i) the MWTA, (ii) the U.S. Public Vessel Medical Waste
Anti-Dumping Act of 1988, 33 USCA ss.ss. 2501 ET SEQ., (iii) the Marine
Protection, Research, and Sanctuaries Act of 1972, 33 USCA ss.ss.1401 ET SEQ.,
(iv) The Occupational Safety and Health Act, 29 USCA ss.ss.651 ET M., (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
purport to control Medical Waste, or impose requirements relating to Medical
Waste.
(am) "PAYMENT DATE" shall have the meaning set forth in Section 7.3.
(an) "PERSONAL PROPERTY" shall have the meaning set forth in Section
3.3(b).
(ao) "PHYSICIAN" shall mean all Physician Stockholders and Physician
Employees, as defined below.
(ap) "PHYSICIAN EMPLOYMENT AGREEMENT" shall mean the employment
agreement entered into between the Group Practice and Physician Employees,
whether on the date hereof or on any date hereafter during the term of this
Agreement and any extension thereof.
(aq) "PHYSICIAN EMPLOYEES" shall mean those individuals who are
physicians employed by the Group Practice under a Physician Employment
Agreement, or who are otherwise under contract or associated with the Group
Practice to provide professional medical services to patients of the Group
Practice except those individuals employed under a Physician Engagement
Agreement.
(ar) "PHYSICIAN ENGAGEMENT AGREEMENT" shall mean the engagement
agreement entered into between the Group Practice and Physician Stockholders,
whether on the date hereof or on any date hereafter during the term of this
Agreement and any extensions thereof.
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(as) "PHYSICIAN EXTENDER EMPLOYEES" shall mean those individuals who are
employed by or otherwise under contract or associated with Administrator as
nurse anesthetists, physicians assistants, nurse practitioners or similar
positions, or any position that generates a professional charge, but shall not
include Ancillary Employees.
(at) "PHYSICIAN STOCKHOLDER" shall mean those individuals engaged by the
Group Practice under a Physician Engagement Agreement.
(au) "PLANS" shall have the meaning set forth in Section 4.10(a).
(av) "PREMISES" shall mean the premises provided to the Group Practice
pursuant to Section 3.3.
(aw) "RESTRICTIVE COVENANTS" shall mean the Current Physician
Restrictive Covenants and the Future Physician Restrictive Covenants.
(ax) "SERVICE FEE" shall have the meaning set forth in Section 7. 1 (b).
(ay) "STARK" shall mean the anti-selfreferral provisions for certain
health services found in 42 U.S.C. ss. 1395nn and all rules and regulations
promulgated thereunder, as such may be amended or revised from time to time.
(az) "STATE" shall mean the State of ___________________.
(ba) "TAX RETURNS" shall include all federal, state, local, franchise,
property and other tax returns.
(bb) "TERMINATION DATE" shall have the meaning set forth in Section
10.5.
(bc) "TERMINATION NOTICE" shall have the meaning set forth in Section
10.5(a).
ARTICLE 2
Relationship of the Parties
The Group Practice 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 Practice agree that the Group Practice
shall retain the exclusive authority to direct the medical, professional, and
ethical aspects of its medical practice. Administrator shall neither exercise
control over nor interfere with the physician-patient relationships of the Group
Practice, which shall be maintained strictly between the physicians of the Group
Practice and their patients. The parties hereby agree that the benefits to the
Group Practice hereunder do not require, are not payment 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
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the Group Practice's patients in any ancillary service controlled, managed or
operated by Administrator.
ARTICLE 3
Services to be Provided by Administrator
SECTION 3.1 OVERALL FUNCTION. Administrator shall provide or arrange for
the services set forth in this Article 3 and the costs, fees, expenses and other
disbursements incurred by Administrator in connection therewith shall be
included in Group Practice Expenses, except to the extent such costs, fees or
expenses are Excluded Group Practice Expenses, Administrator Expenses or
Ancillary Expenses. Administrator is authorized to perform its services
hereunder as is necessary or appropriate for the efficient operation of the
Group Practice, including, without limitation, performance of some of the
business office functions at locations other than the Group Practice. The Group
Practice 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 use its best efforts to cause its
employees, to comply with all applicable federal, state and local laws, rules
and regulations in its provision of services hereunder.
SECTION 3.2 GENERAL ADMINISTRATIVE SERVICES.
(a) The Group Practice hereby engages Administrator to serve as its
exclusive manager and administrator of non-physician services relating to the
operation of the Group Practice, subject to matters reserved for the Group
Practice or referred to the Joint Planning Board as herein contemplated, and
Administrator shall have all necessary authority to perform such services. The
Group Practice agrees that the purpose and intent of this Agreement is to
relieve the Physician Employees to the maximum extent possible of the
administrative, accounting, purchasing, non-physician personnel and other
business aspects of its practice. Administrator agrees that only the Group
Practice and Physician Employees, will perform the medical functions of its
practice. Administrator shall have no authority, directly or indirectly, to
perform or supervise, and shall not perform or supervise, any medical function.
Administrator may, however, advise the Group Practice as to the relationship
between its performance of medical functions and overall administrative and
business functions of its practice to the extent permitted by applicable law.
(b) Administrator shall, in the name of and on behalf of the Group
Practice, bill patients, insurance companies and other third-party payors and
collect the professional fees for medical services rendered by the Group
Practice in the Group Practice, for services performed outside the Group
Practice for its hospitalized patients, and for other professional and Group
Practice services and products. The Group Practice hereby appoints Administrator
for the term of this Agreement to be its true and lawful attorney-in-fact, for
the following purposes: (i) to bill patients, insurance companies and other
third-party payors in the Group Practice's name and on
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its behalf, (ii) to collect accounts receivable resulting from such billing in
the Group Practice's name and on its behalf, (iii) to receive payments on behalf
of the Group Practice from insurance companies, prepayments received from health
care plans, Medicare, Medicaid and all other third party payors; (iv) to take
possession of and endorse in the name of the Group Practice (and/or in the name
of an individual physician), such payments intended for the purpose of payment
of a physician's bill related to the Group Practice, and notes, checks, money
orders, insurance payments and other instruments received in payment of accounts
receivable; and (v) to initiate the institution of legal proceedings in the name
of the Group Practice or a Physician Employee to collect any accounts and monies
owed to the Group Practice or the Physician Employee, to enforce the rights of
the Group Practice or the Physician Employee 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. All monies shall be accounted for by Administrator as being distinctly
attributable to the Group Practice. The Group Practice may perform the functions
or exercise the rights set forth in this Section 3.2(b) only with the consent of
Administrator. The Group Practice shall execute a Power of Attorney in form and
substance acceptable to the parties hereto in connection with the rights and
powers granted to Administrator pursuant to this Section 3.2(b). The Group
Practice shall cooperate with and at the request of Administrator shall provide
reasonable assistance to Administrator regarding the functions set forth herein.
In the performance of the services described in the Section 3.2(b),
Administrator shall use commercially reasonable efforts to collect such
professional fees and still comply with all applicable managed care contracts
and all applicable laws, rules and regulations.
(c) Administrator shall supply to the Group Practice the ordinary,
necessary or appropriate services for the efficient operation of the Group
Practice, including without limitation, necessary 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
Practice may elect to prepare its own Tax Returns, in which case, the cost of
preparing such Tax Returns in excess of $1,500 per annum shall be included in
Excluded Group Practice Expenses. Administrator shall prepare monthly unaudited
financial statements for the Group Practice containing a balance sheet, income
statement and cash flow statement, which shall be delivered to the Group
Practice as soon as practicable, but not later than thirty (30) days after the
end of each calendar month. The Group Practice may elect, no more than annually,
to have an audit conducted with respect to such financial statements, in which
case the cost of such audit shall be included in Excluded Group Practice
Expenses.
(d) Administrator shall maintain all files and records relating to the
operation of the Group Practice, including, but not limited to, accounting,
billing, collection and customary financial records and patient files. The
management of all files and records shall comply with all applicable federal,
state and local statutes and regulations, and all files and records shall be
located so that they are readily accessible for patient care, consistent with
ordinary records management practices. The Group Practice shall supervise the
preparation of, and direct the contents of, patient medical records, all of
which shall remain confidential. All original patient
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records contributed to the Group Practice by the Group Practice Physician
Stockholders shall be and remain the property of the Group Practice and all
original patient records created after the Acquisition Effective Date by the
Group Practice shall be and remain the property of the Group Practice. At such
time as this Agreement expires or terminates, (i) Administrator will provide the
Group Practice with the original patient records that it owns, if any (or true
and complete copies thereof, if Administrator shall be prevented by any
applicable laws, regulations or accreditation policies from providing the Group
Practice with the original records), of all continuing patients of the Group
Practice, but subject to applicable laws, regulations and accreditation
policies, Administrator shall be permitted to retain true and complete copies of
such records (and shall retain the original records if, for any of the foregoing
reasons, it is prevented from providing them to the Group Practice), and (ii)
subject to applicable laws, regulations and accreditation policies, the Group
Practice will, if requested by Administrator, provide Administrator with true
and complete copies of the original patient records that it owns. 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 Group Practice.
(e) Administrator shall take such action in the name of and on behalf of
the Group Practice to collect fees and pay in a timely manner all Group Practice
Expenses, except as otherwise agreed among Administrator and the Group Practice.
(f) Administrator shall, upon the terms and at the times as mutually
agreed by Administrator and the Group Practice (but in no event less frequently
than monthly), distribute the Group Practice Funds to the Group Practice
Accounting Centers, with appropriate adjustments made to reflect any Group
Practice Expenses paid by the Administrator and not reimbursed by Group Practice
or Group Practice Revenues collected or received by the Group Practice and not
remitted to Administrator.
SECTION 3.3 FACILITIES.
(a) PREMISES. Administrator shall make available to the Group Practice
the Premises that are described in Schedule 3.3 attached hereto and such other
real property acquired (with the consent of the Group Practice) and improvements
made by Administrator for the use of the Group Practice hereunder; provided,
that in the event Administrator's rights to use any such Premises shall
terminate, Administrator shall use its best efforts to provide other suitable
Premises to be used by the Group Practice, which Premises shall be approved by
the Group Practice, such approval not to be unreasonably withheld. Administrator
shall obtain for the Group Practice 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 services and refuse
disposal. Administrator shall maintain the Premises and make all necessary
repairs thereto.
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(b) PERSONAL PROPERTY. Administrator shall provide the Group Practice
with the use of the equipment, furniture, fixtures, furnishings and other
personal property acquired by Administrator in the Acquisitions, together with
such other equipment, furniture, fixtures, furnishings and other personal
property acquired by Administrator for the use of Group Practice pursuant to the
terms hereof (collectively, the "Personal Property"). Administrator shall
maintain the Personal Property and make necessary repairs thereto.
(c) EXPENSES. All costs, fees, expenses and other disbursements incurred
by Administrator or the Group Practice in connection with the Premises and the
Personal Property, including, without limitation, all 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, principal and other debt service or
refinancing payments and expenses, depreciation, taxes and casualty, liability
and other insurance, shall be included in Group Practice Expenses, provided that
the lesser of depreciation or principal payments for the same assets shall not
both be included in Group Practice Expenses.
(d) DISPOSITION. Nothing herein shall be construed as precluding
Administrator from selling, leasing or otherwise disposing of all or any part of
its real property, improvements, Personal Property, tradenames, trademarks and
other intangible property; provided that any such disposition shall not
eliminate or diminish Administrator's obligations hereunder.
SECTION 3.4 ACQUISITION AND ASSISTANCE. In the event a decision is made
by the Group Practice to employ additional physicians or acquire physician
groups or practices and if requested by the Group Practice, Administrator may,
in its sole discretion, assist the Group Practice in the identification and
selection of physicians or physician groups or practices that may be beneficial
in providing the services and products of the Group Practice. In the event that
a decision is made by the Group Practice to pursue the employment of selected
physicians or the acquisition of a particular physician group or practice,
Administrator may, in its sole discretion, if requested by the Group Practice,
provide recruiting, consulting, negotiating and other services and may provide
for legal, accounting and other professional advisor services in connection with
such transaction. Nothing contained herein shall be construed to require
Administrator to provide any capital, funds or other assistance to the Group
Practice in connection with the employment of physicians or acquisition of
physician groups or practices by the Group Practice.
SECTION 3.5 FINANCIAL PLANNING AND BUDGETING.
(a) Subject to the terms contained herein, Administrator will make funds
available for capital expenditures and improvements by Administrator on behalf
of the Group Practice. Requests for expenditures and improvement projects shall
be prepared by the Joint Planning Board in consultation with the Group Practice
and Administrator. All requests for capital expenditures and improvements at the
Group Practice in excess of $5,000 individually and $20,000 in the aggregate for
any calendar year must be approved by the Board of Directors of Administrator.
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(b) Administrator shall consult with the Group Practice and the Joint
Planning Board, in the preparation of all annual capital and operating budgets.
Combined annual budgets for the Group Practice shall be subject to the review,
amendment and approval or disapproval of the Board of Directors of Administrator
(or a committee designated by such Board of Directors) and the Group Practice.
In the event Administrator and the Group Practice can not reach agreement on
such budgets, the next previously agreed to budgets shall remain in effect with
an adjustment to all items not to exceed three percent (3%).
SECTION 3.6 INVENTORY AND SUPPLIES. Administrator shall order and
purchase inventory and supplies, and such other ordinary, necessary or
appropriate materials which are requested by the Group Practice and which the
Group Practice shall reasonably determine to be necessary in the operation of
the Group Practice. Supplies and inventory to be used directly in patient care
and providing medical services shall be of the type and quality specified by the
Group Practice. Such inventory, supplies and other materials shall be included
in Group Practice Expenses at their cost to Administrator, as the case may be.
SECTION 3.7 MARKETING, ADVERTISING AND PUBLIC RELATIONS. In consultation
with the Joint Planning Board and the Group Practice, Administrator shall
implement (and design where requested) any appropriate local marketing, public
relations or advertising program on behalf of the Group Practice, with
appropriate emphasis on public awareness of the availability of services at the
Group Practice. Prior to publication or distribution of marketing or public
relations material or information, Administrator shall submit such material to
the Group Practice for its review and approval, which approval shall not be
unreasonably withheld. However, if Administrator does not receive a response
from Group Practice regarding a submission of material within ten (10) days of
such submission, Administrator may continue as if it had received approval from
Group Practice. Administrator shall also design and implement all national or
other non-local public relations or advertising programs on behalf of the Group
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 marketing, public relations
or advertising programs, in which case, such costs will be included in Group
Practice Expenses. 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 3.8 PERSONNEL. Except as specifically provided in Section 5(b)
of this Agreement, Administrator shall employ or otherwise retain and shall be
responsible for selecting, hiring, training, supervising, and terminating, all
management, administrative, clerical, secretarial, bookkeeping, accounting,
payroll, billing and collection and other personnel as Administrator deems
reasonably necessary and appropriate for Administrator's performance of its
duties and obligations under this Agreement. Consistent with reasonably prudent
personnel management policies, Administrator shall seek and consider the advice,
input, and requests of the Group Practice in regard to personnel matters.
Administrator shall have sole responsibility for determining the salaries and
providing such fringe benefits, and for withholding, as required by law, any
sums for income tax, unemployment insurance, social security, or any other
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withholding required by applicable law or governmental requirement.
Notwithstanding the foregoing, it is clearly understood that Physicians shall
exercise control over all actions taken by personnel with regard to the
rendering of medical services to the same extent Physicians would exercise such
control if such personnel were directly employed by Physician.
SECTION 3.9 PROVIDER AND PAYOR RELATIONSHIPS. Administrator shall
provide financial and business assistance to the Group Practice in the
negotiation, establishment, supervision and maintenance of contracts and
relationships (collectively, the "Managed Care Contracts") with all managed
care, institutional health care providers and payors, health maintenance
organizations, preferred provider organizations, exclusive provider
organizations, Medicare, Medicaid and other similar persons (collectively,
"Managed Care Payors"). Approval, disapproval, termination or amendment of any
contract or relationship with such Managed Care Payors and the Group Practice
shall be the responsibility of the Group Practice and the Joint Planning Board;
provided, however, that should a contract or relationship between any Managed
Care Payor and the Group Practice involve or affect a contract or relationship
between a Managed Care Payor and Administrator or a person or entity serviced or
managed by Administrator and a consensus among such affected Affiliates and
serviced entities cannot be reached regarding the contract or relationship, then
the ultimate decision as to the approval, disapproval, termination or amendment
of the contract or the relationship between such Affiliates and other affected
or involved serviced clinics and such Managed Care Payor, and such decision
involving the Group Practice and such Managed Care Payor, shall be made by the
Board of Directors of AMP.
SECTION 3.10 QUALITY ASSURANCE. Subject to Article 2, Administrator
shall assist the Group Practice 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 for the
direct benefit of the Group Practice shall be included in Group Practice
Expenses.
SECTION 3.11 OTHER CONSULTING AND ADVISORY SERVICES. Administrator will
provide such consulting and other advisory services as requested by the Group
Practice in all areas of the Group Practice's business functions, including,
without limitation, financial planning, acquisition and expansion strategies,
development of long-term business objectives and other related matters.
SECTION 3.12 EVENTS EXCUSING PERFORMANCE. In the event of strikes,
lock-outs, calamities, acts of God, unavailability of supplies or other events
over which Administrator has no control, Administrator shall not be liable to
the Group Practice for failure to perform any of the material services required
hereunder and the Group Practice 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 of the services
required hereunder for a period of 180 consecutive days
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or more, either Administrator or Group Practice may terminate this Agreement by
written notice to the other.
ARTICLE 4
Obligations of the Group Practice
SECTION 4.1 EMPLOYMENT OF PHYSICIAN EMPLOYEES; DISTRIBUTIONS TO
PHYSICIANS STOCKHOLDERS. The Group Practice shall have complete control of and
responsibility for the hiring, compensation, supervision, training, evaluation
and termination of its Physician Employees, although Administrator and/or the
Joint Planning Board shall consult with the Group Practice with respect to such
matters. The Group Practice 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 and shall compensate such
Physician Employees in amounts not to exceed amounts which are reasonable and
customary for physicians of comparable skills and experience in the community
where the Group Practice is located. Although Administrator may provide payroll
and other related services to the Group Practice, the Group Practice shall be
solely responsible for the payment of Physician Employees' salaries and wages,
payroll taxes and all other taxes now or hereafter applicable to their
employment. Physician Stockholders shall receive distributions in accordance
with their Physician Engagement Agreement. Neither the Group Practice nor its
Physicians shall have any claim under this Agreement or otherwise against
Administrator for workers' compensation, unemployment compensation or Social
Security benefits, all of which shall be the sole responsibility of the Group
Practice. The Group Practice shall only employ or contract with licensed
physicians or other persons meeting applicable credentialing guidelines
established by the Group Practice and approved by the Joint Planning Board. The
Group Practice shall cooperate in the obtaining and retaining of professional
liability insurance by ensuring that all its Physicians and its 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 Practice shall provide
professional services to patients in compliance at all times with ethical
standards, laws, rules and regulations applicable to the operations of the Group
Practice and the Physicians. The Group Practice shall ensure that each Physician
has all required licenses, credentials, approvals or other certifications to
perform his or her duties and services for the Group Practice. In the event that
any disciplinary actions or medical malpractice actions are initiated against
any Physician, the Group Practice shall inform Administrator within 24 hours of
such action and the underlying facts and circumstances. The Group Practice shall
carry out a program to monitor the quality of medical care practiced at the
Group Practice. The Group Practice shall employ such Physicians as is necessary
to provide efficient medical care to patients of the Group Practice.
SECTION 4.3 MEDICAL PRACTICES. The Group Practice 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 by
Administrator, which approval shall not be
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unreasonably withheld, it is expressly acknowledged by the parties hereto that
the medical practice or practices conducted by the Group Practice shall be
conducted solely by Physicians associated with the Group Practice, and, except
as set forth on Schedule 4.3, no other physician or medical practitioners shall
be permitted to use or occupy the Group Practice. The Group Practice shall be
solely and exclusively in control of all aspects of the practice of medicine and
the delivery of medical services at the Group Practice's Premises and at such
outpatient surgery center, acute care hospitals and other facilities as the
Group Practice may deem appropriate from time to time. The rendition of all
medical professional services, including, but not limited to, diagnosis,
treatment, surgery, therapy, the prescription of medicine and drugs, and the
supervision and preparation of medical reports shall be the sole responsibility
of the Group Practice. Administrator shall have no authority whatsoever with
respect to the establishment of fees or charges for the rendition of such
services. From time to time, the Group Practice in its discretion will adopt and
implement fee schedules for non-prepaid patients which shall be reasonable in
relation to fees generally being obtained in the same or similar market areas
and for all re-billings and recovery items on prepaid Managed Care Contracts
which are authorized and permitted by such contracts, a copy of which and each
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 PRACTICE'S INTERNAL MATTERS. The Group Practice shall
be responsible for matters involving its corporate governance, employees and
similar internal matters, including, but not limited to, preparation and the
contents of such reports to regulatory authorities governing the Group Practice
as the Group Practice is required by law to provide, distribution of
professional fee income among the Group Practice Physician Stockholders, which
will be included in Excluded Group Practice Expenses; PROVIDED, HOWEVER, that
such compensation shall be consistent with the Physician Engagement Agreements
and Physician Employment Agreements for each Physician. The costs incurred in
connection with the foregoing matters shall be Group Practice Expenses.
SECTION 4.5 GROUP PRACTICE BOARD MEETINGS. Administrator shall have the
right to have a non-voting attendee at all meetings of the Members and the Board
of Managers of the Group Practice, and shall be entitled to reasonable notice of
every such meeting as afforded Members and the Board of Managers.
SECTION 4.6 NAME. Administrator agrees that the Group Practice shall be
entitled to use on a non-exclusive and nontransferable basis at no cost for the
term of this Agreement such of the tradenames, service marks and trade marks of
Administrator at no cost as may be necessary or appropriate in the performance
of the Group Practice's services and obligations hereunder; provided, however,
that the Group Practice enter into such Tradename, Service Mark and Trade Mark
Agreements as Administrator may require.
SECTION 4.7 COMPLIANCE WITH LAWS. The Group Practice shall, and shall
use its best efforts to cause the Physicians to comply with all applicable
federal, state and local laws, rules, regulations and restrictions in the
conduct of the Group Practice's business. Without limiting
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the generality of the foregoing, the Group Practice shall comply, and shall use
its best efforts to cause each Physician Employee to comply with all Medical
Waste Laws applicable to the operation of the Group Practice in the generation,
transportation, treatment, storage, disposal or other handling of Medical Waste
(to the extent that the Group Practice or the Physician Employees engage in such
activities), and the Group Practice shall not, and shall use its best efforts to
forbid any Physician to:
(a) enter 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 Group Practice, if such transaction is in
violation of any applicable law, rule or regulation;
(b) knowingly and wilfully make or cause to be made a false statement or
representation of a material fact in any application for any benefit or payment;
(c) fail 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
behalf or on behalf of another, with intent to fraudulently secure such benefit
or payment;
(d) knowingly and willfully pay, solicit or receive any remuneration
(including any kickback, bribe or rebate), directly or indirectly, overtly or
covertly, in cash or in kind or offer 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
(e) refer a patient for Designated Health Services to, or provide
Designated 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 Stark.
SECTION 4.8 ANCILLARY OPERATIONS. The Group Practice shall not acquire,
establish or commence the operation of any satellite location, medical office,
ambulatory surgery center, health maintenance organization, preferred provider
organization, exclusive provider organization or similar entity or organization
established or operated by the Group Practice after the date hereof without the
prior written consent of Administrator.
SECTION 4.9 PREMISES AND PERSONAL PROPERTY. The Group Practice 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. The Group Practice shall promptly inform Administrator in
writing of any and all necessary replacements,
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repairs or maintenance to any of the Premises or Personal Property and any
failures of equipment of which it becomes aware. The Group Practice shall comply
with all of the covenants and provisions set forth in any leases or subleases
for the Premises entered into or assumed by Administrator.
SECTION 4.10 GROUP PRACTICE EMPLOYEE BENEFIT PLANS
(a) Effective on the Acquisition Effective Date, the Group Practice
shall amend the tax-qualified retirement plan(s) described on Schedule 4.10(c)
(the "Group Practice Plan") to provide that employees of the Administrator who
are classified as "leased employees" (as defined in Code Section 414(n)) of the
Group Practice shall be treated as Group Practice employees for purposes of
eligibility and participation in the Group Practice Plan. Not less often than
annually, the Group Practice and the Administrator shall agree upon and identify
in writing those individuals to be classified as leased employees of the Group
Practice (the "designated leased employees"). The Group Practice and the
Administrator shall establish mutually agreeable procedures with respect to the
participation of designated leased employees in the Group Practice Plan. Such
procedures shall be designed to avoid the tax disqualifications of the Group
Practice Plan, similar plans of clinics similarly situated, and any similar plan
sponsored or maintained by the Administrator from time to time (collectively,
the "Plans").
(b) If the Joint Planning Board determines that the relationship between
the Administrator and the Group Practice (and other clinics similarly situated)
constitutes an "affiliated service group" (as defined in Code Section 414(m)),
the Administrator and the Group Practice shall take such actions as may be
necessary to avoid the tax disqualification of the Plans. Such actions may
include the amendment, freeze, termination or merger of the Group Practice Plan.
(c) The Plans described on Schedule 4.10(c) attached hereto are approved
by Administrator. The Group Practice shall not enter into any new "employee
benefit plan" as defined in Section 3(3) of the Employee Retirement Security Act
("ERISA") without the express written consent of Administrator. The Group
Practice shall not offer any retirement benefits or make any material retirement
payments other than under the Group Practice Plan to any Group Practice
Physician Employee without the express written consent of Administrator. Except
as otherwise required by law, the Group Practice shall not materially amend,
freeze, terminate or merge the Group Practice Plan without the express written
consent of Administrator. In the event of either of the foregoing, the
Administrator's consent shall not be withheld if such action would not
jeopardize the qualification of any of the Plans. The Group Practice agrees to
make such changes to the Group Practice Plan, including the freezing,
termination, or merger of the Group Practice Plan, as may be approved by the
Joint Planning Board and the Administrator, but only if such changes are
necessary to prevent the disqualification of any of the Plans.
(d) Expenses incurred in connection with the Group Practice Plan or
other Group Practice employee benefit plans, including without limitation the
compensation of counsel, accountants, corporate trustees, and other agents shall
be allocated amongst covered employees and treated as Group Practice Expense,
Ancillary Expense or Excluded Clinic Expense, as applicable.
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(e) The employee benefit plan contribution and administration expenses
for the Physician Employees shall be included in the Group Practice's operating
budget. The Group Practice and the Administrator shall not make employee benefit
plan contributions or payments to the Group Practice for their respective
employees in excess of such budgeted amounts unless required by law or the terms
of the Group Practice Plan. The Administrator shall make contributions or
payments with respect to the Group Practice Plan or other Group Practice
employee benefit plans; (1) as a Group Practice Expense, on behalf of designated
leased employees, and other eligible Group Practice employees; (2) as an
Excluded Group Practice Expense on behalf of Physician Employees; and (3) as an
Ancillary Expense on behalf of all employees designated as performing Ancillary
Services. In the event the Group Practice Plan or other Group Practice employee
benefit is terminated, the Administrator shall be responsible, as a Group
Practice Expense, for any funding liabilities related to designated leased
employees, or other eligible Group Practice employees, excluding any liability
for Physician Stockholder or Physician Employee.
(f) The Administrator shall have the sole and exclusive authority to
adopt, amend, or terminate any employee benefit plan for the benefit of its
employees, regardless of whether such employees are designated leased employees,
unless such actions would require the amendment, freeze or termination of the
Group Practice Plan to avoid disqualification of the Group Practice Plan, in
which case any such action would be subject to the express prior written consent
of the Joint Planning Board. The Administrator shall have the sole and exclusive
authority to appoint the trustee, custodian and administrator of any such plan.
(g) From and after the Acquisition Effective Date, the Group Practice's
employees and designated leased employees shall receive credit for prior service
with the Group Practice's predecessor for vesting and eligibility purposes under
the Group Practice Plan, but only to the extent such service was actually
recognized under the Group Practice Plan immediately prior to the Acquisition
Effective Date.
(h) In the event that any "employee welfare benefit plan" ( as defined
in ERISA Section 3(l)) maintained or sponsored by the Group Practice must be
amended, terminated, modified, or changed as a result of the Group Practice and
Administrator being deemed to be a part of an affiliated service group, the
Joint Planning Board will replace such plan or plans with a plan or plans that
provides those benefits approved by the Joint Planning Board. It shall be the
goal of the Joint Planning Board in such event to provide substantially similar
or comparable benefits if the same can be provided at a substantially similar
cost to the replaced plan.
ARTICLE 5
Joint Planning Board
(a) The parties hereto shall establish a Joint Planning Board which
shall be responsible for developing long-term strategic planning objectives and
management policies for the overall
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operation of the Group Practice and shall facilitate communication and
interaction between Administrator and the Group Practice. The Joint Planning
Board shall consist of six (6) members. Administrator shall designate, in its
sole discretion, three (3) members of the Joint Planning Board. The Group
Practice shall designate, in its sole discretion, three (3) members of the Joint
Planning Board. Actions of the Joint Planning Board must be approved by 2/3rds
of Administrator-designated members AND 2/3rds of Group Practice-designated
members.
(b) The Joint Planning Board shall, in addition to the responsibilities
set forth elsewhere in this Agreement, have the authority to (i) develop and
assist the Group Practice in implementing both long-term strategic objectives
and short-term operating plans, (ii) prepare proposals and make recommendations
to the Board of Directors of AMP regarding significant capital expenditures,
contractual arrangements, capital improvement and expansion projects on behalf
of the Group Practice, (iii) with assistance of Administrator, prepare the
annual capital and operating budgets of the Group Practice, (iv) consider and
make recommendations regarding grievances pertaining to matters not specifically
addressed in this Agreement if such matters are referred to it by the Group
Practice or Administrator, (v) make recommendations to the Group Practice
regarding the performance, number and type of physicians required for the
efficient operation of the Group Practice, and (vi) make decisions and
recommendations regarding the Group Practice Plan. Subject to Sections 3.4 and
4.1, decisions regarding the hiring or firing of physicians shall be made solely
by the Group Practice.
ARTICLE 6
Restrictive Covenants and Liquidated Damages
The parties recognize that the services provided by Administrator
hereunder shall be feasible only if the Group Practice operates an active
medical practice to which the physicians associated with the Group Practice
devote their full business time and attention. Accordingly, the parties hereto
agree as follows:
SECTION 6.1 RESTRICTIVE COVENANTS OF THE GROUP PRACTICE
(a) NONCOMPETITION. During the term of this Agreement and for a period
of one year thereafter, the Group Practice shall not, without the prior written
consent of Administrator, (i) establish, operate or provide physician services
at any medical office, clinic or other health care facility providing services
similar to those provided by the Group Practice, or (ii) engage or participate
in any business which engages in competition with the business conducted by AMP
Group, in either case, anywhere within twenty (20) miles of any location at
which any Physician of the Group Practice has practiced medicine in the last
year. This provision shall not apply to any Physician who leaves the Group
Practice because of death, disability, full-time retirement, termination without
cause or by law. This provision shall not apply to the Group Practice in the
event this Agreement is terminated under Section 10.3, below.
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(b) ACKNOWLEDGMENT OF PROPRIETARY INTEREST. The Group Practice
recognizes the proprietary interest of Administrator in any Confidential and
Proprietary Information (as hereinafter defined). The Group Practice
acknowledges and agrees that any and all Confidential and Proprietary
Information communications, learned of, developed or otherwise acquired by the
Group Practice during the term of this Agreement shall be the property of
Administrator. The Group Practice further acknowledges and understands that its
disclosure of any Confidential and Proprietary Information will result in
irreparable injury and damage to Administrator. As used herein, "Confidential
and Proprietary Information" means all trade secrets and other confidential
and/or proprietary information of Administrator, including information derived
from reports, investigations, research, work in progress, codes, marketing and
sales programs, financial projections, cost summaries, pricing formula,
contracts 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
Practice's original patient records) prepared or performed for, by or on behalf
of Administrator by its employees, officers, directors, agents, representatives,
or consultants.
(c) COVENANT NOT-TO-DIVULGE CONFIDENTIAL AND PROPRIETARY INFORMATION.
The Group Practice acknowledges and agrees that Administrator is entitled to
prevent the disclosure of Confidential and Proprietary Information. The Group
Practice agrees that at all times during the term of this Agreement and forever
thereafter to hold in strictest confidence and not to disclose to any person,
firm or corporation, other than to Physicians and persons engaged by
Administrator to further the business of the Group Practice, and not to use
except in the pursuit of the business of Administrator, Confidential and
Proprietary Information, without the prior written consent of Administrator,
unless (i) such information becomes known or available to the public generally
through no wrongful act of the Group Practice or its employees, (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
Confidential and Proprietary Information pursuant to this clause (ii), the Group
Practice shall, if possible, give prior written notice thereof to the
Administrator and provide Administrator with the opportunity to contest such
disclosure, or (iii) the Group Practice reasonably believes that such disclosure
is required in connection with a lawsuit to which the Group Practice is a party.
(d) RETURN OF MATERIALS TO ADMINISTRATOR. In the event of any
termination of this Agreement for any reason whatsoever, or at any time upon the
request of Administrator, the Group Practice will promptly deliver to
Administrator all documents, data and other information in the Group Practice's
possession that contains any Confidential and Proprietary Information. The Group
Practice shall not take or retain any documents or other information, or any
reproduction or excerpt thereof, containing any Confidential and Proprietary
Information, unless otherwise authorized in writing by Administrator.
(e) RETURN OF MATERIALS TO THE GROUP PRACTICE. In the event of any
termination of this Agreement for any reason whatsoever, or at any time upon the
request of the Group Practice, the Administrator will promptly deliver to the
Group Practice all documents, data and other information pertaining to trade
secrets or other confidential and/or proprietary information of
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the Group Practice, unless such documents, data or information is necessary for
Administrator to perform its services hereunder, in which case Administrator
shall be able to retain such data or information and shall furnish copies of
such documents.
SECTION 6.2 RESTRICTIVE COVENANTS AND LIQUIDATED DAMAGES PROVISIONS.
Each Physician Engagement Agreement and each Physician Employment Agreement
contain certain restrictive covenants pertaining to covenants not to compete
with and not to divulge the confidential and proprietary information of
Administrator and the Group Practice ( the "Current Physician Restrictive
Covenants"). Each Physician Engagement Agreement and each Physician Employment
Agreement contain certain provisions pertaining to the payment of liquidated
damages to the Group Practice in certain cases of early termination of such
Physician Engagement Agreement or such Physician Employment Agreement (the
"Liquidated Damages Provisions"). During the term of this Agreement, the Group
Practice shall not amend, alter or otherwise change any term or provision of any
Physician Engagement Agreement or Physician Employment Agreement without the
prior written consent of Administrator. Following termination of this Agreement,
the Group Practice shall not amend, alter or otherwise change any term or
provision of the Restrictive Covenants or Liquidated Damages Provisions ("Future
Physician Restrictive Covenants"), unless such provisions are no longer in force
and effect pursuant to the terms of the applicable Physician Engagement
Agreement or Physician Employment Agreement at the time of termination of this
Agreement.
SECTION 6.3 ENFORCEMENT OF PHYSICIAN AGREEMENTS.
(a) ENFORCEABILITY OF LIQUIDATED DAMAGES PROVISIONS. The Group Practice
hereby acknowledges that the Acquisition Consideration and the terms and
conditions of this Agreement were determined based upon numerous factors,
including the continuity of each Physician's practice and the agreement of
Physicians to remain with the Group Practice pursuant to the terms of the
Physician Engagement Agreement or the Physician Employment Agreements and to
utilize the assets and business overhead required to be provided by
Administrator for a period of five (5) years. Accordingly, in the event that the
Group Practice shall be entitled to any liquidated damages (the "Liquidated
Damages") pursuant to the terms of the Liquidated Damages Provisions, (i) the
Group Practice shall pay to Administrator an amount equal to such Liquidated
Damages on the date such Liquidated Damages are received by the Group Practice
or as otherwise provided in this Section 6.3(a), (ii) at the request of
Administrator, the Group Practice shall assign to Administrator such causes of
action and/or other rights it has in connection with events and actions giving
rise to the Liquidated Damages (the "LD Causes of Action") and shall cooperate
with and provide reasonable assistance to Administrator with respect to the
pursuit of the LD Causes of Action by Administrator, and (iii) at the request of
Administrator, the Group Practice shall seek any and all remedies at law or in
equity that it may have available to it in connection with the LD Causes of
Action. Administrator shall be entitled to receive all Liquidated Damages and/or
other damages or amounts recovered in connection with the LD Causes of Action,
which shall not be included in Group Practice Revenues. The costs and expenses
incurred by the Group Practice or Administrator in connection with pursuing the
LD Causes of Action shall be borne by Administrator and included in
Administrator Expenses. In
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the event that the Group Practice has not initiated proceedings to recover any
Liquidated Damages due and owing to the Group Practice within twenty (20) days
after a request by Administrator, the Group Practice shall, within five (5) days
of a request by Administrator, pay to Administrator an amount equal to such
Liquidated Damages. In no event shall the payment by the Group Practice to
Administrator of Liquidated Damages relieve the Group Practice of its obligation
to assign the LD Causes of Action to Administrator, provided, however, in the
event that the Group Practice pays Liquidated Damages to Administrator pursuant
to the immediately preceding sentence and the Group Practice has assigned the
related LD Causes of Action to Administrator, Administrator shall prosecute such
LD Causes of Action and if Administrator recovers such Liquidated Damages,
Administrator shall reimburse the Group Practice up to the amount paid to
Administrator by the Group Practice out of any Liquidated Damages so recovered.
(b) ENFORCEMENT OF RESTRICTIVE COVENANTS AND OTHER PROVISIONS. The Group
Practice shall enforce the Physician Engagement Agreements and Physician
Employment Agreements, including, without limitation, the Restrictive Covenants.
Subject to Section 6.3(a) and the following sentence, the costs and expenses of
such enforcement shall be included in Group Practice Expenses and all damages
and other amounts recovered thereby shall be included in Group Practice
Revenues. In the event that, after a request by Administrator, the Group
Practice 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
Physician Employment Agreements, upon the request of Administrator, the Group
Practice shall assign to Administrator, such causes of action and/or other
rights it has 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.
SECTION 6.4 REMEDIES. Administrator and the Group Practice acknowledge
and agree that a remedy at law for any breach of the provisions of this Article
6 shall be inadequate, and therefore, either party shall be entitled to specific
performance and injunctive or other equitable relief in the event of any such
breach or attempted breach, in addition to any other rights or remedies
available to either party at law or in equity. Each party hereto waives any
requirement for the securing or posting of any bond in connection with the
obtaining of any such injunctive or other equitable relief. If any provision of
the Restrictive Covenants or this Article 6 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 territory applicable to such provision of the Restrictive Covenants
or this Article 6. The invalidity or non-enforceability of any provision of the
Restrictive Covenants or this Article 6 in any respect shall not affect the
validity or enforceability of the remainder of the Restrictive Covenants or this
Article 6 or of any other provisions of this Agreement.
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ARTICLE 7
Financial and Security Arrangements
SECTION 7.1 SERVICE FEES. The Group Practice and Administrator agree
that the compensation set forth in this Article 7 is being paid to Administrator
in consideration of the services provided and the substantial commitment and
effort made by Administrator hereunder and any such fees have been negotiated at
arms' length and are fair, reasonable and consistent with fair market value.
Administrator shall be paid the following service fees:
(a) Management of Professional Services: Administrator shall be
reimbursed for the amount of all Group Practice Expenses and Ancillary Expenses
recorded by Administrator pursuant to the terms of this Agreement;
(b) Administrator shall receive as compensation an amount equal to
percent (__%) of Group Practice Revenues, subject to any adjustments
provided for herein (the "Service Fee"); and
(c) Management of Ancillary Services: Administrator shall receive as
additional compensation an amount equal to Ancillary Revenues of the Group
Practice minus Ancillary Expenses of the Group Practice multiplied by
percent (__%).
SECTION 7.2 PAYMENTS. The amounts to be paid to Administrator under this
Article 7 shall be calculated by Administrator applying the accrual basis of
accounting and shall be payable monthly. Payments due for each calendar month
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"). Such amounts paid shall be estimates based upon available
information for such month, 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 REPAYMENT. Unless otherwise agreed to by Administrator and
the Group Practice, the Group Practice shall repay Administrator for any amounts
advanced to the Group Practice to fund obligations of the Group Practice as
requested by the Group Practice on the first Payment Date following such
advance. The Group Practice shall repay all indebtedness to Administrator in
connection with funding for capital expenditures or otherwise as agreed between
the Group Practice and Administrator. Any amounts owed to the Administrator by
the Group Practice and/or Physicians shall be subject to offset by Administrator
against amounts otherwise owed to Group Practice and/or Physicians in the event
repayment is not made as agreed.
SECTION 7.4 SECURITY AGREEMENT. In order to enforce its rights granted
hereunder, the Group Practice shall execute a Security Agreement in
substantially the form attached hereto as Exhibit 7.4 (the "Security
Agreement"). In addition, Group Practice shall cooperate with Administrator and
execute all other necessary security documents in connection with the granting
and perfection of such security interest (the "Additional Security Documents")
to Administrator
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or at Administrator's option, its lenders. Specifically, the Security Agreement
and the Additional Security Documents shall grant perfected first lien security
interests in all accounts receivable including Medicare/Medicaid and other
governmental receivables to the fullest extent permitted by law, in a form and
manner satisfactory to Administrator's legal counsel. All collections in respect
of such accounts receivable shall be deposited in a bank account or accounts at
a bank designated by Administrator. To the extent that the Group Practice comes
into possession of any payments in respect of such accounts receivable, the
Group Practice shall promptly remit such payments to Administrator for deposit
in Administrator's bank accounts.
SECTION 7.5 PERFORMANCE INCENTIVE/REDUCTION. It is the intent of the
parties to cause the Service Fee to continue to reflect the fair value of
management services rendered as and if the revenues and profitability of the
Accounting Centers of the Group Practice increase or decrease in relation to the
agreement of the parties. Therefore, if the amount of the Service Fee for any
quarterly period exceeds the amount by which Group Practice Revenues exceed the
sum of Group Practice Expenses and the Compensation of Physician Shareholders of
the Accounting Centers in the Group Practice (as further defined in the
appropriate Physician Engagement Agreements) (the "Adjusted Service Fee") by
more than five percent (5%), then the Service Fee shall be decreased by an
appropriate percentage so that such Service Fee equals the Adjusted Service Fee
and applied on a prospective basis unless further adjusted after the passage of
any successive quarterly period. If the amount of the Service Fee for any
quarterly period is less than the amount of the Adjusted Service Fee by more
than five percent (5%), then the Service Fee shall be increased by an
appropriate percentage so that such Service Fee equals the Adjusted Service Fee
and applied on a prospective basis unless further adjusted after the passage of
any successive quarterly period. Recognizing that certain costs and expenses can
vary to a considerable degree and that reducing such costs and expenses to the
extent practicable is one of the obligations of Administrator herein, the
adjustment should serve to maintain the parties negotiated agreement as to the
reasonable fair market value of the items and services furnished by
Administrator pursuant to this Agreement, considering the nature and volume of
the services required and the risks assumed by Administrator.
ARTICLE 8
Records
All records relating in any way to the operation of the Group Practice
(other than original patient medical records contributed to the Group Practice
by the Group Practice Physician Stockholders and all original patients records
created by the Group Practice after the Acquisition Effective Date) shall,
subject to the obligations of the Group Practice to maintain patient medical
records pursuant to Section 3.2(d), at all times be the property of
Administrator as set forth in Section 3.2(d). During the term of this Agreement,
and for a reasonable time thereafter, the Group Practice or its agents shall
have reasonable access during normal business hours to the Group Practice's and
Administrator's personal and financial records relating to the Group Practice,
including, but not limited to, records of collections, expenses with
disbursements as kept by Administrator in performing Administrator's obligations
under this Agreement, and the Group Practice may copy any or all such records.
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ARTICLE 9
Insurance and Indemnity
SECTION 9.1 INSURANCE TO BE MAINTAINED BY THE GROUP PRACTICE. During the
term of this Agreement, the Group Practice shall maintain comprehensive
professional liability insurance with such carrier as determined jointly by
Administrator and the Group Practice, with limits per claim and per physician to
be agreed upon by Administrator and the Group Practice and a separate limit of
the Group Practice with such deductible as is mutually agreeable by
Administrator and the Group Practice. All malpractice premiums and deductibles
related thereto shall be included in Excluded Group Practice Expenses. All
costs, expenses and liabilities incurred by the Group Practice or Administrator
in excess of the limits of such policies shall also be included in Excluded
Group Practice Expenses.
SECTION 9.2 INSURANCE TO BE MAINTAINED BY ADMINISTRATOR. During the term
of this Agreement, Administrator will use commercially reasonable efforts to
provide and maintain, as a Group Practice Expense, comprehensive professional
liability insurance for all professional employees of Administrator, and
comprehensive general liability and property insurance covering the Group
Practice premises and operations with such limits or coverages as may reasonably
be determined to be appropriate by Administrator; provided that Administrator
must obtain the Group Practice's approval in the event any such limits or
coverages are below the limits and coverages maintained as of the date of this
Agreement.
SECTION 9.3 CONTINUING LIABILITY INSURANCE COVERAGE. The Group Practice
shall obtain or require each of its Physicians to obtain comprehensive 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 Practice for any reason. In the event that neither the Group Practice nor
the Physician obtains such comprehensive liability insurance coverage,
Administrator may do so. The cost of such comprehensive liability Insurance
coverage shall be included in Group Practice Expenses unless such cost is borne
by the Physician.
SECTION 9.4 ADDITIONAL INSURED. The Group Practice 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 Group Practice Expense.
SECTION 9.5 INDEMNIFICATION. The Group Practice shall indemnify, defend
and hold Administrator, AMP and their respective officers, directors,
shareholders, employees, agents and consultants (other than such persons who are
also officers, directors, shareholders, employees, agents or consultants of the
Group Practice) 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
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of the performance of medical services or the performance of any intentional
acts, negligent acts or omissions by the Group Practice and/or its shareholders,
employees and/or subcontractors (other than Administrator or its employees)
during the term of this Agreement. Administrator shall indemnify, defend and
hold the Group Practice and its officers, shareholders, directors, employees,
agents 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 way
intentional acts, negligent acts or omissions by Administrator and/or its
shareholders, employees and/or subcontractors (other than the Group Practice or
its employees) during the term of this Agreement.
SECTION 9.6 GUARANTY. Administrator hereby guarantees, absolutely and
unconditionally, the prompt performance by Administrator and any of its
Affiliates of all of its obligations due to the Group Practice under this
Agreement.
ARTICLE 10
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 ten (10) 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 PRACTICE. The Group Practice may
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 of the following
events:
(a) Administrator 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, voluntarily or involuntary, under any
federal or state law for the benefit of creditors, except for the filing of a
petition in involuntary bankruptcy against Administrator which is dismissed
within ninety (90) days thereafter.
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(b) Administrator shall default in the performance of any material duty
or material obligation imposed upon it by this Agreement and such default shall
continue for a period of ninety (90) days after written notice thereof has been
given to Administrator by the Group Practice, provided that the Group Practice
may terminate this Agreement, if and only if, such termination shall have been
approved by the affirmative vote of the holders of eighty percent (80%) of the
interest of the equity holders of the Group Practice.
SECTION 10.4 TERMINATION BY ADMINISTRATOR. Administrator may terminate
this Agreement by giving written notice thereof to the Group Practice (after the
giving of and 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 Practice 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 the Group Practice, 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 Practice which is
dismissed within ninety (90) days thereafter.
(b) The Group Practice shall default in the performance of any material
duty or material obligation imposed upon it by this Agreement, and such default
shall continue for a period of ninety (90) days after written notice thereof has
been given to the Group Practice by Administrator.
(c) The Group Practice or any Physician (i) engages in any conduct or is
formally accused of conduct for which such Physician's license to practice
medicine reasonably would be expected to be subject to revocation or suspension,
whether or not actually revoked or suspended, or (ii) is otherwise disciplined
by any licensing, regulatory or professional entity or institution, the result
of any of which event described in clause (i) or (ii) does or reasonably would
be expected to materially adversely affect the Group Practice.
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"); or
(b) Upon the expiration of this Agreement pursuant to Section 10.1. and
10.2.
SECTION 10.6 EFFECT UPON TERMINATION. Upon the Termination Date, this
Agreement shall terminate and shall be of no further force and effect; provided,
however:
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(a) Administrator shall use its efforts to cooperate with the Group
Practice for the appropriate transfer of management services. Administrator
shall not object to the employment by the Group Practice of Administrator's
employees performing services solely for the Group Practice and located at the
offices of the Group Practice.
(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) On the Termination Date, the Group Practice shall (i) assign to
Administrator, to the extent permitted by law, all accounts receivable included
in Group Practice Revenues that have not been collected and (ii) pay to
Administrator an amount equal to such accounts receivable (net of any related
allowance for doubtful accounts recorded in accordance with GAAP) that are not
assigned to Administrator by the Group Practice. Any other amounts due and owing
but unpaid to either Administrator or the Group Practice 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
their terms or by reasonable implications 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), 6.2, 6.3, 9.5, Article 7 and the
applicable provisions of Article 11.
ARTICLE 11
General Provisions
SECTION 11.1 ASSIGNMENT. Administrator shall have the right to assign
its rights hereunder without the consent of the Group Practice to AMP or any
direct or indirect wholly-owned subsidiary of Administrator or AMP (that remains
a wholly-owned subsidiary of Administrator or AMP) so long as such assignment
does not create any material economic obligations hereunder. The Group Practice
hereby agrees that Administrator has the right to grant a security interest in
its right to receive payments hereunder to any lending institution from which
Administrator or AMP obtains financing.
SECTION 11.2 AMENDMENTS. This Agreement shall not be modified or amended
except by a written document executed by both parties to this Agreement, and
such written modification(s) or amendment(s) shall be attached hereto.
SECTION 11.3 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.
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SECTION 11.4 ADDITIONAL DOCUMENTS. Each of the parties hereto agrees to
execute any document or documents that may be requested from time to time by the
other party to implement or complete such party's obligations pursuant to this
Agreement.
SECTION 11.5 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 its costs and reasonable attorneys'
fees in addition to any other relief granted.
SECTION 11.6 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 decisions, a
regulatory agency or 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 Practice and Administrator shall amend this Agreement as
necessary to preserve the underlying economic and financial arrangements between
the Group Practice and Administrator and without substantial economic detriment
to either party. 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 11.6 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 11.6 and Section 11.9.
SECTION 11.7 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. 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 11.8 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 11.9 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
effected 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.
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SECTION 11.10 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 RULES GOVERNING
CONFLICTS OF LAWS) OF THE STATE OF __________________________.
SECTION 11.11 NO WAIVER; REMEDIES CUMULATIVE. No party hereto shall by
any act (except by written instrument pursuant to Section 11.3 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
thereunder 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 11.12 ARBITRATION AND MEDIATION. The parties agree to utilize
the following procedure with regard to any contention or claim arising out of or
relating to this Agreement, or any breach thereof (a "Dispute"); provided,
however, that the provisions in this Section 11.12. shall not be applicable to
any LD Cause of Action or other cause of action assigned to Administrator
pursuant to Section 6.3 or any Dispute or cause of action related thereto. If
any Dispute cannot be settled through direct discussions, the parties hereto
agree to endeavor first to resolve the Dispute through mediation in accordance
with Section 11.12(a). If the Dispute cannot be resolved through such mediation,
the parties hereto agree to resolve such Dispute by binding arbitration in
accordance with Section 11.12(b).
(a) Mediation
(i) INITIATION OF PROCEDURE. The initiating party shall give
written notice to the other party, describing the nature of the Dispute
and its claim for relief and identifying one or more individuals with
authority to resolve the Dispute on such party's behalf. The other party
shall have five (5) days from receipt of such notice within which to
designate in writing one or more individuals with authority to resolve
the Dispute on such party's behalf.
(ii) SELECTION OF MEDIATOR. Within ten (10) days from the date
of designation by the noninitiating party, the parties shall make a good
faith effort to select a person to mediate the Dispute. If no mediator
has been selected under this procedure, the parties shall jointly
request the National Health Lawyers Association Alternative Dispute
Resolution Service to provide a list of qualified attorney-mediators.
Within five (5) days of receipt of the list, the parties shall rank the
proposed mediators in numerical order of preference, simultaneously
exchange such list, and select as the mediator the one who has the best
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combined ranking. If such mediator is not available to serve, they shall
proceed to contact the mediator who was next highest in ranking until
they select a mediator.
(iii) TIME AND PLACE FOR MEDITATION; PARTIES REPRESENTED. In
consultation with the mediator selected, the parties shall promptly
designate a mutually convenient time in Houston, Texas for the
mediation, such time to be no later than twenty (20) days after
selection of the mediator. In the mediation, each party shall be
represented by persons with authority and discretion to negotiate a
resolution of the Dispute, and may be represented by counsel.
(iv) CONDUCT OF MEDIATION. The mediator shall determine the
format for the meetings and the mediation sessions shall be private. The
mediator will keep confidential all information learned in private
causes with any party unless specifically authorized by such party to
make disclosure of the information to the other party. The parties agree
that the mediation shall be governed by the provisions of Chapter 154 of
the Tex. Civ. Prac. & Rem. Code and such other rules as the mediator
shall reasonably prescribe.
(v) FEES OF MEDIATOR; DISQUALIFICATION. The fees and expenses of
the mediator shall be shared equally by the parties. The mediator shall
be disqualified as a witness, consultant, expert or counsel for any
party with respect to the Dispute and any related matters.
(vi) CONFIDENTIALITY. Mediation is a compromise negotiation for
purposes of federal and state Rules of Evidence that constitutes
privileged communication under Texas law. The entire mediation process
is confidential, and such conduct, statements, promises, offers, views
and opinions shall not be discoverable or admissible in any proceeding
for any purpose.
(b) BINDING ARBITRATION
(i) Following the close of any unsuccessful mediation proceeding
with respect to a Dispute, such Dispute shall, at the written request of
either party, be finally determined and settled pursuant to arbitration
in Houston, Texas by three arbitrators, one to be appointed by
Administrator, one by the Group Practice, and a neutral arbitrator to be
appointed by such two party-appointed arbitrators, The neutral
arbitrator shall be an attorney and act as chairman. Should either party
fail to appoint an arbitrator as hereinabove contemplated within five
(5) days after the party not requesting arbitration has received such
written request, or the two arbitrators appointed by or on behalf of the
parties as contemplated in this Section 11.12(b) fail to appoint a
neutral arbitrator as hereinabove contemplated within five (5) days
after the date of the appointment of the last arbitrator appointed by or
on behalf of the parties, then the National Health Lawyers Alternative
Dispute Resolution Service, upon application of Administrator or of the
Group Practice, shall appoint an arbitrator to fill such position with
the same force and effect as though such arbitrator had been appointed
as hereinabove contemplated.
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(ii) The arbitration proceeding shall commence within thirty
(30) days of the initial written request for arbitration and be
conducted in accordance with The Alternative Dispute Resolution Rules of
the National Health Lawyers Association. A determination, award or other
action shall be considered the valid action of the arbitrators if
supported by the affirmative vote of two or three of the three
arbitrators. The costs of arbitration (exclusive of attending the
arbitration, and of the fees and expenses of legal counsel to such
party, all of which shall be borne by such party) shall be shared
equally by Administrator and the Group Practice. The arbitration award
shall be final and conclusive and shall receive full faith and credit
and judgment upon such award may be entered and enforced in any court of
competent jurisdiction.
SECTION 11.13 COMMUNICATIONS. The Group Practice and the Administrator
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 Group
Practice.
SECTION 11.14 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 11.15 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 11.16 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 11.17 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 of 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: American Medical Providers, Inc.
3555 Timmons Lane, Suite 1550
Houston, Texas 77027
Attn: Mr. Jack N. McCrary
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With a copy to: Baker & Hostetler, LLP
1000 Louisiana, Suite 2000
Houston, Texas 77002
Attn: Ivan Wood, Esq.
If to the Group Practice: _______________________________
_______________________________
_______________________________
with a copy to: _______________________________
_______________________________
_______________________________
SECTION 11.18 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 11.19 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GROUP PRACTICE:
________________________________
By: ____________________________
Name: __________________________
Title: _________________________
ADMINISTRATOR:
AMERICAN MEDICAL PROVIDERS, INC.
By: ____________________________
Name: __________________________
Title: _________________________
35
EXHIBIT 10.6
FORM OF
PHYSICIAN EMPLOYMENT AGREEMENT
THIS PHYSICIAN EMPLOYMENT AGREEMENT (the "AGREEMENT"), is made and
entered into this _____ day of ____________________, 199__, by and between
____________________________ , D.P.M. (hereinafter "PHYSICIAN EMPLOYEE"), whose
mailing address is and whose facsimile telephone number is , and
___________________________; a [State] [professional limited liability company]
(hereinafter the "GROUP PRACTICE") having its principal office at
___________________________ and whose facsimile telephone number is
___________________ and American Medical Providers, Inc., a Delaware
corporation, or one of its affiliates, successors or assigns (hereinafter
"ADMINISTRATOR") as a designated third party beneficiary hereof whose mailing
address ____________ and whose facsimile telephone number is _______________.
W I T N E S S E T H:
This Agreement is made and entered into under the following
circumstances:
(1) Whereas the Group Practice is engaged in the business of owning and
operating a medical practice; and
(2) Whereas the Group Practice desires, on the terms and conditions
stated herein, to employ the Physician Employee as a clinic physician
specializing in podiatric medicine and all related medical fields to the fullest
extent permitted by Physician Employee's license;
(3) Whereas the Physician Employee desires, on the terms and conditions
stated herein, to be employed by the Group Practice; and
(4) Whereas Group Practice and Administrator have entered into a
Management Services Agreement as of , 1997 attached hereto as Exhibit A (the
"MANAGEMENT SERVICES AGREEMENT"), and capitalized terms used herein but not
defined shall have the meanings ascribed to those terms in the Management
Services Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, and of the
promises, covenants, terms and conditions contained herein, the parties hereto
agree as follows:
1. EMPLOYMENT AND TERM. The Group Practice hereby employs Physician
Employee, and Physician Employee hereby accepts employment with the Group
Practice commencing ______________________ (hereinafter the "EFFECTIVE DATE")
and continuing for a period of __________ (___) years and unless cancelled in
accordance with the terms of this Agreement continuing for successive _______
(___) year renewal periods thereafter (hereinafter the "TERM OF EMPLOYMENT").
The Term of Employment shall automatically renew unless either party gives
written notice of intent not to renew not less than two (2) months prior to the
applicable renewal
<PAGE>
date (the ____________ anniversary of the Effective Date and each anniversary
date thereafter). The Term of Employment provided for in this Section 1 shall be
subject to earlier termination as provided for elsewhere in this Agreement.
The parties agree that with respect to the initial renewal of the Term
of Employment, either party may initiate renewal discussions and negotiations at
any time after the end of the 27th month of the Term of Employment and the
parties will agree to mutually schedule an initial negotiating meeting prior to
the 30th month of the Term of Employment and to proceed with negotiations in an
expeditious manner until the end of the 36th month or until notice of intent not
to renew is given by either party.
2. DUTIES AND QUALIFICATIONS. Physician Employee shall provide medical
services to patients at the Group Practice's office or offices located at as
listed on SCHEDULE A, or such other locations in the county or counties listed
on SCHEDULE A (the "COUNTY") or surrounding area as requested by Group Practice
and automatically agreed to by Physician Employee, in accordance with the laws
of the state listed on SCHEDULE A (the "STATE") and the principles of medical
ethics of the American Podiatric Medical Association.
During the Term of Employment, Physician Employee will practice medicine
only as an employee of the Group Practice, will practice medicine on a full-time
basis and will perform such other duties as are reasonably assigned to Physician
Employee from time to time by the Group Practice. Such duties shall include,
without limitation:
a. Physician Employee shall devote Physician Employee's full
professional time, attention, and energies to rendering professional services at
the Facility and at such other places in the County and its surrounding areas as
may be designated from time to time by Group Practice and to performing
administrative duties related to such professional practice;
b. Physician Employee shall provide "on duty" and "on call"
services on an equal rotating basis with other physician employees of Group
Practice, and shall provide "on call" services at those hospitals and other
facilities that are designated from time to time in Group Practice's business
plan or as otherwise agreed to by Physician Employee;
c. Physician Employee agrees to keep and maintain (or cause to be
kept and maintained) on a timely basis appropriate records relating to all
professional services rendered by Physician Employee hereunder and to attend to
all billing reports, claims, and correspondence required in connection with
Physician Employee's services rendered under this Agreement;
d. Physician Employee shall notify Group Practice immediately,
but in no event later than twenty-four (24) hours after receipt by Physician
Employee of any notice, claim or petition that might be covered under any
medical professional liability insurance covering Physician Employee or, in any
event, that might claim damages in excess of five percent (5%) of Physician
Employee's net worth.
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e. Physician Employee agrees to promote, to the extent permitted
by law and the applicable canons of professional ethics and applicable parts of
this Agreement, the professional practice of Group Practice;
f. Physician Employee will, to a reasonable extent, attend
professional conventions and post-graduate seminars and participate in
professional societies in conjunction with the covenants and agreements
contained herein, and will do all things reasonably desirable to maintain and
improve Physician Employee's professional skills;
g. Physician Employee shall be and remain duly licensed by the
State to practice medicine without restriction and shall comply with and be
controlled and governed by, and otherwise perform services hereunder in
accordance with, applicable law and the ethics and standards of care of the
medical community or communities in which Physician Employee shall from time to
time provide services; and
h. For the purpose of permitting the Group Practice and/or its
management services provider to purchase key man life insurance covering
Physician Employee and naming Group Practice and/or its management services
provider as exclusive beneficiaries, Physician Employee agrees to any action
reasonably required to obtain such insurance, including submitting to a physical
examination if required by any carrier proposing to provide such insurance.
i. Physician Employee shall at all times comply with the policies
and procedures adopted by the Group Practice from time to time, and shall
perform such other duties as Group Practice and Physician Employee may from time
to time mutually agree, which agreement shall not be unreasonably withheld.
j. Nothing herein shall authorize Group Practice to impose duties
or constraints of any kind which would require Physician Employee to infringe
the ethics of the medical profession or violate any local ordinance or other
law. Further, Physician Employee shall be permitted to invest Physician
Employee's personal assets and manage Physician Employee's personal investment
portfolio in such a form and manner as will not require any professional or
business services on Physician Employee's part to any third party, or conflict
with the provisions of Sections 15, 16 or 17 of this Agreement.
3. PROFESSIONAL JUDGMENT. Physician Employee will be free to exercise
Physician Employee's own judgment regarding the treatment of any particular
patient. Physician Employee, however, agrees to observe and comply with the
rules, regulations, policies and procedures of Group Practice as adopted from
time to time by the Group Practice.
4. STATUS OF PHYSICIAN EMPLOYEE. The parties expressly acknowledge that
Physician Employee, in the performance of services hereunder, is an employee of
Group Practice. Accordingly, Group Practice shall deduct from all compensation
paid to Physician Employee
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pursuant to this Agreement any sums required to be deducted by law or any other
requirement of any governmental body.
5. PROFESSIONAL FEES. Physician Employee acknowledges that Group
Practice shall be entitled to all fees generated by Physician Employee pursuant
to professional services rendered by Physician Employee, and all such fees shall
be and remain the property of Group Practice. Physician Employee expressly and
irrevocably transfers, assigns, and otherwise conveys to Group Practice all
right, title, and interest of Physician Employee in and to any fees, whether in
cash, goods, or other items of value, resulting from or incident to Physician
Employee's practice of medicine pursuant to this Agreement during the term
hereof and hereby appoints Group Practice as attorney-in-fact for collection of
same or otherwise enforcing Physician Employee's interests therein.
6. OUTSIDE PROFESSIONAL ACTIVITIES. Any fees or other honoraria received
by Physician Employee for speaking engagements or other outside professional
activities shall be the property of Group Practice, unless specifically excluded
on SCHEDULE A attached hereto or otherwise agreed to in writing.
7. SALARY. Physician Employee shall receive an annual salary of ($ .00)
payable in twelve (12) monthly installments.
[OPTIONAL 8. ANCILLARY PROFITS. During each year of the Term of Employment,
Physician Employee may receive a distribution of the profit from Ancillary
Services offered by the Group Practice, the frequency and amount of which shall
be determined in the sole discretion of the Group Practice.]
9. VACATION/PERSONAL TIME. Physician Employee shall be entitled to paid
leave for vacation, illness, disability, holiday and educational purposes as
provided on the attached SCHEDULE B. Physician Employee shall not be entitled to
any additional absences for any reason unless the Group Practice specifically
approves additional leave in writing. Unused holidays and days of vacation may
not be carried over from one fiscal year to another, and additional income will
not be given for vacation time or holidays not taken during any year. Group
Practice and Physician Employee shall mutually agree on the scheduling of
Physician Employee's vacation, holiday and leave time, and all vacation, holiday
and leave time shall be subject to Physician Employee's obligation to make
arrangements with Group Practice's other professional employees for on-call
coverage.
10. BENEFITS. In addition to any other rights Physician Employee may
have hereunder, Group Practice shall provide to Physician Employee, as an
Excluded Group Practice Expense, the benefits listed on the attached SCHEDULE B.
11. PROFESSIONAL MEETINGS AND CONTINUING MEDICAL EDUCATION. Physician
Employee shall be able to attend professional meetings and continuing medical
education conferences as
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<PAGE>
provided on SCHEDULE B, but the cost of such meetings or conferences shall be
Exchuded Group Practice Expense.
12. PROFESSIONAL LIABILITY INSURANCE.
a. MINIMUM POLICY. Group Practice shall, at Physician Employee's
expense, at all times during the Term of Employment, maintain and keep in force
professional liability insurance "claims made" policies of standard form in the
State providing coverage for Physician Employee, Group Practice and
Administrator (if possible) with limits of not less than Two Hundred Thousand
Dollars ($200,000.00) per occurrence, and not less than Six Hundred Thousand
Dollars ($600,000.00) in the aggregate or such higher amount as may be deemed
reasonable and/or necessary for each single year. The policy shall be placed
with insurance companies authorized and licensed to issue such policies in the
State with an "A" or higher A.M. Best Rating and reasonably acceptable to Group
Practice, and shall name Physician Employee, Group Practice and Administrator
(if possible) as insured parties. Physician Employee shall cooperate fully with
Group Practice and such insurance companies in order to obtain such professional
liability insurance policy.
b. TAIL COVERAGE. Upon termination of Physician Employee's
employment with Group Practice for any reason other than death, disability or
retirement at age 65 or older, Physician Employee shall obtain at Physician
Employee's expense an extended reporting period or "tail" professional liability
insurance policy in an amount of not less than Two Hundred Thousand Dollars
($200,000.00) per occurrence and Six Hundred Thousand Dollars ($600,000.00) in
the aggregate or such higher amount as may be deemed reasonable and/or necessary
for not less than 5 years, such tail coverage policy to provide coverage of
Physician Employee, Group Practice and Administrator (if possible) for all
occurrences and events during Physician Employee's employment with Group
Practice.
c. INDEMNIFICATION. Physician Employee hereby agrees to defend,
indemnify and hold Group Practice harmless from and against any loss, claim,
suit, expense or obligation arising out of or resulting from Physician
Employee's actual or alleged malpractice in the performance of medical services
pursuant to this Agreement.
d. LOSS OF PROFESSIONAL LIABILITY INSURANCE. Group Practice may
immediately suspend Physician Employee from practice under this Agreement if,
due to any act or omission of Physician Employee, medical professional liability
insurance as specified in (a) above cannot be obtained for Physician Employee or
if Physician Employee's medical professional liability insurance is cancelled,
suspended, revoked or terminated, and Physician Employee shall not be reinstated
or permitted to practice at Group Practice's business until such time as the
medical professional liability insurance for Physician Employee is reinstated to
the satisfaction of Group Practice. Physician Employee will notify Group
Practice immediately, but in no event later than twenty-four (24) hours after
receipt by Physician Employee of any notice or information that
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<PAGE>
Physician Employee's professional liability insurance has been or may be
cancelled, terminated, revoked or suspended.
13. TERMINATION. Notwithstanding any other provisions of this Agreement,
the Term of Employment shall terminate upon:
a. the death of Physician Employee; or,
b. upon Physician Employee's "disability" (for purposes of this
Agreement, the term "disability" shall mean the inability of Physician Employee,
arising out of any medically determinable physical or mental impairment, to
perform the services required of him hereunder for a period of sixty (60)
consecutive days during which sixty (60) day period Physician Employee's
compensation hereunder shall continue); or,
c. at Group Practice's option, immediately upon the existence of
"cause." For purposes of this Agreement, the term "cause" shall be defined as:
(1) failure of Physician Employee to perform the duties
required of him in this Agreement in a manner satisfactory to Group
Practice, in Group Practice's sole discretion; provided, however, that
the Term of Employment shall not be terminated pursuant to this
subparagraph (1) unless Group Practice first gives Physician Employee a
written notice ("Notice of Deficiency"). The Notice of Deficiency shall
specify the deficiencies in Physician Employee's performance of his
duties. Physician Employee shall have a period of thirty (30) days,
commencing on receipt of the Notice of Deficiency, in which to cure the
deficiencies contained in the Notice of Deficiency. In the event
Physician Employee does not cure the deficiencies to the satisfaction of
Group Practice, in its sole discretion, within such thirty (30) day
period, the Group Practice shall have the right to immediately terminate
the Term of Employment and this Agreement. The provisions of this
subparagraph (1) may be invoked by Group Practice any number of times
and cure of deficiencies contained in any Notice of Deficiency shall not
be construed as a waiver of this subparagraph (1) nor prevent the Group
Practice from issuing any subsequent Notices of Deficiency;
(2) any dishonesty by Physician Employee in his dealings
with the Group Practice, the commission of fraud by Physician Employee,
or negligence in the performance of the duties of Physician Employee,
all as determined by the Group Practice in accordance with adopted
procedures;
(3) the arrest or conviction (or plea of guilty or nolo
contendere) of Physician Employee of any felony or other crime involving
dishonesty or moral turpitude;
(4) any violation of any covenant or restriction contained
in Section 16 or Section 17 hereof;
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(5) unlawful use of narcotics or other controlled
substances, or use of alcohol or other drugs in a manner the Group
Practice determines to be adverse to the best interests of the Group
Practice;
(6) failure of Physician Employee to maintain Physician
Employee's license and authorization to practice as a physician in the
State;
(7) failure of Physician Employee to (a) obtain within two
(2) years of the Effective Date, and/or (b) maintain Physician
Employee's status as Board certified in podiatric medicine by a
certifying organization acceptable to Group Practice;
(8) if, due to any act or omission of Physician Employee,
the medical professional liability insurance required by Section 12(a)
of this Agreement cannot be obtained or maintained at standard cost, or
if, due to any act or omission of Physician Employee, such medical
professional liability insurance is cancelled, terminated or revoked.
For all purposes of this Agreement, termination for "cause" shall be
deemed to have occurred in the event of Physician Employee's resignation when,
because of existing facts and circumstances, subsequent termination for "cause"
can reasonably be foreseen.
Except as otherwise provided in this Agreement, in the event of
termination of this Agreement pursuant to this Section 13, Physician Employee or
Physician Employee's estate, as appropriate, shall be entitled to receive (in
addition to any fringe benefits payable upon death in the case of Physician
Employee's death) the compensation provided for in Section 7 hereof (prorated on
a daily basis) and any Ancillary Profits provided for in Section 8 hereof
(determined as provided in Section 8), up to and including the effective date of
termination. However, Group Practice reserves the right of setoff for any
damages resulting from the termination or for any amounts owed by Physician
Employee to Group Practice.
14. EFFECTS OF TERMINATION. In the event of termination of this
Agreement, neither party shall have any further obligations hereunder except for
(i) obligations accruing prior to the date of termination and (ii) obligations,
promises or covenants contained herein which are expressly made to extend beyond
the term of this Agreement, including, without limitation, confidentiality of
information, indemnities and Physician Employee's covenants not to compete and
to pay damages (which covenants and agreements shall survive the termination or
expiration of this Agreement). No compensation shall be payable to Physician
Employee following the effective date of Physician Employee's termination of
employment. The termination of this Agreement, for whatever reason, shall not
extinguish those obligations of Physician Employee specified in Sections 18 and
19 hereof, nor shall the same extinguish the right of either party to bring an
action, either in law or in equity, for breach of this Agreement by the other
party.
15. TRANSITION FOLLOWING NOTICE OF TERMINATION. Following any notice of
termination of employment hereunder, whether given by Group Practice or
Physician Employee, Physician
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Employee will fully cooperate with Group Practice in all matters relating to the
winding up of Physician Employee's pending work on behalf of Group Practice and
the orderly transfer of such work to the other professional employees of Group
Practice. On or after the giving of notice of termination hereunder and during
any notice period, Group Practice will be entitled to such full-time or
part-time services of Physician Employee as Group Practice may reasonably
require, and Group Practice will specifically have the right to terminate the
active services of Physician Employee at the time such notice is given and to
pay to Physician Employee the compensation due to him under this Agreement for
the duration of the notice period.
16. NON-COMPETITION. During the Term of Employment and for a continuous
period of one (1) year thereafter commencing upon expiration or termination of
the Term of Employment, regardless of any termination pursuant to Section 13 or
any voluntary termination or resignation by Physician Employee, Physician
Employee shall not without the written consent of Group Practice, individually
or jointly with others, directly or indirectly, whether for his own account or
for that of any other person or entity, own or hold any ownership or voting
interest in any person or entity engaged in a business the same as or similar to
any business of the Group Practice, or in a business which competes in any
manner whatsoever with the business of Group Practice or Group Practice's
facility (other than Business Interests as disclosed on SCHEDULE A and any
ownership interest in the Administrator) and which is located or intended to be
located anywhere within a radius of twenty (20) miles of any office of Group
Practice designated by Group Practice or at which Physician Employee has
practiced medicine in the last year; and Physician Employee shall not act as an
officer, director, employee, partner, independent contractor, consultant,
principal, agent, proprietor, or in any other capacity for, nor lend any
assistance (financial, managerial, professional or otherwise) or cooperation to,
nor perform any services for, any such person or entity engaged in a business
the same as or similar to any business of the Group Practice, or in a business
which competes in any manner whatsoever with the business of Group Practice or
Group Practice's facility (other than Business Interests as disclosed on
SCHEDULE A and any ownership interest in the Administrator).
17. NON-DISCLOSURE; NON-SOLICITATION. Except in the performance of his
duties hereunder, at no time during the Term of Employment or at any time
thereafter shall Physician Employee, individually or jointly with others, for
the benefit of Physician Employee or any third party, publish, disclose, use or
authorize anyone else to publish, disclose or use, any secret or confidential
material or information relating to any aspect of the business or operations of
the Group Practice or any information regarding the business methods, business
policies, procedures, techniques, or trade secrets, or other knowledge or
processes of or developed by Group Practice (and/or any other Physician Employee
or agent of Group Practice), any affiliate of the Group Practice, any entity in
which the Group Practice has an interest, including, without limitation, any
secret or confidential information relating to the business, customers,
financial position, trade or industrial practices, trade secrets, technology or
know-how of the Group Practice. Moreover, during the Term of Employment,
Physician Employee shall not act as an officer, director, employee, partner,
independent contractor, consultant, principal, agent, proprietor, owner or part
owner of, or in any other capacity for, nor lend any assistance (financial,
managerial or otherwise) or cooperation to, any person or entity (other than
Group
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Practice or the Administrator) which employs any person or hires or contracts
with, as a consultant or other independent agent or independent contractor, any
person or entity (other than Physician Employee) who was employed by or acted as
an agent for, consultant to, or independent contractor of the Group Practice,
any affiliate of the Group Practice, or any entity in which the Group Practice
has an interest, at any time during the Term of Employment, nor shall Physician
Employee employ any such person or induce or attempt to influence any such
person to terminate employment with Group Practice.
18. REASONABLENESS OF RESTRICTIONS; REFORMATION; ENFORCEMENT. The
parties hereto recognize and acknowledge that the geographical and time
limitations contained in Sections 16 and 17 hereof (hereinafter the "RESTRICTIVE
COVENANTS") are reasonable and properly required for the adequate protection of
the Group Practice's interest. Physician Employee acknowledges that the Group
Practice will provide to Physician Employee confidential information concerning
the Group Practice's business methods and operating practices in reliance on the
covenants contained in the Restrictive Covenants. It is agreed by the parties
hereto that if any portion of the restrictions contained in the Restrictive
Covenants are held to be unreasonable, arbitrary or against public policy, then
the restrictions shall be considered divisible, both as to the time and to the
geographical area, with each month of the specified period being deemed a
separate period of time and each radius mile of the restricted territory being
deemed a separate geographical area, so that the lesser period of time or
geographical area shall remain effective so long as the same is not
unreasonable, arbitrary or against public policy. The parties hereto agree that
in the event any court of competent jurisdiction determines the specified period
or the specified geographical area of the restricted territory to be
unreasonable, arbitrary or against public policy, a lesser time period or
geographical area which is determined to be reasonable, nonarbitrary and not
against public policy may be enforced against Physician Employee. If Physician
Employee shall violate any of the covenants contained herein and if any court
action is instituted by the Group Practice to prevent or enjoin such violation,
then the period of time during which the Physician Employee's business
activities shall be restricted, as provided in this Agreement, shall be
lengthened by a period of time equal to the period between the date of the
Physician Employee's breach of the terms or covenants contained in this
Agreement and the date on which the decree of the court disposing of the issues
upon the merits shall become final and not subject to further appeal.
19. NO REMEDY AT LAW. With respect to the covenants and agreements of
Physician Employee set forth in the Restrictive Covenants, the parties agree
that a violation of such covenants and agreements will cause irreparable injury
to Group Practice for which Group Practice will not have an adequate remedy at
law, and that Group Practice shall be entitled, in addition to any other rights
and remedies it may have, at law or in equity, to obtain an injunction to
restrain Physician Employee from violating, or continuing to violate, such
covenants and agreements. In the event Group Practice does apply for such an
injunction, Physician Employee shall not raise as a defense thereto that the
Group Practice has an adequate remedy at law.
20. LIQUIDATED DAMAGES. The parties agree that in the event of
termination of this Agreement by Physician Employee other than at the expiration
of the Term of Employment or
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as a result of the violation of the terms of this Agreement by Physician
Employee, the direct costs and damages to Group Practice, though substantial,
would be difficult to precisely determine. Therefore, the parties agree that in
the event of such termination, Physician Employee shall pay to Group Practice,
not as a penalty, but as the parties' reasonable estimate of the direct costs
and other direct damages resulting to Group Practice in connection with such
termination, liquidated damages in an amount equal to the twelve (12) months of
Group Practice expenses attributable to Physician Employee next preceding the
termination of this Agreement, which amount is the best estimate of the expenses
to continue to be incurred while Physician Employee is fully replaced. Such
damages shall be payable on demand by Group Practice. Physician Employee and
Group Practice agree that the damages provided for herein are not the full
measure of damages that could be incurred by the Group Practice as a result of
Physician Employee's breach of the terms of this Agreement and nothing contained
in this Section 20 shall prevent Group Practice from seeking injunctive relief
to enforce the terms of this Agreement.
21. BILLING SERVICES. Group Practice shall have sole responsibility and
authority for preparation of billings for, and collection of income generated
from, Physician Employee's practice of medicine and the operation of the
Facility and, pursuant to this Agreement, the delegated authority to request,
demand, collect, receive and provide receipts for all income on behalf of
Physician Employee including any payment or reimbursement from governmental
agencies and insurance carriers on account of medical services provided to
patients of the Facility. Upon notification by Group Practice, Physician
Employee will utilize the Group Practice's provider numbers to bill on behalf of
Physician Employee for payment and reimbursement from governmental agencies and
insurance carriers. All funds collected from operation of the Facility and from
Physician Employee's practice of medicine hereunder shall be the sole property
of Group Practice and shall be deposited into Group Practice's account and Group
Practice shall have sole authority to make disbursements therefrom, including
refunds and repayment of payments received in error.
22. REPRESENTATIONS OF PHYSICIAN EMPLOYEE. Physician Employee hereby
makes the following representations to Group Practice, each of which is material
and is being relied on by Group Practice and shall be true as of the date hereof
and throughout the Term of Employment:
a. PHYSICIAN EMPLOYEE QUALIFICATIONS. Physician Employee is, and
will continue to be, duly licensed to practice medicine in the State, is Board
certified in podiatric medicine or if not currently certified then will obtain
such certification within two (2) years of the Effective Date, agrees to
participate and does participate in a continuing medical education program, and
agrees to obtain and maintain an American Podiatric Medical Association C.M.E.
certificate or its equivalent.
b. FACTUAL INFORMATION. Any and all factual information furnished
by Physician Employee to Group Practice is true and accurate in every material
respect as of the date on which such information was furnished.
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c. PROFESSIONAL CONDUCT. Physician Employee has and will continue
to conduct his professional activities in accordance and compliance with any and
all laws, regulations and ethical and professional standards applicable thereto.
d. AUTHORITY. Physician Employee has full power and authority to
enter into this Agreement and perform all obligations hereunder. The execution
and performance of this Agreement by Physician Employee will not constitute a
breach or violation of any covenant, agreement or contract to which Physician
Employee is a party or by which Physician Employee is bound.
e. NO CONFLICT. Physician Employee represents, warrants and
covenants that during the term of this Agreement and any extensions thereof,
Physician Employee will not enter into any understanding, agreement or contract
or engage in any conduct that would conflict with or be in violation of the
Management Services Agreement dated between Group Practice and Administrator or
this Agreement, or that would be to the detriment of the Group Practice, and
will sign an annual no conflict statement to that effect. Physician Employee
will inform the Group Practice if he or she is in violation of this Section
22(e) at any time and will respond to reasonable inquiry by the Group Practice
as to such Physician Employee's compliance hereunder.
23. PRIOR ACTS AND OMISSIONS OF PHYSICIAN EMPLOYEE. Physician Employee
represents and warrants to Group Practice that, as of the Effective Date, there
is no pending or threatened litigation or proceeding against Physician Employee
relating to Physician Employee's practice of medicine except as listed on the
attached SCHEDULE C. Group Practice shall not, and this Agreement is not
intended to and shall not be construed in any way as to cause Group Practice to,
assume any liabilities of Physician Employee for the acts or omissions of
Physician Employee relating to periods prior to the Effective Date, and
Physician Employee shall indemnify and hold Group Practice harmless from and
against any liability in respect thereof.
24. PATIENT RECORDS, BOOKS, OFFICE EQUIPMENT, ETC.
a. PATIENT RECORDS. As between the Physician Employee and the
Group Practice, all patient records shall at all times be and remain Group
Practice's property and all possessory rights to the patient records shall
remain with the Group Practice and Physician Employee shall have no such
possessory rights to patient records except as required by law and further;
provided, however, that upon termination of this Agreement, Group Practice shall
provide Physician Employee, at Physician Employee's expense, access to and
copies of such records relating to medical services performed at Group
Practice's business by Physician Employee during the term hereof, if so
requested by the patient or if required by Physician Employee in defense of any
professional liability claim.
b. EQUIPMENT AND SUPPLIES. Group Practice shall provide for
Physician Employee's use of all professional instruments, books, office
equipment and other property reasonably necessary, in Group Practice's
discretion, for Physician Employee's practice of
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medicine under this Agreement. All instruments, equipment, furniture,
furnishings, supplies, samples, forms, charts, logs, brochures, patient records,
policies and procedures, contracts and any other property, materials or
information furnished by Group Practice are and shall remain the sole property
of Group Practice. Upon termination of this Agreement, Physician Employee shall
return all such property to Group Practice. The use of any equipment not
provided by the Group Practice will be subject to the approval of the Group
Practice.
25. ASSIGNABILITY. This Agreement and the rights and duties created
hereunder shall not be assignable or delegable by Physician Employee. Group
Practice may, at Group Practice's option and without consent of Physician
Employee, assign its rights and duties hereunder to any successor entity or
transferee of Group Practice's assets.
26. NOTICES. All notices or other communications provided for herein to
be given or sent to a party by the other party shall be deemed validly given or
sent if in writing and mailed, postage prepaid, by registered or certified
United States mail or hand delivered or sent by facsimile, addressed to the
parties at their addresses hereinabove set forth. Any party may give notice to
the other parties at any time, by the method specified above, of a change in the
address at which, or the person to whom, notice is to be addressed.
27. SEVERABILITY. Each section, subsection and lesser section of this
Agreement constitutes a separate and distinct undertaking, covenant or provision
hereof. In the event that any provision of this Agreement shall be determined to
be invalid or unenforceable, such provision shall be deemed limited by
construction in scope and effect to the minimum extent necessary to render the
same valid and enforceable, and, in the event such a limiting construction is
impossible, such invalid or unenforceable provision shall be deemed severed from
this Agreement, but every other provision of this Agreement shall remain in full
force and effect.
28. WAIVER. The failure of a party to enforce any term, provision or
condition of this Agreement at any time or times shall not be deemed a waiver of
that term, provision or condition for the future, nor shall any specific waiver
of a term, provision or condition at one time be deemed a waiver of such term,
provision or condition for any future time or times.
29. PARTIES. This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their heirs, personal representatives,
legal representatives, and proper successors and assigns, as the case may be.
30. GOVERNING LAW. The validity, interpretation and performance of this
Agreement shall be governed by the laws of the State, without giving effect to
the principles of comity or conflicts of laws thereof. Each party hereto agrees
to submit to the personal jurisdiction and venue of the state and federal courts
having jurisdiction over the County and the State, for a resolution of all
disputes arising in connection with the interpretation, construction, and
enforcement of this Agreement, and hereby waives the claim or defense therein
that such courts constitute an inconvenient forum.
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31. CAPTIONS. The captions of this Agreement have been assigned thereto
for convenience only, and shall not be construed to limit, define or modify the
substantive terms hereof.
32. ENTIRE AGREEMENT; COUNTERPARTS. This Agreement constitutes the
entire agreement between the parties hereto concerning the subject matter
hereof, and supersedes all prior agreements, memoranda, correspondence,
conversations and negotiations. This Agreement may be executed in several
counterparts that together shall constitute but one and the same Agreement.
33. COSTS OF ENFORCEMENT. In the event it is necessary for any party to
retain the services of an attorney or to initiate legal proceedings to enforce
the terms of this Agreement, the prevailing party shall be entitled to recover
from the non-prevailing party, in addition to all other remedies, all costs of
such enforcement, including reasonable attorneys' fees and costs and including
trial and appellate proceedings.
34. GENDER, ETC. Words used herein, regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context indicates is appropriate.
35. THIRD-PARTY BENEFICIARY. The parties acknowledge and agree that
Administrator has entered into a Management Services Agreement with the Group
Practice in the form attached as SCHEDULE B and that Physician Employee and
Administrator, together with certain other parties, have entered into a Business
Purchase Agreement, with Group Practice in reliance on or in expectation of the
covenants of Physician Employee contained in Sections 16 and 17 hereof.
Physician Employee acknowledges and agrees that Administrator has entered into
the Business Purchase Agreement, purchased assets and incurred expenses in order
to fulfill its obligations pursuant to the Management Services Agreement, and
otherwise detrimentally relied upon Physician Employee's agreement to perform
his obligations pursuant to terms of this Agreement, and that the
Administrator's agreement to pay the consideration described in the Business
Purchase Agreement was made in reliance on Physician Employee's commitment to
provide services as an employee of the Group Practice pursuant to terms of this
Agreement for the Term of Employment. Accordingly, Group Practice and Physician
Employee agree that Administrator is a specific intended third-party beneficiary
of such covenants, who shall be independently entitled to the benefit thereof
and shall have an independent right to enforce same. In addition, Group Practice
and Physician Employee covenant and agree for the benefit of Administrator that
this Agreement shall not be terminated, modified or amended nor any of the Group
Practice's rights hereunder waived without the prior written consent of
Administrator.
Physician Employee acknowledges and agrees that in the event of
termination of this Agreement, and in connection with any violation of this
Agreement on the part of Physician Employee, Group Practice may, upon request of
Administrator, assign any cause of action and/or rights that it may have
hereunder to the Administrator, including Group Practice's rights, if any, to
recover liquidated damages from Physician Employee.
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IN WITNESS WHEREOF, the undersigned have hereunto set their hands on the
date first written above.
PHYSICIAN EMPLOYEE:
____________________________
GROUP PRACTICE:
_____________________, [State]
[professional limited liability company]
By: ___________________________________
_________________, President
ACKNOWLEDGED:
AMERICAN MEDICAL PROVIDERS, INC.,
a Delaware corporation
By: __________________________________
Printed Name: __________________________________
Title: __________________________________
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EXHIBIT A
MANAGEMENT SERVICES AGREEMENT
Exhibit A - 1
<PAGE>
SCHEDULE A
A. State _____________________________________
B. County(ies) _____________________________________
C. Office Location(s) _____________________________________
_____________________________________
_____________________________________
D. List of Outside _____________________________________
Professional Activities _____________________________________
_____________________________________
E. List of Business _____________________________________
Interests _____________________________________
_____________________________________
A - 1
<PAGE>
SCHEDULE B
A. Vacation/Personal Time ______ weeks/year
B. Benefits
Retirement Plan $ ____________________
Stock Purchase Plan $ ____________________
Insurance - Life $ ____________________
Insurance - Health $ ____________________
Insurance - Disability $ ____________________
C. Professional Meetings/ ______ weeks/year
Continuing Medical Education
B - 1
<PAGE>
SCHEDULE C
PENDING LITIGATION
[NONE]
C - 1
EXHIBIT 10.7
FORM OF
PHYSICIAN ENGAGEMENT AGREEMENT
THIS PHYSICIAN ENGAGEMENT AGREEMENT (the "AGREEMENT"), is made and
entered into this _____ day of ____________________, 1997, by and between ______
___________, D.P.M. (hereinafter "PHYSICIAN STOCKHOLDER"), whose mailing address
is ; _________________________, a Texas professional limited liability company
(hereinafter the "GROUP PRACTICE") having its principal office at
___________________________________, and American Medical Providers, Inc., a
Delaware corporation, or one of its affiliates, successors or assigns
(hereinafter "ADMINISTRATOR") as a designated third party beneficiary hereof
whose mailing address is 3555 Timmons Lane, Suite 1550, Houston, Texas 77027.
W I T N E S S E T H:
This Agreement is made and entered into under the following
circumstances:
(1) Whereas the Group Practice is engaged in the business of owning and
operating a medical practice; and
(2) Whereas the Group Practice desires, on the terms and conditions
stated herein, to engage the Physician Stockholder as a clinic physician
specializing in podiatric medicine and all related medical fields to the fullest
extent permitted by Physician Stockholder's license; and
(3) Whereas the Physician Stockholder desires, on the terms and
conditions stated herein, to participate in the Group Practice; and
(4) Whereas Group Practice and Administrator have entered into a
Management Services Agreement, attached hereto as Exhibit A (the "Management
Services Agreement"); and capitalized terms used herein but not defined shall
have the meanings ascribed to those terms in the Management Services Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, and of the
promises, covenants, terms and conditions contained herein, the parties hereto
agree as follows:
1. MEMBERSHIP TERM. The Group Practice hereby engages Physician
Stockholder, and Physician Stockholder hereby accepts the engagement with the
Group Practice commencing ____________________ (hereinafter the "EFFECTIVE
DATE") and continuing for a period of five (5) years and unless cancelled in
accordance with the terms of this Agreement continuing for successive two (2)
year renewal periods thereafter (hereinafter the "TERM OF ENGAGEMENT"). The Term
of Engagement shall automatically renew unless either party gives written notice
of intent not to renew not less than two (2) years prior to the applicable
renewal date (the fifth anniversary of the Effective Date and each odd year
anniversary date thereafter). The Term of Engagement provided for in this
Section 1 shall be subject to earlier termination as provided for elsewhere in
this Agreement.
<PAGE>
The parties agree that with respect to the initial renewal of the Term
of Engagement, either party may initiate renewal discussions and negotiations at
any time after the end of the 27th month of the Term of Engagement and the
parties will agree to mutually schedule an initial negotiating meeting prior to
the 30th month of the Term of Engagement and to proceed with negotiations in an
expeditious manner until the end of the 36th month or until notice of intent not
to renew is given by either party.
2. DUTIES AND QUALIFICATIONS. Physician Stockholder shall provide
medical services to patients at the Group Practice's office or offices located
at as listed on SCHEDULE A, or such other locations in the county or counties
listed on SCHEDULE A (the "COUNTY") or surrounding area as requested by Group
Practice and agreed to by Physician Stockholder, in accordance with the laws of
the state listed on SCHEDULE A (the "State") and the principles of medical
ethics of the American Podiatric Medical Association.
During the Term of Engagement, Physician Stockholder will practice
medicine only as a participant in the Group Practice, will practice medicine on
a full-time basis and will perform such other duties as are reasonably assigned
to and accepted by Physician Stockholder from time to time by the Group
Practice. Such duties shall include, without limitation:
a. Physician Stockholder is, and will continue to be, duly
licensed to practice medicine in the State, is Board certified in podiatric
medicine or if not currently certified then will obtain such certification
within two (2) years of the Effective Date, agrees to participate and does
participate in a continuing medical education program, and agrees to obtain and
maintain an American Podiatric Medical Association C.M.E. certificate or its
equivalent.
b. Physician Stockholder shall devote Physician Stockholder's
full professional time, attention, and energies to rendering professional
services at the Premises and at such other places in the County and its
surrounding areas as may be designated from time to time by Group Practice and
consented to by Physician Stockholder and to performing administrative duties
related to such professional practice;
c. Physician Stockholder shall provide "on duty" and "on call"
services on an equal rotating basis with other physician members of Group
Practice, and shall provide "on call" services at those hospitals and other
facilities that are designated from time to time in Group Practice's business
plan and as agreed to by Physician Stockholder;
d. Physician Stockholder agrees to keep and maintain (or cause to
be kept and maintained) on a timely basis appropriate records relating to all
professional services rendered by Physician Stockholder hereunder and to attend
to all billing reports, claims, and correspondence required in connection with
Physician Stockholder's services rendered under this Agreement;
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<PAGE>
e. Physician Stockholder shall notify Group Practice immediately,
but in no event later than one business day after receipt by Physician
Stockholder of any notice, claim or petition that might be covered under any
medical professional liability insurance covering Physician Stockholder or, in
any event, that might claim damages in excess of five percent (5%) of Physician
Stockholder's net worth.
f. Physician Stockholder agrees to promote, to the extent
permitted by law and the applicable canons of professional ethics and applicable
parts of this Agreement, the professional practice of Group Practice;
g. Physician Stockholder will, to a reasonable extent, attend
professional conventions and post-graduate seminars and participate in
professional societies in conjunction with the covenants and agreements
contained herein, and will do all things reasonably desirable to maintain and
improve Physician Stockholder's professional skills;
h. Physician Stockholder shall be and remain duly licensed by the
State(s) to practice medicine without restriction and shall comply with and be
controlled and governed by, and otherwise perform services hereunder in
accordance with, applicable law and the ethics and standards of care of the
medical community or communities in which Physician Stockholder shall from time
to time provide services; and
i. For the purpose of permitting the Group Practice and/or its
management services provider to purchase key man life insurance covering
Physician Stockholder and naming Group Practice and/or its management services
provider as exclusive beneficiaries, Physician Stockholder agrees to any action
reasonably required to obtain such insurance, including submitting to a physical
examination if required by any carrier proposing to provide such insurance.
j. Physician Stockholder shall at all times comply with the
reasonable and necessary policies and procedures adopted by the Group Practice
from time to time, and shall perform such other duties as Group Practice and
Physician Stockholder may from time to time mutually agree, which agreement
shall not be unreasonably withheld.
k. Nothing herein shall authorize Group Practice to impose duties
or constraints of any kind which would require Physician Stockholder to infringe
the ethics of the medical profession or violate any local ordinance or other
law. Further, Physician Stockholder shall be permitted to invest Physician
Stockholder's personal assets and manage Physician Stockholder's personal
investment portfolio in such a form and manner as will not require any
professional or business services on Physician Stockholder's part to any third
party, or conflict with the provisions of Sections 17, 18 or 19 of this
Agreement.
l. Physician Stockholder has full power and authority to enter
into this Agreement and perform all obligations hereunder. The execution and
performance of this Agreement by Physician Stockholder will not constitute a
breach or violation of any covenant,
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<PAGE>
agreement or contract to which Physician Stockholder is a party or by which
Physician Stockholder is bound.
3. PROFESSIONAL JUDGMENT. Physician Stockholder will be free to exercise
Physician Stockholder's own judgment regarding the treatment of any particular
patient. Physician Stockholder, however, agrees to observe and comply with the
rules, regulations, policies and procedures of Group Practice as adopted from
time to time by the Group Practice.
4. TAX STATUS OF PHYSICIAN STOCKHOLDER. The parties expressly
acknowledge that Physician Stockholder, in the performance of services
hereunder, is a Member of the Group Practice which is taxed as a partnership for
federal income and employment tax purposes. Physician Stockholder has received a
copy of the Professional Limited Liability Company Regulations of the Group
Practice and understands his or her share of the income taxes of the Group
Practice.
5. PROFESSIONAL FEES. Physician Stockholder acknowledges that Group
Practice shall be entitled to all fees generated by Physician Stockholder
pursuant to professional services rendered by Physician Stockholder, and all
such fees shall be and remain the property of Group Practice. Physician
Stockholder expressly and irrevocably transfers, assigns, and otherwise conveys
to Group Practice all right, title, and interest of Physician Stockholder in and
to any fees, whether in cash, goods, or other items of value, resulting from or
incident to Physician Stockholder's practice of medicine pursuant to this
Agreement during the term hereof and hereby appoints Group Practice as
attorney-in-fact for collection of same or otherwise enforcing Physician
Stockholder's interests therein.
6. OUTSIDE PROFESSIONAL ACTIVITIES. Any fees or other honoraria received
by Physician Stockholder for speaking engagements or other outside professional
activities shall be the property of Group Practice, unless specifically excluded
on SCHEDULE A attached hereto or otherwise agreed to in writing.
7. ACCOUNTING CENTER. Physician Stockholder's services, and the services
of such other physicians as may be agreed to by Physician Stockholder, shall
become the basis for an accounting center within the Group Practice (the
"Accounting Center"). Earnings Before Taxes for the Accounting Center and the
physicians to be included therein shall be calculated according to Schedule C,
attached hereto and the Management Services Agreement. Physician Stockholder
agrees to fully participate in the preparation of annual plans and budgets.
8. COMPENSATION. Physician Stockholder's compensation shall be based
upon Net Earnings Before Taxes of the Accounting Center calculated according to
Schedule C, multiplied by __%. Physician Stockholder shall receive actual
compensation according to this share of Net Earnings Before Taxes of the
Accounting Center as divided among all physicians related to the Accounting
Center according to Schedule D attached hereto (individually, his or her
"Compensation"). Such Compensation will be payable in the form of an estimated
monthly draw, payable on the 15th day of each calendar month, adjusted quarterly
by an estimated
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<PAGE>
distribution or assessment and yearly by a final distribution or assessment made
after the Group Practice has filed its annual tax return.
9. OPTIONAL DISTRIBUTIONS; LOANS TO PHYSICIAN STOCKHOLDER.
Notwithstanding Section 8 above, in the first year of this Agreement the actual
distributions to Physician Stockholder shall be subject to adjustment as
follows:
a. If Physician Stockholder has so indicated on SCHEDULE D, he or
she will receive an Advance on the first monthly draw as a loan payable in
accordance with this Section 9.
b. Physician Stockholder shall have the option to receive
additional distributions during each month of the first three months of the
first year of this Agreement in the amount of the difference between the actual
compensation under Section 8 and ninety percent (90%) of 1/12th of the actual
distributions received by Physician Stockholders during the twelve (12) months
immediately preceding the commencement of this Agreement and reflected on
SCHEDULE D.
c. Physician Stockholder shall have the option to receive
additional distributions during each month of the second three months of the
first year of this Agreement in the amount of the difference between the actual
compensation under Section 8 and eighty percent (80%) of 1/12th of the actual
distributions received by Physician Stockholder during the twelve (12) months
immediately preceding the commencement of this Agreement and reflected on
SCHEDULE D.
All such distributions in excess of Physician Stockholders actual Compensation
under Section 8 above shall be a loan to Physician Stockholder, repayable to the
Group Practice as of the second anniversary of this Agreement in twenty-four
(24) monthly installments, plus interest at an annual percentage rate equal to
the prime rate as published in The Wall Street Journal on the date of said loan,
to be withheld on a prorated basis from the monthly draw.
10. ANCILLARY PROFITS. During each year of the Term of Engagement,
Physician Stockholder may receive a monthly distribution of the profit or loss
from Ancillary Services offered by the Group Practice and related to the
Accounting Center, the frequency and amount of which shall be determined in the
sole discretion of the Group Practice.
11. VACATION/PERSONAL TIME. Physician Stockholder shall be entitled to
leave for vacation, illness, disability, holiday and educational purposes as
provided on the attached SCHEDULE B. Physician Stockholder shall not be entitled
to any additional absences for any reason unless the Group Practice specifically
approves additional leave in writing. Unused holidays and days of vacation may
not be carried over from one fiscal year to another. Group Practice and
Physician Stockholder shall mutually agree on the scheduling of Physician
Stockholder's vacation, holiday and leave time, and all vacation, holiday and
leave time shall
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<PAGE>
be subject to Physician Stockholder's obligation to make arrangements with Group
Practice's other professional employees for on-call coverage.
12. BENEFITS. In addition to any other rights Physician Stockholder may
have hereunder, Group Practice shall provide to Physician Stockholder, as an
Excluded Group Practice Expense, the benefits listed on the attached SCHEDULE B.
Additionally, key man life insurance may be maintained on Physician Stockholder
but the cost of such insurance shall be a Group Practice Expense.
13. PROFESSIONAL MEETINGS AND CONTINUING MEDICAL EDUCATION. Physician
Stockholder shall be able to attend professional meetings and continuing medical
education conferences as provided on SCHEDULE B, but the cost of such meetings
or conferences shall be an Excluded Group Practice Expense.
14. PROFESSIONAL LIABILITY INSURANCE.
a. MINIMUM POLICY. Group Practice shall, at Physician
Stockholder's expense, at all times during the Term of Engagement, maintain and
keep in force professional liability insurance "claims made" (or occurrence)
policies of standard form in the State providing coverage for Physician
Stockholder, Group Practice and Administrator (if possible) with limits of not
less than Two Hundred Thousand Dollars ($200,000.00) per occurrence, and not
less than Six Hundred Thousand Dollars ($600,000.00) in the aggregate, or such
higher amount as may be deemed reasonable and/or necessary for each single year.
The policy shall be placed with insurance companies authorized and licensed to
issue such policies in the State with an "A" or higher A.M. Best Rating and
reasonably acceptable to Group Practice, and shall name Physician Stockholder,
Group Practice and Administrator (if possible) as insured parties. Physician
Stockholder shall cooperate fully with Group Practice and such insurance
companies in order to obtain such professional liability insurance policy.
b. TAIL COVERAGE. Upon termination of Physician Stockholder's
engagement with Group Practice for any reason, other than death, disability,
termination without cause or retirement at age 65 or older, Physician
Stockholder shall obtain at Physician Stockholder's expense an extended
reporting period or "tail" professional liability insurance policy in an amount
of not less than Two Hundred Thousand Dollars ($200,000.00) per occurrence and
Six Hundred Thousand Dollars ($600,000.00) in the aggregate, or such higher
amount as may be deemed reasonable and/or necessary for not less than 5 years,
such tail coverage policy to provide coverage of Physician Stockholder, Group
Practice and Administrator (if possible) for all occurrences and events during
Physician Stockholder's engagement with Group Practice.
c. INDEMNIFICATION. Physician Stockholder hereby agrees to
defend, indemnify and hold Group Practice harmless from and against any loss,
claim, suit, expense or obligation arising out of or resulting from Physician
Stockholder's actual or alleged malpractice in the performance of medical
services pursuant to this Agreement.
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<PAGE>
d. LOSS OF PROFESSIONAL LIABILITY INSURANCE. Group Practice may
immediately suspend Physician Stockholder from practice under this Agreement if,
due to any act or omission of Physician Stockholder, medical professional
liability insurance as specified in (a) above cannot be obtained for Physician
Stockholder or if Physician Stockholder's medical professional liability
insurance is cancelled, suspended, revoked or terminated, and Physician
Stockholder shall not be reinstated or permitted to practice at Group Practice's
business until such time as the medical professional liability insurance for
Physician Stockholder is reinstated to the satisfaction of Group Practice.
Physician Stockholder will notify Group Practice, immediately, but in no event
later than twenty-four (24) hours after receipt by Physician Stockholder of any
notice or information that Physician Stockholder's professional liability
insurance has been or may be cancelled, terminated, revoked or suspended.
15. TERMINATION. Notwithstanding any other provisions of this Agreement,
the Term of Engagement shall terminate upon:
a. the death of Physician Stockholder; or,
b. upon Physician Stockholder's "disability" (for purposes of
this Agreement, the term "disability" shall mean the inability of Physician
Stockholder, arising out of any medically determinable physical or mental
impairment, to perform the services required of him hereunder for a period of
sixty (60) consecutive days during which sixty (60) day period Physician
Stockholder's compensation hereunder shall continue); or,
c. at Group Practice's option, immediately upon the existence of
"cause." For purposes of this Agreement, the term "cause" shall be defined as:
(1) failure of Physician Stockholder to perform the duties
required of him in this Agreement in a manner reasonably satisfactory to
Group Practice, in Group Practice's sole discretion upon a vote of not
less than 2/3 of the Board of Managers of the Group Practice; provided,
however, that the Term of Engagement shall not be terminated pursuant to
this subparagraph (1) unless Group Practice first gives Physician
Stockholder a written notice ("Notice of Deficiency"). The Notice of
Deficiency shall specify the deficiencies in Physician Stockholder's
performance of his duties. Physician Stockholder shall have a period of
thirty (30) days, commencing on receipt of the Notice of Deficiency, in
which to cure the deficiencies contained in the Notice of Deficiency. In
the event Physician Stockholder does not cure the deficiencies to the
satisfaction of Group Practice, in its sole discretion, within such
thirty (30) day period, the Group Practice shall have the right to
immediately terminate the Term of Engagement and this Agreement. The
provisions of this subparagraph (1) may be invoked by Group Practice any
number of times and the cure of deficiencies contained in any Notice of
Deficiency shall not be construed as a waiver of this subparagraph (1)
nor prevent the Group Practice from issuing any subsequent Notices of
Deficiency;
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<PAGE>
(2) any material dishonesty by Physician Stockholder in
his dealings with the Group Practice, the commission of fraud by
Physician Stockholder, or gross negligence in the performance of the
medical duties of Physician Stockholder, all as determined by the Group
Practice in accordance with adopted procedures;
(3) the conviction (or plea of guilty or nolo contendere)
of Physician Stockholder of any felony or other crime involving moral
turpitude;
(4) any violation of any covenant or restriction contained
in Section 18 or Section 19 hereof;
(5) unlawful use of narcotics or other controlled
substances, or use of alcohol or other drugs in a manner the Group
Practice determines to be adverse to the best interests of the Group
Practice;
(6) failure of Physician Stockholder to maintain Physician
Stockholder's license and authorization to practice as a physician in
the State;
(7) failure of Physician Stockholder to (a) obtain within
two (2) years of the Effective Date, and/or (b) maintain Physician
Stockholder's status as Board certified in podiatric medicine by a
certifying organization acceptable to the Group Practice;
(8) if, due to any act or omission of Physician
Stockholder, the medical professional liability insurance required by
Section 14(a) of this Agreement cannot be obtained by Group Practice, or
if, due to any act or omission of Physician Stockholder, such medical
professional liability insurance is cancelled, terminated or revoked and
cannot be replaced within 60 days.
For all purposes of this Agreement, termination for "cause" shall be
deemed to have occurred in the event of Physician Stockholder's resignation
when, because of existing facts and circumstances, subsequent termination for
"cause" can reasonably be foreseen.
Except as otherwise provided in this Agreement, in the event of
termination of this Agreement pursuant to this Section 15, Physician Stockholder
or Physician Stockholder's estate, as appropriate, shall be entitled to receive
(in addition to any benefits payable upon death in the case of Physician
Stockholder's death) the compensation provided for in Section 8 hereof (prorated
on a daily basis) and any Ancillary Profits provided for in Section 10 hereof
(determined as provided in Section 10), up to and including the effective date
of termination. However, Group Practice reserves the right of setoff for any
damages resulting from the termination or for any amounts owed by Physician
Stockholder to Group Practice.
16. EFFECTS OF TERMINATION. In the event of termination of this
Agreement, neither party shall have any further obligations hereunder except for
(i) obligations accruing prior to the date of termination and (ii) obligations,
promises or covenants contained herein which are
8
<PAGE>
expressly made to extend beyond the term of this Agreement as provided herein,
including, without limitation, confidentiality of information, indemnities and
Physician Stockholder's covenants not to compete and to pay damages (which
covenants and agreements shall survive the termination or expiration of this
Agreement). No compensation shall be payable to Physician Stockholder following
the effective date of the termination of Physician Stockholder's Term of
Engagement. The termination of this Agreement, for whatever reason, shall not
extinguish those obligations of Physician Stockholder specified in Sections 18
and 19 hereof, nor shall the same extinguish the right of either party to bring
an action, either in law or in equity, for breach of this Agreement by the other
party.
17. TRANSITION FOLLOWING NOTICE OF TERMINATION. Following any notice of
termination of Physician Stockholder's Term of Engagement hereunder, whether
given by Group Practice or Physician Stockholder, Physician Stockholder will
fully cooperate with Group Practice in all matters relating to the winding up of
Physician Stockholder's pending work on behalf of Group Practice and the orderly
transfer of such work to the other professional employees of Group Practice. On
or after the giving of notice of termination hereunder and during any notice
period, Group Practice will be entitled to such full-time or part-time services
of Physician Stockholder as Group Practice may reasonably require.
18. NON-COMPETITION. During the Term of Engagement and for a continuous
period of one (1) year thereafter commencing upon expiration or termination of
the Term of Engagement, regardless of any termination pursuant to Section 15 or
any voluntary termination or resignation by Physician Stockholder, except for
death, disability, full-time retirement, termination without cause or by law,
Physician Stockholder shall not without the written consent of Group Practice,
individually or jointly with others, directly or indirectly, whether for his own
account or for that of any other person or entity, own or hold any ownership or
voting interest in any person or entity engaged in a business the same as or
similar to any business of the Group Practice, or in a business which competes
in any manner whatsoever with the business of Group Practice or Group Practice's
facility (other than Business Interests as disclosed on SCHEDULE A and any
ownership interest in the Administrator) and which is located or intended to be
located anywhere within a radius of twenty (20) miles of the offices of Group
Practice at which Physician Stockholder has practiced podiatry in the last year.
19. NON-DISCLOSURE; NON-SOLICITATION. Except in the performance of his
duties hereunder, at no time during the Term of Engagement or for a period of
one year thereafter shall Physician Stockholder, individually or jointly with
others, for the benefit of Physician Stockholder or any third party, publish,
disclose, use or authorize anyone else to publish, disclose or use, any secret
or confidential material or information relating to any aspect of the business
or operations of the Group Practice or any information regarding the business
methods, business policies, procedures, techniques, or trade secrets, or other
knowledge or processes of or developed by Group Practice (and/or any other
Physician Stockholder or agent of Group Practice), any affiliate of the Group
Practice, any entity in which the Group Practice has an interest, including,
without limitation, any secret or confidential information relating to the
business, customers, financial position, trade or industrial practices, trade
secrets, technology
9
<PAGE>
or know-how of the Group Practice. Moreover, during the Term of Engagement,
Physician Stockholder shall not act as an officer, director, employee, partner,
independent contractor, consultant, principal, agent, proprietor, owner or part
owner of, or in any other capacity for, nor lend any assistance (financial,
managerial or otherwise) or cooperation to, any person or entity (other than
Group Practice or the Administrator) which employs any person or hires or
contracts with, as a consultant or other independent agent or independent
contractor, any person or entity (other than Physician Stockholder) who was
employed by or acted as an agent for, consultant to, or independent contractor
of the Group Practice, any affiliate of the Group Practice, or any entity in
which the Group Practice has an interest, at any time during the Term of
Engagement, nor shall Physician Stockholder employ any such person or induce or
attempt to influence any such person to terminate employment with Group
Practice.
20. REASONABLENESS OF RESTRICTIONS; REFORMATION; ENFORCEMENT. The
parties hereto recognize and acknowledge that the geographical and time
limitations contained in Sections 18 and 19 hereof (hereinafter the "RESTRICTIVE
COVENANTS") are reasonable and properly required for the adequate protection of
the Group Practice's interest. Physician Stockholder acknowledges that the Group
Practice will provide to Physician Stockholder confidential information
concerning the Group Practice's business methods and operating practices in
reliance on the covenants contained in the Restrictive Covenants. It is agreed
by the parties hereto that if any portion of the restrictions contained in the
Restrictive Covenants are held to be unreasonable, arbitrary or against public
policy, then the restrictions shall be considered divisible, both as to the time
and to the geographical area, with each month of the specified period being
deemed a separate period of time and each radius mile of the restricted
territory being deemed a separate geographical area, so that the lesser period
of time or geographical area shall remain effective so long as the same is not
unreasonable, arbitrary or against public policy. The parties hereto agree that
in the event any court of competent jurisdiction determines the specified period
or the specified geographical area of the restricted territory to be
unreasonable, arbitrary or against public policy, a lesser time period or
geographical area which is determined to be reasonable, nonarbitrary and not
against public policy may be enforced against Physician Stockholder. If
Physician Stockholder shall violate any of the covenants contained herein and if
any court action is instituted by the Group Practice to prevent or enjoin such
violation, then the period of time during which the Physician Stockholder's
business activities shall be restricted, as provided in this Agreement, shall be
lengthened by a period of time equal to the period between the date of the
Physician Stockholder's breach of the terms or covenants contained in this
Agreement and the date on which the decree of the court disposing of the issues
upon the merits shall become final and not subject to further appeal.
21. NO REMEDY AT LAW. With respect to the covenants and agreements of
Physician Stockholder set forth in the Restrictive Covenants, the parties agree
that a violation of such covenants and agreements will cause irreparable injury
to Group Practice for which Group Practice will not have an adequate remedy at
law, and that Group Practice shall be entitled, in addition to any other rights
and remedies it may have, at law or in equity, to obtain an injunction to
restrain Physician Stockholder from violating, or continuing to violate, such
covenants and agreements. In the event Group Practice does apply for such an
injunction, Physician
10
<PAGE>
Stockholder shall not raise as a defense thereto that the Group Practice has an
adequate remedy at law.
22. LIQUIDATED DAMAGES. The parties agree that in the event of
termination of this Agreement by Physician Stockholder other than at the normal
expiration of the Term of Engagement or as a result of the violation of the
terms of this Agreement by the Group Practice, the direct costs and damages to
Group Practice, though substantial, would be difficult to precisely determine.
Therefore, the parties agree that in the event of such termination, Physician
Stockholder shall pay to Group Practice, not as a penalty, but as the parties'
reasonable estimate of the direct costs and other direct damages resulting to
Group Practice in connection with such termination, liquidated damages in an
amount equal to Dollars ($ ), which amount is intended to approximate the twelve
(12) months of Group Practice expenses attributable to Physician Stockholder
next preceding the termination of this Agreement, which amount is the best
estimate of the expenses to continue to be incurred while Physician Stockholder
is fully replaced. Such damages shall be payable on demand by Group Practice.
Physician Stockholder and Group Practice agree that the damages provided for
herein are not the full measure of damages that could be incurred by the Group
Practice as a result of Physician Stockholder's breach of the terms of this
Agreement and nothing contained in this Section 22 shall prevent Group Practice
from seeking injunctive relief to enforce the terms of this Agreement.
23. BILLING SERVICES. Group Practice shall have sole responsibility and
authority for preparation of billings for, and collection of income generated
from, Physician Stockholder's practice of medicine and the operation of
Ancillary Services and, pursuant to this Agreement, the delegated authority to
request, demand, collect, receive and provide receipts for all income on behalf
of Physician Stockholder including any payment or reimbursement from
governmental agencies and insurance carriers on account of medical services
provided to patients. Upon notification by Group Practice, Physician Stockholder
will utilize the Group Practice's provider numbers to bill on behalf of
Physician Stockholder for payment and reimbursement from governmental agencies
and insurance carriers. All funds collected from operation of Ancillary Services
and from Physician Stockholder's practice of medicine hereunder shall be the
sole property of Group Practice and shall be deposited into Group Practice's
account and Group Practice shall have sole authority to make disbursements
therefrom, including refunds and repayment of payments received in error.
24. PATIENT RECORDS, BOOKS, OFFICE EQUIPMENT, ETC.
a. PATIENT RECORDS. As between the Physician Stockholder and the
Group Practice, all patient records shall at all times be and remain Group
Practice's property and all possessory rights to the patient records shall
remain with the Group Practice and Physician Stockholder shall have no such
possessory rights to patient records except as required by law and further;
provided, however, that upon termination of this Agreement, Group Practice shall
provide Physician Stockholder, at Physician Stockholder's expense, access to and
copies of such records relating to medical services performed at Group
Practice's business by Physician
11
<PAGE>
Stockholder during the term hereof, if so requested by the patient or if
required by Physician Stockholder in defense of any professional liability
claim.
b. EQUIPMENT AND SUPPLIES. Group Practice shall provide for
Physician Stockholder's use of all professional instruments, books, office
equipment and other property reasonably necessary, in Group Practice's
discretion, for Physician Stockholder's practice of medicine under this
Agreement. All instruments, equipment, furniture, furnishings, supplies,
samples, forms, charts, logs, brochures, patient records, policies and
procedures, contracts and any other property, materials or information furnished
by Group Practice are and shall remain the sole property of Group Practice. Upon
termination of this Agreement, Physician Stockholder shall return all such
property to Group Practice. The use of any equipment not provided by the Group
Practice will be subject to the approval of the Group Practice.
25. ASSIGNABILITY. This Agreement and the rights and duties created
hereunder shall not be assignable or delegable by Physician Stockholder. Group
Practice may, at Group Practice's option and without consent of Physician
Stockholder, assign its rights and duties hereunder to any successor entity or
transferee of Group Practice's assets.
26. NOTICES. All notices or other communications provided for herein to
be given or sent to a party by the other party shall be deemed validly given or
sent if in writing and mailed, postage prepaid, by registered or certified
United States mail or hand delivered or sent by facsimile, addressed to the
parties at their addresses hereinabove set forth. Any party may give notice to
the other parties at any time, by the method specified above, of a change in the
address at which, or the person to whom, notice is to be addressed.
27. SEVERABILITY. Each section, subsection and lesser section of this
Agreement constitutes a separate and distinct undertaking, covenant or provision
hereof. In the event that any provision of this Agreement shall be determined to
be invalid or unenforceable, such provision shall be deemed limited by
construction in scope and effect to the minimum extent necessary to render the
same valid and enforceable, and, in the event such a limiting construction is
impossible, such invalid or unenforceable provision shall be deemed severed from
this Agreement, but every other provision of this Agreement shall remain in full
force and effect.
28. WAIVER. The failure of a party to enforce any term, provision or
condition of this Agreement at any time or times shall not be deemed a waiver of
that term, provision or condition for the future, nor shall any specific waiver
of a term, provision or condition at one time be deemed a waiver of such term,
provision or condition for any future time or times.
29. PARTIES. This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto and their heirs, personal representatives,
legal representatives, and proper successors and assigns, as the case may be.
12
<PAGE>
30. GOVERNING LAW. The validity, interpretation and performance of this
Agreement shall be governed by the laws of the State, without giving effect to
the principles of comity or conflicts of laws thereof. Each party hereto agrees
to submit to the personal jurisdiction and venue of the state and federal courts
having jurisdiction over the County and the State, for a resolution of all
disputes arising in connection with the interpretation, construction, and
enforcement of this Agreement, and hereby waives the claim or defense therein
that such courts constitute an inconvenient forum.
31. CAPTIONS. The captions of this Agreement have been assigned thereto
for convenience only, and shall not be construed to limit, define or modify the
substantive terms hereof.
32. ENTIRE AGREEMENT; COUNTERPARTS. This Agreement constitutes the
entire agreement between the parties hereto concerning the subject matter
hereof, and supersedes all prior agreements, memoranda, correspondence,
conversations and negotiations. This Agreement may be executed in several
counterparts that together shall constitute but one and the same Agreement.
33. COSTS OF ENFORCEMENT. In the event it is necessary for any party to
retain the services of an attorney or to initiate legal proceedings to enforce
the terms of this Agreement, the prevailing party shall be entitled to recover
from the non-prevailing party, in addition to all other remedies, all costs of
such enforcement, including reasonable attorneys' fees and costs and including
trial and appellate proceedings.
34. GENDER, ETC. Words used herein, regardless of the number and gender
specifically used, shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context indicates is appropriate.
35. THIRD-PARTY BENEFICIARY. The parties acknowledge and agree that the
Administrator has entered into a Management Services Agreement with the Group
Practice and that Physician Stockholder and Administrator, together with certain
other parties, have entered into a Business Purchase Agreement, with Group
Practice in reliance on the covenants of Physician Stockholder contained in
Sections 18 and 19 hereof. Physician Stockholder acknowledges and agrees that
Administrator has entered into the Business Purchase Agreement, purchased assets
and incurred expenses in order to fulfill its obligations pursuant to the
Management Services Agreement, and otherwise detrimentally relied upon Physician
Stockholder's agreement to perform his obligations pursuant to terms of this
Agreement, and that the Administrator's agreement to pay Physician Stockholder
the consideration described in the Business Purchase Agreement was made in
reliance on Physician Stockholder's commitment to provide services as a
participant in the Group Practice pursuant to terms of this Agreement for the
Term of Engagement. Accordingly, Group Practice and Physician Stockholder agree
that Administrator is a specific intended third-party beneficiary of such
covenants, who shall be independently entitled to the benefit thereof and shall
have an independent right to enforce same. In addition, Group Practice and
Physician Stockholder covenant and agree for the benefit of
13
<PAGE>
Administrator that this Agreement shall not be terminated, modified or amended
nor any of the Group Practice's rights hereunder waived without the prior
written consent of Administrator.
Physician Stockholder acknowledges and agrees that in the event of
termination of this Agreement, and in connection with any violation of this
Agreement on the part of Physician Stockholder, Group Practice may, upon request
of Administrator, assign any cause of action and/or rights that it may have
hereunder to the Administrator, including Group Practice's rights, if any, to
recover liquidated damages from Physician Stockholder. Physician Stockholder
acknowledges and agrees that in the event of any such assignment, Administrator
shall be entitled to set off liquidated damages and other amounts payable by
Physician Stockholder hereunder which have been assigned to Administrator
against amounts paid or to be paid by Administrator to Physician Stockholder
under the terms of the Business Purchase Agreement, subject to any defenses
against the assignor thereof.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands on the
date first written above.
PHYSICIAN STOCKHOLDER:
__________________________________
GROUP PRACTICE:
_____________________, a Texas
professional limited liability company
By: ______________________________
_________________, President
ACKNOWLEDGED:
AMERICAN MEDICAL PROVIDERS, INC.,
a Delaware corporation
By: _________________________________
Printed Name: _________________________________
Title: _________________________________
14
<PAGE>
SCHEDULE A
A. STATE _____________________________________
B. COUNTY(IES) _____________________________________
C. OFFICE LOCATION(S) _____________________________________
_____________________________________
_____________________________________
D. LIST OF OUTSIDE _____________________________________
PROFESSIONAL ACTIVITIES _____________________________________
_____________________________________
E. LIST OF BUSINESS _____________________________________
INTERESTS _____________________________________
_____________________________________
A - 1
<PAGE>
SCHEDULE B
A. VACATION/PERSONAL TIME ______ weeks/year
B. BENEFITS
Retirement Plan
Stock Purchase Plan
Insurance - Life
Insurance - Health
Insurance - Disability
C. PROFESSIONAL MEETINGS/ ______ weeks/year
CONTINUING MEDICAL EDUCATION
B - 1
<PAGE>
SCHEDULE C
C - 1
<PAGE>
SCHEDULE D
COMPENSATION
Salary or Percentage Advance on First
Of Net Earnings Before Taxes Month Draw (Y/n)
---------------------------- ----------------
PHYSICIAN EMPLOYEE:
_______________________ _______________________
_______________________ _______________________
_______________________ _______________________
_______________________ _______________________
PHYSICIAN STOCKHOLDER: BASE
Y/N
_______________________ _______________________ __________
_______________________ _______________________ __________
_______________________ _______________________ __________
_______________________ _______________________ __________
D - 1
<PAGE>
SCHEDULE E
PENDING LITIGATION
[NONE]
E - 1
EXHIBIT 10.8
- --------------------------------------------------------------------------------
FORM OF
STOCK PURCHASE AGREEMENT
AMONG
AMERICAN MEDICAL PROVIDERS, INC.,
-------------------------,
AND
THE OWNERS NAMED HEREIN
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I Definitions....................................................... 1
Section 1.1. Definitions............................................. 1
ARTICLE II The Acquisition.................................................. 7
Section 2.1. The Acquisition......................................... 7
Section 2.2. The Closing............................................. 7
Section 2.3. Acquisition Consideration............................... 7
Section 2.4. Fractional Shares....................................... 8
ARTICLE III Representations and Warranties of the Company and the Owners.... 8
Section 3.1. Organization and Good Standing; Qualification........... 8
Section 3.2. Capital Structure....................................... 8
Section 3.3. Transactions in Capital................................. 8
Section 3.4. Continuity of Business Enterprise....................... 9
Section 3.5. Records................................................. 9
Section 3.6. Authorization and Validity.............................. 9
Section 3.7. No Violation............................................ 9
Section 3.8. Consents................................................ 10
Section 3.9. Financial Statements.................................... 10
Section 3.10. Liabilities and Obligations............................. 10
Section 3.11. Employee Matters........................................ 10
Section 3.12. Aliens.................................................. 12
Section 3.13. Employee Benefit Plans.................................. 12
Section 3.14. Absence of Certain Changes.............................. 14
Section 3.15. Title; Leased Assets.................................... 15
Section 3.16. Commitments............................................. 16
Section 3.17. Insurance............................................... 17
Section 3.18. Proprietary Rights and Information...................... 18
Section 3.19. Taxes................................................... 18
Section 3.20. Compliance with Laws.................................... 20
Section 3.21. Finder's Fee............................................ 20
Section 3.22. Litigation.............................................. 20
Section 3.23. Condition of Fixed Assets............................... 21
Section 3.24. Distributions and Repurchases........................... 21
Section 3.25. Banking Relations....................................... 21
Section 3.26. Interested Persons; Affiliations........................ 21
Section 3.27. Environmental Matters................................... 22
i
<PAGE>
Section 3.28. Certain Payments........................................ 22
Section 3.29. Medical Waste........................................... 22
Section 3.30. Medicare and Medicaid Programs.......................... 22
Section 3.31. Fraud and Abuse......................................... 23
Section 3.32. Payors.................................................. 23
ARTICLE IV Representations and Warranties of the Owners..................... 24
Section 4.1. Validity; Owner's Capacity.............................. 24
Section 4.2. No Violation............................................ 24
Section 4.3. Personal Holding Companies; Control of Related
Businesses..... 24
Section 4.4. Transfers of Ownership Interests........................ 24
Section 4.5. Accredited Investor Status.............................. 25
Section 4.6. Consents................................................ 25
Section 4.7. Certain Payments........................................ 25
Section 4.8. Finder's Fee............................................ 25
Section 4.9. Interested Persons; Affiliations........................ 25
Section 4.10. Investments in Competitors.............................. 25
Section 4.11. Disposition of AMP Shares............................... 25
ARTICLE V Representations and Warranties of AMP and AMP Subsidiary.......... 26
Section 5.1. Organization and Good Standing.......................... 26
Section 5.2. Capitalization of AMP................................... 26
Section 5.3. Capitalization of AMP Subsidiary........................ 26
Section 5.4. Authorization and Validity.............................. 26
Section 5.5. No Violation............................................ 26
Section 5.6. Finder's Fee............................................ 27
Section 5.7. Capital Stock........................................... 27
Section 5.8. Consents................................................ 27
Section 5.9. Liabilities and Obligations............................. 27
Section 5.10. Employee Benefit Plans.................................. 27
Section 5.11. Taxes................................................... 28
Section 5.12. Compliance with Laws.................................... 28
Section 5.13. Litigation.............................................. 29
ARTICLE VI Covenants of the Company and the Owner........................... 29
Section 6.1. Consummation of Agreement............................... 29
Section 6.2. Business Operations..................................... 29
Section 6.3. Access.................................................. 29
Section 6.4. Tax Returns............................................. 30
Section 6.5. Notification of Certain Matters......................... 30
Section 6.6. Approvals of Third Parties.............................. 30
Section 6.7. Employee Matters........................................ 30
Section 6.8. Contracts............................................... 31
Section 6.9. Capital Assets; Payments of Liabilities................. 31
ii
<PAGE>
Section 6.10. Mortgages, Liens and Guaranties......................... 31
Section 6.11. Acquisition Proposals................................... 31
Section 6.12. Distributions and Repurchases........................... 32
Section 6.13. Requirements to Effect Acquisition...................... 32
Section 6.14. Formation of the Group Practice......................... 32
Section 6.15. Access.................................................. 32
Section 6.16. Licenses and Permits.................................... 33
Section 6.17. Physician Employment Agreements......................... 33
Section 6.18. Delivery of Schedules................................... 33
ARTICLE VII Covenants of AMP and AMP Subsidiary............................. 33
Section 7.1. Consummation of Agreement............................... 33
Section 7.2. Requirements to Effect Acquisition...................... 33
Section 7.3. Notification of Certain Matters......................... 33
Section 7.4. Approvals of Third Parties.............................. 34
Section 7.5. Stock Option Plan for Advisors and Consultants.......... 34
Section 7.6. Licenses and Permits.................................... 34
Section 7.7. Delivery of Schedules................................... 34
Section 7.8. Professional Liability Insurance........................ 34
ARTICLE VIII Covenants of AMP, the Company and the Owners................... 34
Section 8.1. Filings; Other Action................................... 34
Section 8.2. Amendment of Schedules.................................. 35
Section 8.3. Proration of Costs and Rents............................ 35
Section 8.4. Management Agreement.................................... 35
Section 8.5. Physician Engagement Agreements......................... 35
ARTICLE IX Conditions Precedent of AMP...................................... 36
Section 9.1. Proceedings............................................. 36
Section 9.2. No Material Adverse Effect.............................. 36
Section 9.3. Government Approvals and Required Consents.............. 36
Section 9.4. Securities Approvals.................................... 36
Section 9.5. Closing Deliveries...................................... 36
Section 9.6. Charter Amendment....................................... 36
ARTICLE X Conditions Precedent of the Company and the Owners................ 36
Section 10.1. Proceedings............................................. 37
Section 10.2. Government Approvals and Required Consents.............. 37
Section 10.3. Securities Approvals.................................... 37
ARTICLE XI Closing Deliveries............................................... 37
Section 11.1. Deliveries of the Company and the Owners................ 37
Section 11.2. Deliveries of AMP....................................... 39
iii
<PAGE>
ARTICLE XII Post Closing Matters............................................ 40
Section 12.1. Further Instruments of Transfer......................... 40
Section 12.2. Acquisition Tax Covenant................................ 40
ARTICLE XIII Remedies....................................................... 41
Section 13.1. Indemnification by the Owners and the Company........... 41
Section 13.2. Indemnification by AMP and AMP Subsidiary............... 41
Section 13.3. Indemnification Procedures.............................. 42
Section 13.4. Indemnification Limitations............................. 44
Section 13.5. Remedies Not Exclusive.................................. 44
Section 13.6. Costs, Expenses and Legal Fees.......................... 45
ARTICLE XIV Termination..................................................... 45
Section 14.1. Termination............................................. 45
Section 14.2. Effect of Termination................................... 45
ARTICLE XV Noncompetition................................................... 45
Section 15.1. Prohibited Activities................................... 45
Section 15.2. Damages................................................. 46
Section 15.3. Reasonable Restraint.................................... 46
Section 15.4. Severability; Reformation............................... 46
Section 15.5. Term.................................................... 46
ARTICLE XVI Nondisclosure of Confidential Information....................... 47
Section 16.1. Nondisclosure........................................... 47
Section 16.2. Damages................................................. 47
Section 16.3. Survival................................................ 47
ARTICLE XVII Transfer Restrictions.......................................... 47
Section 17.1. Transfer Restrictions................................... 47
ARTICLE XVIII Federal Securities Law Restrictions on AMP Common Stock....... 48
Section 18.1. Investment Representation............................... 48
Section 18.2. Compliance with Law..................................... 48
Section 18.3. Economic Risk; Sophistication........................... 49
ARTICLE XIX General......................................................... 49
Section 19.1. Amendment; Waivers...................................... 49
Section 19.2. Assignment.............................................. 49
Section 19.3. Parties in Interest; No Third Party Beneficiaries....... 49
Section 19.4. No Joint Liability of Owners............................ 50
Section 19.5. Entire Agreement........................................ 50
Section 19.6. Severability............................................ 50
Section 19.7. Survival of Representations, Warranties and Covenants... 50
iv
<PAGE>
Section 19.8. Governing Law........................................... 50
Section 19.9. Captions................................................ 50
Section 19.10.Gender and Number....................................... 50
Section 19.11.Reference to Agreement.................................. 50
Section 19.12.Confidentiality; Publicity and Disclosures.............. 51
Section 19.13.Notice.................................................. 51
Section 19.14.Choice of Forum......................................... 52
Section 19.15.No Waiver; Remedies..................................... 52
Section 19.16.Counterparts............................................ 52
Section 19.17.Defined Terms........................................... 52
v
<PAGE>
FORM OF
STOCK PURCHASE AGREEMENT
Stock Purchase Agreement (this "Agreement"), dated as of _____________,
1997, among ____________________D.P.M., P.A., a Texas professional association
and its non-professional successor entity ("the "Company"),
_____________________, D.P.M., (collectively the "Owners" and individually an
"Owner"), and American Medical Providers, Inc., a Delaware corporation, its
affiliates, successors or assigns ("AMP").
The Owners of the Company desire to contribute, and AMP desires to
receive, all of the issued and outstanding Shares (the "Shares") of capital
stock of the Company, and, accordingly, the Owners, the Company and AMP desire
to effect the Acquisition (defined below) upon the terms and subject to the
conditions contained herein.
In order to effect the Acquisition, the Company will convert from a
Texas professional entity to a Texas business corporation immediately before the
Closing.
It is intended that for federal income tax purposes the Acquisition,
together with the transactions contemplated by the Other Agreements (defined
below) will qualify as a transfer pursuant to the requirements of Section 351 of
the Internal Revenue Code of 1986, as amended (the "Code").
AMP intends to enter into business purchase agreements or other
acquisition agreements (collectively, the "Other Agreements") similar to this
Agreement, in order to acquire other podiatry or other medical practices.
To provide AMP with the necessary working capital and funds to
consummate the transactions contemplated hereby and by the Other Agreements, AMP
expects to, subject to the terms and conditions of this Agreement, enter into an
underwriting agreement with an Underwriter Representative (defined below) in
connection with a proposed Initial Public Offering (defined below).
In consideration of the mutual representations, warranties and covenants
herein contained and such other good and valuable consideration, the receipt and
sufficiency of which are hereby mutually 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. The following terms have the meanings set
forth below:
1
<PAGE>
"Acquisition" has the meaning set forth in Section 2.1.
"Acquisition Consideration" has the meaning set forth in Section 2.3.
"actual knowledge," "have no actual knowledge of," "do not actually know
of" and similar phrases mean (i) in the case of a natural person, the actual
conscious awareness, or not, as the context requires, of the particular fact by
such person or (ii) in the case of an entity, the actual conscious awareness, or
not, as the context requires, of the particular fact by any stockholder,
partner, owner, director or officer of such entity.
"Advisors Plan" has the meaning set forth in Section 7.5.
"Affiliate," with respect to any person, means a person that directly or
indirectly through one or more intermediaries controls, is controlled by or is
under common control with such person.
"AMP Common Stock" means the common stock, par value $0.01 per share, of
AMP.
"AMP Employee Benefit Plans" has the meaning set forth in Section 5.10.
"AMP Subsidiary" means the wholly-owned subsidiary of AMP formed prior
to Closing identified in Section 2.1.
"AMP Subsidiary Common Stock" means the common stock, par value $0.01
per share, of AMP Subsidiary.
"Arthur Andersen" means Arthur Andersen LLP, independent certified
public accountants.
"Assets" means the Equipment and all properties and assets (tangible and
intangible) of every kind and wherever situated that are owned by the Company or
in which the Company has any right or interest (including, without limitation,
rights under its insurance policies and warranties related thereto; its causes
of action, judgments, claims and demands of whatever nature related thereto; its
deferred charges, security deposits, advance payments, prepaid items, claims for
refunds, rights of offset and credits of all kinds related thereto; its rights
under all assigned Commitments; all personal property of every kind and
character as used in connection with Equipment or otherwise and its files,
papers and records relating to the aforesaid properties and assets), other than
the Excluded Assets.
"Balance Sheet" has the meaning set forth in Section 3.9.
"Balance Sheet Date" has the meaning set forth in Section 3.9.
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"best knowledge," "have no knowledge of," "do not know of" or "to the
knowledge of" and similar phrases mean (i) in the case of a natural person, the
particular fact was known, or not known, as the context requires, to such person
or (ii) in the case of an entity, the particular fact was known, or not known,
as the context requires, to any stockholder, partner, owner, director or officer
of such entity.
"Cash Compensation" has the meaning set forth in Section 3.11(a).
"Claim Notice" has the meaning set forth in Section 13.3(a).
"Closing" means the closing of the transactions contemplated by this
Agreement.
"Closing Date" has the meaning set forth in Section 2.2.
"Code" has the meaning set forth in the recitals to this Agreement.
"Commitments" has the meaning set forth in Section 3.16.
"Company" has the meaning set forth in the recitals hereto.
"Compensation Plans" has the meaning set forth in Section 3.11(b).
"Confidential Information" means all trade secrets and other
confidential and/or proprietary information of the particular person, including
information derived from reports and investigations, research, work in progress,
codes, marketing and sales programs, referral sources, patient lists, financial
projections, cost summaries, pricing formulae, 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 such person by such
person's stockholders, owners, partners, employees, officers, directors, agents,
representatives or consultants.
"Controlled Group" has the meaning set forth in Section 3.13(g).
"Damages" has the meaning set forth in Section 13.1.
"Effective Date" means the date that the Registration Statement is
declared effective by the SEC.
"Election Period" has the meaning set forth in Section 13.3(a).
"Employee Benefit Plans" has the meaning set forth in Section 3.13(a).
"Employee Policies and Procedures" has the meaning set forth in Section
3.11(d).
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"Employment Agreements" has the meaning set forth in Section 3.11(c).
"Environmental Laws" means any laws or regulations pertaining to the
environment as in effect on the date hereof and the Closing Date, including
without limitation (i) the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (42 U.S.C. ss.ss. 9601 ET SEQ.), as amended (including
without limitation as amended pursuant to the Superfund Amendments and
Reauthorization Act of 1986) and any regulations promulgated thereunder, (ii)
the Resource Conservation and Recovery Act of 1976 (42 U.S.C. ss.ss. 6901 ET
SEQ.), as amended, and any regulations promulgated thereunder, and (iii) the
provisions contained in any similar federal, state or local statutes or
regulations relating to environmental matters applicable to the Company's assets
or operations.
"Equipment" means all equipment, machinery, tools and similar assets
owned by the Company and used by the Company in its business, including, without
limitation, all supplies of the Company related thereto.
"ERISA" has the meaning set forth in Section 3.13(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" means the following assets and properties of the
Company: (i) the Acquisition Consideration, (ii) the Company's right to enforce
AMP's representations, warranties and covenants hereunder and the obligations of
AMP to pay, perform or discharge the Assumed Liabilities and all other rights,
including rights of indemnification, of the Company under this Agreement or any
instrument executed pursuant hereto and (iii) the Employee Benefit Plans.
"Financial Statements" has the meaning set forth in Section 3.9.
"Fixed Assets" has the meaning set forth in Section 3.23.
"Group Practice" means the professional limited liability company to be
formed pursuant to Section 6.14.
"Indemnified Party" has the meaning set forth in Section 13.3(a).
"Indemnifying Party" has the meaning set forth in Section 13.3(a).
"Indemnity Notice" has the meaning set forth in Section 13.3(d).
"Initial Public Offering" means the initial underwritten public offering
of AMP Common Stock contemplated by the Registration Statement.
"Initial Public Offering Price" means the price per share of AMP Common
Stock received by AMP in connection with its Initial Public Offering.
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"Insurance Policies" has the meaning set forth in Section 3.17.
"IRS" means the Internal Revenue Service.
"Management Agreement" has the meaning set forth in Section 11.1(1).
"Material Adverse Effect" means a material adverse effect on the
business, operations, condition (financial or otherwise), results of operations
or prospects of the Company in consideration of all relevant facts and
circumstances.
"Medical Waste" means (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" means the following, including regulations
promulgated and orders issued thereunder, as in effect on the date hereof and
the Closing Date: (i) the MWTA, (ii) the U.S. Public Vessel Medical Waste
Anti-Dumping Act of 1988, 33 U.S.C.A. ss.ss. 2501 ET SEQ., (iii) the Marine
Protection, Research and Sanctuaries Act of 1972, 33 U.S.C.A. ss.ss. 1401 ET
SEQ., (iv) the Occupational Safety and Health Act, 29 U.S.C.A. ss.ss. 651 ET
SEQ., (v) the United States Department of Health and Human Services, National
Institute for Occupational Safety and Health, Infectious Waste Disposal
Guidelines, Publication No. 88-119 and (vi) any other federal, state, regional,
county, municipal or other local laws, regulations and ordinances insofar as
they are applicable to the Company's assets or operations and purport to
regulate Medical Waste or impose requirements relating to Medical Waste.
"MWTA" means the Medical Waste Tracing Act of 1988, 42 U.S.C. ss.ss.
6992, ET SEQ.
"Nose Coverage" has the meaning set forth in Section 7.8.
"ordinary course of business" means the usual and customary way in which
the particular entity has conducted its business in the past, in all cases, in
compliance with law.
"Other Agreements" has the meaning set forth in the recitals to this
Agreement.
"Owner(s)" means those person(s), all of whom are identified in the
first paragraph of this Agreement, who own, beneficially and of record, all of
the ownership interests in the Company, whatever form those interests may take,
including, without limitation, capital stock, partnership interests, units,
shares in profit, membership interests or the like.
"Payors" has the meaning set forth in Section 3.30.
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"person" means any natural person, corporation, partnership, joint
venture, limited liability company, association, group, organization or other
entity.
"Physician Employee" means any physician of the Company executing a
Physician Employment Agreement.
"Physician Employment Agreements" has the meaning set forth in Section
11.1(n).
"Physician Engagement Agreements" has the meaning set forth in Section
11.1(m).
"Private Placement Memorandum" means the Confidential Private Placement
Memorandum, dated June, 1997, provided by AMP to the Owners and the Company.
"Proprietary Rights" has the meaning set forth in Section 3.18.
"Registration Rights Agreement" has the meaning set forth in Section
11.1(o).
"Registration Statement" has the meaning set forth in Section 8.1(a).
"Related Acquisitions" means, collectively, the Acquisition and the
mergers and acquisitions of entities and assets contemplated by the Other
Agreements.
"Schedules" means 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.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" has the meaning set forth in the recitals.
"Taxes" means all taxes, however denominated, including any interest,
penalties or other additions to tax that may become payable in respect thereof,
imposed by any federal, state, territorial, state, local or foreign government
or any agency or political subdivision of any such government, which taxes shall
include, without limiting the generality of the foregoing, all income or profits
taxes, real property gains taxes, payroll and employee withholding taxes,
unemployment insurance taxes, social security taxes, sales and use taxes, ad
valorem taxes, excise taxes, franchise taxes, gross receipts taxes, occupation
taxes, real and personal property taxes, stamp taxes, environmental taxes,
alternative minimum taxes, transfer taxes, workers compensation or Pension
Benefit Guaranty Corporation premiums, and other obligations of the same or of a
similar nature, which the Company is required to pay, withhold or collect.
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"Tax Returns" shall mean all reports, estimates, information statements
and returns relating to, or required to be filed in connection with, any Taxes,
including information returns or reports with respect to backup withholding and
other payments to third parties.
"Third Party Claim" has the meaning set forth in Section 13.3(a).
"Transfer" has the meaning set forth in Section 12.2(a).
"Underwriter Representative" means the underwriter in the Initial Public
Offering who acts as the lead managing underwriter of the Initial Public
Offering.
ARTICLE II
THE ACQUISITION
SECTION 2.1. THE ACQUISITION. Subject to the terms and conditions of
this Agreement, on the Closing Date, the Owner shall transfer, assign, convey
and deliver the Shares to AMP or its subsidiary ("AMP Subsidiary"), free and
clear of all security interests, liens, claims and encumbrances, and AMP
Subsidiary shall accept and acquire the Shares (the "Acquisition").
SECTION 2.2. THE CLOSING. The Closing of the Acquisition will take place
at 10:00 a.m., local time, at the offices of Baker & Hostetler, Suite 2000, 1000
Louisiana, Houston, Texas on the day on which the transactions contemplated by
the Initial Public Offering are consummated.
The date on which the Closing occurs is the "Closing Date."
SECTION 2.3. ACQUISITION CONSIDERATION.
(a) CONSIDERATION. Subject to post-closing adjustments under Section
2.3(b) below, the total consideration for the Shares will be the cash and shares
of AMP Common Stock in the amounts set forth on Annex I hereto (the "Acquisition
Consideration"). The cash portion of the Acquisition Consideration consists of
net realizable value of net accounts receivable plus __% of non-monetary assets,
not to exceed __% of the total valuation ("Cash Consideration"). Annex I
attached hereto shows an estimate of the net accounts receivable as of the
Balance Sheet Date.
(b) POST-CLOSING ADJUSTMENTS OF NET ACCOUNTS RECEIVABLE CONSIDERATION.
On the six month anniversary of the Closing Date, AMP will review the estimate
of net accounts receivable. If AMP has collected more than the estimated
accounts receivable, such amount will be paid to the Owners according to their
percentage ownership in the Company as of the Closing Date. If AMP has collected
less than the estimate of net accounts receivable, the Owners will be jointly
and severally liable and will repay the deficit amount. All amounts under this
Section 2.3(b) shall be payable in cash within sixty (60) days of written notice
sent by AMP to the Owners. The Owners agree that AMP may offset the accounts
receivable deficit against any other amounts owed by AMP to Owners under any
other agreements.
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SECTION 2.4. FRACTIONAL SHARES. Notwithstanding any other provision
herein, no fractional shares of AMP Common Stock shall be issued, and the person
entitled hereunder to receive a fractional share of AMP Common Stock but for
this Section 2.4 will be entitled to receive a cash payment in lieu thereof
reflecting such person's proportionate interest in a share of AMP Common Stock
multiplied by the Initial Public Offering Price.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE OWNERS
The Company and the Owners (in proportion to each such Owner's
respective ownership of the Company) represent and warrant to AMP and AMP
Subsidiary that the following are true and correct as of the Closing Date:
SECTION 3.1. ORGANIZATION AND GOOD STANDING; QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of its state of organization with all requisite power and authority to
carry on the business in which it is engaged, to own the properties it owns, to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The Company is not qualified or licensed to do business in
any other jurisdiction. The Company has no assets, employees or offices in a
state other than the state of its organization. Except as set forth in Schedule
3.1, none of the Company, any Owner or any Physician Employee owns, directly or
indirectly, any of the capital stock of any other corporation or any entity or a
profit sharing, participation or other interest in any corporation, partnership,
joint venture or other entity that is engaged in a business that is in or
related to the healthcare industry.
SECTION 3.2. CAPITAL STRUCTURE. The Owners own all of the Company's
issued and outstanding common stock in the respective amounts set forth in
Schedule 3.2, free and clear of all security interests, liens, adverse claims,
encumbrances, equities, proxies and shareholders' agreements, except to the
extent specifically disclosed in detail on Schedule 3.2. Each outstanding share
of common stock of the Company has been legally and validly issued and is fully
paid and nonassessable. No share of capital stock is owned by the Company in
treasury. No shares of capital stock of the Company have been issued or disposed
of in violation of the preemptive rights, rights of first refusal or similar
rights of any of the Company's stockholders. The Company has no bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or are convertible into or exercisable for securities having the right to
vote) with the stockholders of the Company on any matter.
SECTION 3.3. TRANSACTIONS IN CAPITAL. The Company has not acquired any
of its capital stock. Except as set forth in Schedule 3.3, there exist no
options, warrants, subscriptions or other rights to purchase, or securities
convertible into or exchangeable for, any of the authorized or outstanding
securities of the Company, and no option, warrant, call, conversion right or
commitment of any kind exists that obligates the Company to issue any of its
authorized but
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unissued capital stock. Except as set forth in Schedule 3.3, the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. Except as set forth in Schedule 3.3,
neither the equity structure of the Company nor the relative ownership of shares
among any of its stockholders has been altered or changed in contemplation of
the transactions contemplated hereby.
SECTION 3.4. CONTINUITY OF BUSINESS ENTERPRISE. Except as set forth in
Schedule 3.4 and except as contemplated by Section 6.14, there has not been any
sale, distribution or spin-off of assets of the Company or any of its
Affiliates, other than in the ordinary course of business within the five years
preceding the date of this Agreement. The Owners shall be responsible for any
and all tax liability of all such sales, distributions or spin-offs.
SECTION 3.5. RECORDS. The copies of the Articles of Incorporation or
Articles of Association, as the case may be, and Bylaws, and all amendment
thereto, of the Company that have been delivered to AMP are true, correct and
complete copies thereof, as in effect on the date hereof. The minute books of
the Company, copies of which have been delivered to AMP, contain materially
accurate minutes of meetings of, and accurate consents to all actions taken
without meetings by, the Board of Directors (and any committees thereof) and the
stockholders of the Company since its formation as to material matters reflected
therein.
SECTION 3.6. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Company of this Agreement and the other agreements expressly
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by the Company. This Agreement has
been duly executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms. The Company has obtained, in accordance with
applicable law and its Bylaws and its Articles of Incorporation or Articles of
Association, as the case may be, the approval of its stockholders necessary to
consummate the transactions contemplated hereby.
SECTION 3.7. NO VIOLATION. Except as set forth specifically in detail in
Schedule 3.7 or Schedule 3.8, neither the execution, delivery or performance of
this Agreement or the other agreements contemplated hereby nor the consummation
of the transactions contemplated hereby or thereby will (a) conflict with,
result in a violation or breach of the terms, conditions or provisions of or
constitute a default under the Bylaws or the Articles of Incorporation of the
Company, (b) except as would not, individually or in the aggregate, result in a
Material Adverse Effect, conflict with, result in a violation or breach of the
terms conditions or provisions of or constitute a default under any agreement,
indenture or other instrument by which the Company is bound or to which any of
the assets of the Company is subject, or result in the creation or imposition of
any security interest, lien, charge or encumbrance upon any assets of the
Company or (c) except as would not, individually or in the aggregate, result in
a Material Adverse Effect, violate or conflict with any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body.
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SECTION 3.8. CONSENTS. Except as set forth in Schedule 3.8, no consent,
authorization, approval, permit or license of, or filing with, any governmental
or public body or authority, any lender, any lessor or any other person or
entity is required to authorize, or is required in connection with, the
execution, delivery or performance of this Agreement or the agreements
contemplated hereby.
SECTION 3.9. FINANCIAL STATEMENTS. The Company will furnish AMP its
balance sheet and related statements of income, retained earnings and cash flows
for its prior three full fiscal years and its balance sheet dated as of June 30,
1997 (the "Balance Sheet," and the date thereof the "Balance Sheet Date") and
related statements of income, retained earnings and cash flows for the six (6)
months then ended (all such financial information, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly present
the financial condition and results of operations of the Company as of the dates
and for the periods indicated and have been prepared in conformity with
generally accepted accounting principles (subject to normal year-end adjustments
and the absence of notes for any unaudited interim financial statement for any
interim periods presented) applied on a consistent basis with prior periods,
except as otherwise specifically indicated in the Financial Statements.
SECTION 3.10. LIABILITIES AND OBLIGATIONS. Except as set forth in
Schedule 3.10, the Financial Statements reflect all material liabilities of the
Company, accrued, contingent or otherwise, required to be reflected on a balance
sheet, or in the notes thereto, prepared in accordance with generally accepted
accounting principles, except for liabilities or obligations incurred in the
ordinary course of business consistent with reasonable past practice since the
Balance Sheet Date. Except as specifically set forth in the Financial Statements
or Schedule 3.10, the Company is not liable upon or with respect to, or
obligated in any other way to provide funds in respect of or to guarantee or
assume in any manner, any debt, obligation or dividend of any person,
corporation, association, partnership, joint venture, trust or other entity, and
the Company does not know of any valid basis for the assertion of any claims or
liabilities of any nature or in any amount.
SECTION 3.11. EMPLOYEE MATTERS.
(a) CASH COMPENSATION. Schedule 3.11(a) contains a complete and accurate
list of the names, titles and annual cash compensation as of June 30, 1997,
including, without limitation, wages, salaries, bonuses (discretionary and
formula) and other cash compensation (the "Cash Compensation"), of all full and
part-time employees of the Company. In addition, Schedule 3.11(a) contains a
complete and accurate description of (i) all increases in Cash Compensation of
employees of the Company during the current fiscal year and the immediately
preceding fiscal year and (ii) any promised increases in Cash Compensation of
employees of the Company that have not yet been effected.
(b) COMPENSATION PLANS. Schedule 3.11(b) contains a complete and
accurate list of all compensation plans, arrangements or practices (the
"Compensation Plans") sponsored by the Company or to which the Company
contributes on behalf of its employees, other than
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Employment Agreements listed in Schedule 3.11(c) and Employee Benefit Plans
listed in Schedule 3.13. The Compensation Plans include, without limitation,
plans, arrangements or practices that provide for severance pay, deferred
compensation, incentive, bonus or performance awards and stock ownership or
stock options. The Company has provided to AMP a copy of each written
Compensation Plan and a written description of each unwritten Compensation Plan.
Except as set forth on Schedule 3.11(b), each of the Compensation Plans can be
terminated or amended at will by the Company.
(c) EMPLOYMENT AGREEMENTS. Except as set forth in Schedule 3.11(c), the
Company is not a party to any employment agreement (the "Employment Agreements")
with respect to any of its employees. Employment Agreements include, without
limitation, employee leasing agreements, employee services agreements and
noncompetition agreements.
(d) EMPLOYEE POLICIES AND PROCEDURES. Schedule 3.11(d) contains a
complete and accurate list of all employee manuals and all policies, procedures
and work-related rules (the "Employee Policies and Procedures") that apply to
employees of the Company. The Company has provided or made available to AMP a
copy of all written Employee Policies and Procedures and a written description
of all unwritten Employee Policies and Procedures.
(e) UNWRITTEN AMENDMENTS. Except as described in Schedule 3.11(b),
3.11(c), or 3.11(d), no unwritten material amendments have been made, whether by
oral communication, pattern of conduct or otherwise, with respect to any
Compensation Plans, Employment Agreements or Employee Policies and Procedures.
(f) LABOR COMPLIANCE. To its actual knowledge, the Company has been and
is in compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except for any such failures to be in compliance
that, individually or in the aggregate, would not result in a Material Adverse
Effect, and the Company is not liable for any arrears of wages or penalties for
failure to comply with any of the foregoing. To its actual knowledge, the
Company has not engaged in any unfair labor practice or discriminated on the
basis of race, color, religion, sex, national origin, age, disability or
handicap in its employment conditions or practices. Except as set forth in
Schedule 3.11(f), there are no (i) unfair labor practice charges or complaints
or racial, color, religious, sex, national origin, age, disability or handicap
discrimination charges or complaints pending or, to the knowledge of the
Company, threatened against the Company before any federal, state or local
court, board, department, commission or agency (nor, to the knowledge of the
Company, does any valid basis therefor exist) or (ii) existing or, to the
knowledge of the Company, threatened labor strikes, disputes, grievances,
controversies or other labor troubles affecting the Company (nor, to the
knowledge of the Company, does any valid basis therefor exist).
(g) UNIONS. The Company has never been a party to any agreement with any
union, labor organization or collective bargaining unit. No employees of the
Company are represented by any union, labor organization or collective
bargaining unit. Except as set forth in Schedule
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3.11(g), to the knowledge of the Company, none of the employees of the Company
has threatened to organize or join a union, labor organization or collective
bargaining unit.
SECTION 3.12. ALIENS. To the actual knowledge of the Company, all
employees of the Company are citizens of, or are authorized in accordance with
federal immigration laws to be employed in, the United States.
SECTION 3.13. EMPLOYEE BENEFIT PLANS.
(a) IDENTIFICATION. Schedule 3.13 contains a complete and accurate list
of all employee benefit plans (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) sponsored
by the Company or to which the Company contributes on behalf of its employees
and all employee benefit plans previously sponsored or contributed to on behalf
of its employees within the five years preceding the date hereof (the "Employee
Benefit Plans"). The Company has provided to AMP copies of all plan documents,
determination letters, pending determination letter applications, trust
instruments, insurance contracts, 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, the Company has provided AMP a written description of all existing
practices engaged in by the Company that constitute Employee Benefit Plans.
Except as set forth in Schedule 3.13 and subject to the requirements of ERISA,
each of the Employee Benefit Plans can be terminated or amended at will by the
Company. Except as set forth in Schedule 3.13, 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 3.13, the Company 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.
(d) PROHIBITED TRANSACTIONS. No prohibited transactions (within the
meaning of Section 4975 of the Code) have occurred with respect to any Employee
Benefit Plan.
(e) CLAIMS AND LITIGATION. Except as set forth in Schedule 3.13, no
pending or, to the actual knowledge of the Company, threatened, claims, suits or
other proceedings exist with respect to an Employee Benefit Plan, other than
normal benefit claims filed by participants or beneficiaries.
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(f) QUALIFICATIONS. The Company has received a favorable determination
letter or ruling from the IRS for each of the Employee Benefit Plans intended to
be qualified within the meaning of Section 401(a) of the Code and/or tax-exempt
within the meaning of Section 501(a) of the Code. No proceedings exist or, to
the actual knowledge of the Company, 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 3.13, 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 the Company is a member (a "Controlled
Group"). Except as set forth in Schedule 3.13, 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
funded as 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 90 days prior
to the date hereof. Schedule 3.13 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 the Company nor any member of a Controlled
Group has any liability to pay excise taxes with respect to any Employee Benefit
Plan under applicable provisions of the Code or ERISA.
(i) MULTIEMPLOYER PLANS. Neither the Company 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.
(j) PBGC. No facts or circumstances exist that would result in the
imposition of liability against AMP or AMP Subsidiary by the Pension Benefit
Guaranty Corporation as a result of any act or omission by the Company 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. The Company has no obligation or commitment to provide
medical, dental or life insurance benefits to or on behalf of any of its
employees who may retire or any of its former employees who have retired, except
as may be required pursuant to the continuation of coverage provisions of
Section 4980B of the Code and the applicable provisions of ERISA.
(l) OTHER COMPENSATION ARRANGEMENTS. Except as set forth in Schedules
3.11(a), 3.11(b), 3.11(c), 3.11(d), 3.13 and 3.13(l), none of the Company, any
Owner or any Physician
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Employee is a party to any compensation or other arrangement with any person
relating to the provision of healthcare related services, other than
arrangements with the Company.
SECTION 3.14. ABSENCE OF CERTAIN CHANGES. Except as set forth on
Schedule 3.14 and as contemplated pursuant to Section 6.14, since the Balance
Sheet Date, the Company has not
(a) suffered a Material Adverse Effect, whether or not caused by any
deliberate act or omission of the Company or any Owner;
(b) contracted for the purchase of any capital asset having a cost in
excess of $5,000 or made any single capital expenditure in excess of $5,000;
(c) incurred any indebtedness for borrowed money (other than short-term
borrowings in the ordinary course of business consistent with reasonable past
practice) or issued or sold any debt securities;
(d) incurred or discharged any material liabilities or obligations,
except in the ordinary course of business consistent with reasonable past
practice;
(e) paid any amount on any indebtedness prior to the due date, forgiven
or cancelled any claims or any debt in excess of $5,000 or released or waived
any rights or claims, except in the ordinary course of business consistent with
reasonable past practice;
(f) mortgaged, pledged or subjected to any security interest, lien,
lease or other charge or encumbrance any of its properties or assets (other than
statutory liens arising in the ordinary course of business consistent with
reasonable past practice or other liens that do not materially detract from the
value or interfere with the use of such properties or assets);
(g) suffered any damages or destruction to or loss of any assets
(whether or not covered by insurance) that has resulted, or might reasonably be
expected to result, individually or in the aggregate, in a Material Adverse
Effect;
(h) acquired or disposed of any assets having an aggregate value in
excess of $5,000, except in the ordinary course of business consistent with
reasonable past practice or except as contemplated in this Agreement;
(i) written up or written down the carrying value of any of its assets,
other than accounts receivable in the ordinary course of business consistent
with reasonable past practice;
(j) changed the costing system or depreciation methods of accounting for
its assets;
(k) lost or terminated any employee, patient, customer or supplier that
has resulted, or might reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect;
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(l) increased the compensation of any Owner, director, officer, key
employee or consultant;
(m) increased the compensation of any employee (except for increases in
the ordinary course of business consistent with reasonable past practice) or
hired any new employee who, in either case, is expected to receive annualized
compensation of $15,000 or more;
(n) made any payments of cash or assets to or loaned any money or assets
to any person or entity referred to in Section 3.26;
(o) formed, or acquired or disposed of any interest in, any corporation,
partnership, joint venture, limited liability company or other entity;
(p) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of its capital stock,
securities or other ownership interests or any rights to acquire such capital
stock, securities or other ownership interests, or agreed to change the terms
and conditions of any such capital stock, securities or other ownership
interests or rights;
(q) entered into any agreement providing for total payments in excess of
$5,000 in any 12 month period with any person or group, or modified or amended
in any material respect the terms of any such existing agreement, except in the
ordinary course of business consistent with reasonable past practice;
(r) entered into, adopted or amended any Employee Benefit Plan, except
as contemplated hereby; or
(s) entered into any commitment or transaction, or experienced any
event, that would materially interfere with its performance under this Agreement
or any other agreements or document executed or to be executed pursuant to this
Agreement or otherwise has resulted, or might reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Effect.
SECTION 3.15. TITLE; LEASED ASSETS.
(a) REAL PROPERTY. The Company does not own any interest in any real
property, other than leasehold interests referred to in Schedule 3.15. The
leased real property referred to in Schedule 3.15 constitutes the only real
property that has been necessary for the conduct of the Company's business.
(b) PERSONAL PROPERTY. Except as set forth in Schedule 3.15, the Company
has good and marketable title to all the personal property owned by it and the
Company has good and marketable title to the Assets. The Assets and the leased
personal property referred to in Section 3.15(c) constitute the only personal
property that has been necessary for the conduct of the
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Company's business. Upon consummation of the transactions contemplated hereby,
AMP Subsidiary will have good and marketable title to the Assets, free and clear
of all security interests, liens, claims and encumbrances, other than statutory
liens and contractual liens of landlords arising in the ordinary course of
business or other liens that do not materially detract from the value or
interfere with the use of such properties or assets.
(c) LEASES. A list and brief description of (i) all leases of real
property and (ii) leases of personal property involving rental payments within
any 12-month period in excess of $5,000, in either case to which the Company is
a party, either as lessor or lessee, are set forth in Schedule 3.15. All such
leases are valid and, to the knowledge of the Company, enforceable in accordance
with their respective terms.
SECTION 3.16. COMMITMENTS. Except as set forth in Schedule 3.16, the
Company is not a party to nor is it bound by, nor are any of its partnership
interests subject to, nor are the assets or the business of the Company bound
by, whether or not in writing, any of the following (collectively, the
"Commitments"):
(i) partnership or joint venture agreement;
(ii) guaranty or suretyship, indemnification or contribution
agreement or performance bond;
(iii) debt instrument, loan agreement or other obligation
relating to indebtedness for borrowed money or money lent or to be lent
to another;
(iv) contract to purchase real property;
(v) agreement with dealers or sales or commission agents, public
relations or advertising agencies, accountants or attorneys (other than
in connection with this Agreement and the transactions contemplated
hereby) involving total payments within any 12-month period in excess of
$5,000 and that is not terminable on 30 days' notice with or without
penalty;
(vi) agreement relating to any matter or transaction involving
more than $5,000 in the aggregate;
(vii) powers of attorney;
(viii) contracts containing noncompetition covenants;
(ix) agreement providing for the purchase from a supplier of all
or substantially all of the requirements of the Company of a particular
product or service; or
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(x) any other agreement or commitment not made in the ordinary
course of business or that is material to the Company's business,
operations, condition (financial or otherwise), results of operations or
prospects.
True, correct and complete copies of the written Commitments, and true, correct
and complete written descriptions of the oral Commitments, have been delivered
to AMP. Except as set forth in Schedule 3.16, there are no existing or asserted
defaults, events of default or events, occurrences, acts or omissions that, with
the giving of notice or lapse of time or both, would constitute defaults by the
Company or, to the best knowledge of the Company, any other party to a material
Commitment, and no penalties have been incurred nor are amendments pending with
respect to any material Commitment, except as described in Schedule 3.16. The
Commitments are in full force and effect and are valid and enforceable
obligations of the Company and, to the best knowledge of the Company, the other
parties thereto in accordance with their respective terms, and no defenses,
off-sets or counterclaims have been asserted or, to the best knowledge of the
Company, may be made by any party thereto (other than by the Company) nor has
the Company waived any rights thereunder, except as described in Schedule 3.16.
Except as disclosed specifically in Schedule 3.16, (i) none of the Company or
any Owner has received notice of any plan or intention of any other party to any
Commitment to exercise any right to cancel or terminate any Commitment, and
neither the Company nor any Owner knows of any fact that would justify the
exercise of such a right and (ii) none of the Company or any Owner currently
contemplates, or has a reason to believe any other person currently
contemplates, any amendment or change to any Commitment.
SECTION 3.17. INSURANCE. The Company, each Owner and each Physician
Employee carry property, liability, malpractice, workers' compensation and such
other types of insurance pursuant to the insurance policies listed and described
in Schedule 3.17 (the "Insurance Policies"). The Insurance Policies are all of
the insurance policies of the Company, the Owners and the Physician Employees
relating to the Company. All of the Insurance Policies are issued by insurers of
recognized responsibility, and, to the best knowledge of the Company, are valid
and enforceable policies. All Insurance Policies have been maintained in force
without interruption up to and including the Closing Date. True, complete and
correct copies of all Insurance Policies have been provided to AMP. Except as
set forth in Schedule 3.17, none of the Company, any Owner or any Physician
Employee has received any notice or other communication from any issuer of any
Insurance 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 actual knowledge of the Company, no
such cancellation or increase of deductibles, retainages or premiums is
threatened. Except as set forth on Schedule 3.17, none of the Company, any Owner
or any Physician Employee has any outstanding claims, settlements or premiums
owed against any Insurance Policy, and the Company, each Owner and each
Physician Employee has given all notices or has presented all potential or
actual claims under any Insurance Policy in a due and timely fashion. Except as
set forth on Schedule 3.17, none of the Company, any Owner or any Physician
Employee has filed a written application for any professional liability
insurance coverage that has been denied by an insurance agency or carrier, and
the Company, each Owner and each Physician Employee
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has been continuously insured for professional malpractice claims for at least
the past seven years (or such shorter periods of time that the Company has been
in existence or any Owner or Physician Employee has been licensed to practice
medicine). Schedule 3.17 also sets forth a list of all claims under any
Insurance Policy in excess of $5,000 per occurrence filed by the Company, any
Owner or any Physician Employee during the immediately preceding five years.
SECTION 3.18. PROPRIETARY RIGHTS AND INFORMATION. Set forth in Schedule
3.18 is a true and correct description of the following (the "Proprietary
Rights"):
(a) all trademarks, trade-names, service marks and other trade
designations, including common law rights, registrations and applications
therefor, and all patents and applications therefor currently owned, in whole or
in part, by the Company, and all licenses, royalties, assignments and other
similar agreements relating to the foregoing to which the Company is a party
(including expiration date, if applicable); and
(b) to its actual knowledge, all agreements relating to technology,
know-how or processes that the Company is licensed or authorized to use by
others (other than technology, know-how or processes generally available to
other health care providers) or which it licenses or authorizes others to use.
To its actual knowledge, the Company owns or has the legal right to use the
Proprietary Rights, without conflicting, infringing or violating the rights of
any other person. Except as disclosed in Schedule 3.18, to the actual knowledge
of the Company no consent of any person will be required for the use of the
Proprietary Rights by AMP Subsidiary 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 or for infringement by
the Company of the proprietary right of any other person, and the Company does
not know of any valid basis for any such claim. To its actual knowledge, the
Company has the right to use, free and clear of any adverse claims or rights of
others, all trade secrets, customer lists and proprietary information required
for the marketing of all merchandise and services formerly or presently sold or
marketed by it.
SECTION 3.19. TAXES.
(a) FILING OF TAX RETURNS. The Company has duly and timely filed (in
accordance with any extensions duly granted by the appropriate governmental
agency, if applicable) with the appropriate governmental agencies all material
Tax Returns and reports required to be filed in the United States, 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 the Company for the periods covered thereby.
(b) PAYMENT OF TAXES. To the actual knowledge of the Company, except for
such items as the Company may be disputing in good faith by proceedings in
compliance with applicable law, which are described in Schedule 3.19(b) and are
adequately accrued for, (i) the Company has paid all Taxes that have become due
(including those related to employment) and has properly accrued, in accordance
with generally accepted accounting principles, on its books
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and records for all of the same that have not yet become due and (ii) the
Company is not delinquent in the payment of any Tax.
(c) NO PENDING DEFICIENCIES, DELINQUENCIES, ASSESSMENTS OR AUDITS.
Except as set forth in Schedule 3.19(c), the Company has not received any notice
that any Tax deficiency or delinquency has been asserted against the Company. To
the actual knowledge of the Company, there is no unpaid assessment, proposal for
additional Taxes, deficiency or delinquency in the payment of any of the Taxes
of the Company that could be asserted by any Taxing authority. There is no
Taxing authority audit of the Company pending, or, to the actual knowledge of
the Company, threatened, and the results of any completed audits are properly
reflected in the Financial Statements. To the actual knowledge of the Company,
the Company has not violated in any material respect any federal, state, local
or foreign Tax law.
(d) NO EXTENSION OF LIMITATION PERIOD. The Company has not granted an
extension to any taxing authority of the limitation period during which any Tax
liability may be assessed or collected.
(e) ALL WITHHOLDING REQUIREMENTS SATISFIED. To the actual knowledge of
the Company, all monies required to be withheld by the Company and paid to
governmental agencies for all income, social security, unemployment insurance,
sales, excise, use and other Taxes have been collected or withheld and paid to
the respective governmental agencies.
(f) FOREIGN PERSON. The Company is not a foreign person, as such term is
referred to in Section 1445(f)(3) of the Code.
(g) SAFE HARBOR LEASE. None of the Assets of the Company constitutes
property that the Company, AMP or any Affiliate of AMP 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 of the Company are subject to
a lease to a "tax exempt entity" as such term is defined in Section 168(h)(2) of
the Code.
(i) COLLAPSIBLE CORPORATION. The Company has not at any time consented,
and the Owners will not permit the Company to elect, to have the provisions of
Section 341(f)(2) of the Code apply to it.
(j) BOYCOTTS. The Company 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 the Company has been or will be characterized as an "excess parachute
payment" within the meaning of Section 280G(b)(1) of the Code.
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(l) S CORPORATION. The Company has not made an election to be taxed as
an "S" corporation under Section 1362(a) of the Code.
(m) PERSONAL SERVICE CORPORATION. The Company is not nor has it been a
personal service corporation subject to the provisions of Section 269A of the
Code.
(n) PERSONAL HOLDING COMPANY. The Company is not nor has it been a
personal holding company within the meaning of Section 542 of the Code.
SECTION 3.20. COMPLIANCE WITH LAWS. To the actual knowledge of the
Company, the Company, each Owner and each Physician Employee have complied in
all material respects with, and are in compliance in all material respects with,
all applicable laws, regulations and licensing requirements and have filed with
the proper authorities all necessary statements and reports, except where the
failure to so comply or file would not, and is not reasonably expected to,
individually or in the aggregate, result in a Material Adverse Effect. To the
actual knowledge of the Company, there are no existing violations by the
Company, any Owner or any Physician Employee of any federal, state or local law
or regulation that could, individually or in the aggregate, result in a Material
Adverse Effect. To the actual knowledge of the Company, the Company, each Owner
and each Physician Employee possess all materially necessary licenses,
franchises, permits and governmental authorizations for the conduct of its, his
or her business as now conducted, all of which are listed (with expiration
dates, if applicable) in Schedule 3.20. Except as set forth in Schedule 3.20,
the transactions expressly contemplated by this Agreement will not result in a
default under or a breach or violation of, or adversely affect the rights and
benefits afforded by, any such licenses, franchises, permits or government
authorizations, except for any such default, breach or violation that would not,
and is not reasonably expected to, individually or in the aggregate, have a
Material Adverse Effect. Except as set forth in Schedule 3.20, none of the
Company, any Owner or any Physician Employee has received any notice from any
federal, state or other governmental authority or agency having jurisdiction
over its, his or her properties or activities, or any insurance or inspection
body, that its, his or her operations or any of its, his or her properties,
facilities, equipment or business practices fail to comply with any applicable
law, ordinance, regulation, building or zoning law or requirement of any public
or quasi-public authority or body, except where failure to so comply would not,
and is not reasonably expected to, individually or in the aggregate, have a
Material Adverse Effect.
SECTION 3.21. FINDER'S FEE. Except as set forth in Schedule 3.21, none
of the Company, any Owner or any of their Affiliates has incurred any obligation
for any finder's, broker's, agent's or similar fee in connection with the
transactions expressly contemplated hereby.
SECTION 3.22. LITIGATION. Except as described specifically in detail in
Schedule 3.22, there are no legal actions, administrative proceedings or
investigations instituted, or, to the actual knowledge of the Company,
threatened, affecting or that could affect the Company, any Owner, any Physician
Employee, the outstanding ownership interests in the Company, any of the assets
of the Company or the operations, business, condition (financial or otherwise),
results
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of operations or prospects of the Company which (i) if successful, could, or
might reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect or (ii) could adversely affect the ability of the
Company or any Owner to effect the transactions contemplated hereby. None of the
Company, any Owner or any Physician Employee is (a) subject to any court or
administrative order, judgment, writ, injunction or decree or (b) in default
with respect to any such order, judgment, writ, injunction or decree. The
Company and the Owners have no actual knowledge of any valid basis for any such
action, proceeding or investigation. Except as set forth in Schedule 3.22, to
the actual knowledge of the Company, all medical malpractice claims asserted
against the Company or any of its Affiliates, general liability incidents and
incident reports have been submitted on a timely basis and in the proper manner
to the Company's insurer therefor. All claims made or threatened against the
Company in excess of its deductible are covered under its Insurance Policies.
SECTION 3.23. CONDITION OF FIXED ASSETS. All of the plants, structures
and equipment (the "Fixed Assets") used by the Company in its business are in
good condition and repair, subject to normal wear and tear, and conform in all
material respects with all applicable ordinances, regulations and other laws,
and the Company and the Owners have no actual knowledge of any material latent
defects therein.
SECTION 3.24. DISTRIBUTIONS AND REPURCHASES. Except as described in
Schedule 3.24, no distribution, payment or dividend of any kind has been
declared or paid by the Company on any of its ownership interests since the
Balance Sheet Date. No repurchase of any of the Company's ownership interests
has been approved or effected or is pending or contemplated by the Board of
Directors of the Company.
SECTION 3.25. BANKING RELATIONS. Set forth in Schedule 3.25 is a
complete and accurate list of all borrowing and investing arrangements that the
Company 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 3.26. INTERESTED PERSONS; AFFILIATIONS. Except as set forth in
Schedule 3.26, no Owner, Physician Employee, officer, employee or director of
the Company, or any of their respective spouses, children or Affiliates, owns,
directly or indirectly, on an individual or joint basis, any interest in, has a
compensation or other financial arrangement with or serves as an officer or
director of any customer or supplier of the Company or any organization that has
a contract or arrangement with the Company. Except as set forth in Schedule
3.26, none of the Company, any of its directors, officers, employees or
consultants, any Owner, any Physician Employee or any Affiliate of any such
person is, or within the last five years was, a party to any contract, lease,
agreement or arrangement, including, but not limited to, any joint venture or
consulting agreement, with any physician, hospital, pharmacy, home health agency
or other person that is in a position to make or influence referrals to, or
otherwise generate business for, the Company.
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SECTION 3.27. ENVIRONMENTAL MATTERS.
(a) ENVIRONMENTAL LAWS. To the actual knowledge of the Company, neither
the Company nor any of its assets is currently in violation of, or subject to
any existing, pending or, to the actual knowledge of the Company, threatened
investigation or inquiry by any governmental authority or to any remedial
obligations under, any Environmental Law.
(b) PERMITS. To its actual knowledge, the Company is not required to
obtain, by reason of any Environmental Law, any permits, licenses or similar
authorizations to occupy, operate or use any buildings, improvements, fixtures
or equipment owned or leased by the Company.
(c) SUPERFUND LIST. None of the assets owned or leased by the Company
are on any federal or state "Superfund" list or subject to any environmentally
related liens.
SECTION 3.28. CERTAIN PAYMENTS. None of the Company, any director,
officer or employee of the Company, any Owner by his or her own act or any of
their respective Affiliates has paid, caused to be paid or received, directly or
indirectly:
(a) to or from any government or agency thereof or any agent of any
supplier or customer, any bribe, kick-back or other similar payment; or
(b) any contribution to any political party or candidate, other than
from personal funds not reimbursed by their respective employers or as otherwise
permitted by applicable law.
SECTION 3.29. MEDICAL WASTE. To the actual knowledge of the Company,
with respect to the generation, transportation, treatment, storage, disposal or
other handling of Medical Waste, the Company has complied with all Medical Waste
Laws.
SECTION 3.30. MEDICARE AND MEDICAID PROGRAMS. The Company, each Owner
and each Physician Employee are qualified for participation in the Medicare and
Medicaid programs and are parties to provider agreements for such programs that
are in full force and effect with no events of default having occurred
thereunder. To its actual knowledge, the Company, each Owner and each Physician
Employee have timely filed all claims or other reports required to be filed
prior to the Effective Date with respect to the purchase of services by
third-party payors ("Payors"), including but not limited to Medicare and
Medicaid programs. To the actual knowledge of the Company, all such claims or
reports are complete and accurate in all material respects. The Company, each
Owner and each Physician Employee has paid or has properly recorded on the
Financial Statements all actually known and undisputed refunds, discounts or
adjustments that have become due pursuant to such claims, and none of the
Company, any Owner or any Physician Employee has any material liability to any
Payor with respect thereto, except as has been reserved for in the Balance
Sheet. There are no pending appeals, overpayment determinations, adjustments,
challenges, audits, litigation or notices of intent to reopen Medicare and/or
Medicaid claims determinations or other reports required to be filed by
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the Company, any Owner or any Physician Employee in order to be paid by a Payor
for services rendered. None of the Company, any of its directors, officers,
employees, consultants or Owners or any of their respective Affiliates has been
convicted of, or pled guilty or nolo contendere to, patient abuse or neglect or
any other Medicare or Medicaid program-related offense. None of the Company or
any of its directors, officers, Owners or, to the best of the Company's actual
knowledge, its employees, consultants or any of the aforesaid persons'
respective Affiliates has committed any offense that may serve as the basis for
the Company's suspension or exclusion from the Medicare and Medicaid programs,
including, but not limited to, defrauding a government program, loss of a
license to provide health care services or failure to provide quality care.
SECTION 3.31. FRAUD AND ABUSE. The Company, the Owners, the Physician
Employees and all other persons and entities providing professional services for
or on behalf of the Company, to their actual knowledge, have not engaged in any
activities that are prohibited under 42 U.S.C. ss.ss. 1320a-7, 7a or 7b or 42
U.S.C. ss. 1395nn (subject to the exceptions set forth in such legislation) or
the regulations promulgated thereunder or pursuant to similar state or local
statutes or regulations or that are prohibited by rules of professional conduct,
including, but not limited to, the following:
(a) 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;
(b) 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;
(c) failure to disclose knowledge by a Medicare or Medicaid claimant of
the occurrence of any event affecting the initial or continued right to any
benefit or payment on their own behalf or on behalf of another with intent to
fraudulently secure such benefit or payment;
(d) knowingly and willfully offering, paying or soliciting or receiving
any remuneration (including any kickback, bribe or rebate), directly or
indirectly, overtly or covertly, in cash or in kind (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 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; or
(e) referring a patient for designated health services (as defined in 42
U.S.C. ss. 1395nn) to or providing designated 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 and to which no exception under 42
U.S.C. ss. 1395nn applies.
SECTION 3.32. PAYORS. Schedule 3.32 sets forth a true, correct and
complete list of the names and addresses of each Payor, including any private
pay patient as a single payor, of the
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Company's services that accounted for more than 5% of the aggregate revenues of
the Company in the five previous fiscal years. Except as set forth in Section
3.32, the Company has good relations with such Payors, and none of such Payors
has notified the Company that it intends to discontinue its relationship with
the Company or to deny any claims submitted to such Payor for payment.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE OWNERS
Each of the Owners (in proportion to each such Owner's respective
ownership of the Company), severally, represents and warrants to AMP and AMP
Subsidiary that the following are true and correct as of the Closing Date:
SECTION 4.1. VALIDITY; OWNER'S CAPACITY. This Agreement and each other
agreement contemplated hereby has been or will be, as the case may be, as of the
Closing Date duly executed and delivered by the Owner and constitute or will
constitute, as the case may be, legal, valid and binding obligations of the
Owner, enforceable against the Owner in accordance with their respective terms.
The Owner has legal capacity to enter into and perform this Agreement and the
other such agreements to which the Owners are a party.
SECTION 4.2. NO VIOLATION. Neither the execution, delivery or
performance of this Agreement or the other agreements of the Owner contemplated
hereby nor the consummation of the transactions contemplated hereby or thereby
will (a) conflict with, result in a violation or breach of the terms, conditions
or provisions of or constitute a default under any agreement, indenture or other
instrument by which any Owner is bound or to which any of the ownership
interests in the Company are subject, or result in the creation or imposition of
any security interest, lien, charge or encumbrance upon any of the ownership
interests in the Company or (b) to the actual knowledge of each Owner, violate
or conflict with any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body.
SECTION 4.3. PERSONAL HOLDING COMPANIES; CONTROL OF RELATED BUSINESSES.
The Owner owns no ownership interests in the Company, directly or indirectly,
beneficially or of record, through a personal holding company. Except as set
forth in Schedule 4.3, the Owner controls no other business that is in the same
or similar line of business as the Company or that has or is engaged in a
transaction with the Company.
SECTION 4.4. TRANSFERS OF OWNERSHIP INTERESTS. Set forth in Schedule 4.4
is a list of all transfers or other transactions involving ownership interests
in the Company. All such transfers by the Owner were made for valid business
reasons and not in anticipation or contemplation of the consummation of the
transactions contemplated by this Agreement.
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SECTION 4.5. ACCREDITED INVESTOR STATUS. Except as set forth in Schedule
4.5, Owner is an "accredited investor" as defined in Rule 501(a) under the
Securities Act.
SECTION 4.6. CONSENTS. Except as specifically disclosed pursuant to
Article III, no consent, authorization or approval of any person is required to
authorize, or is required in connection with, the Owner's execution, delivery
and performance of this Agreement or the agreements contemplated hereby.
SECTION 4.7. CERTAIN PAYMENTS. Owner has not paid, caused to be paid or
received, directly or indirectly, in connection with the business of the
Company:
(a) to or from any government or agency thereof or any agent of any
supplier or customer, any bribe, kick-back or similar payment; or
(b) any contribution to any political party or candidate, other than
from personal funds not reimbursed by the Company or as otherwise permitted by
applicable law.
SECTION 4.8. FINDER'S FEE. Except as set forth in Schedule 4.8, Owner
has not incurred any obligation for any finder's, broker's, agent's or similar
fee in connection with the transactions contemplated hereby.
SECTION 4.9. INTERESTED PERSONS; AFFILIATIONS. Except as set forth in
Schedule 4.9, no Owner and no Owner's spouse, children or Affiliates owns,
directly or indirectly, on an individual or joint basis, any interest in, has a
compensation or other financial arrangement with or serves as an officer or
director of, any customer or supplier of the Company or any organization that
has a contract or arrangement with the Company. No Owner or any of such Owner's
Affiliates is, or within the last five years was, a party to any contract,
lease, agreement or arrangement, including, but not limited to, any joint
venture or consulting agreement, with any physician, hospital, pharmacy, home
health agency or other person that is in a position to make or influence
referrals to, or otherwise generate business for, the Company.
SECTION 4.10. INVESTMENTS IN COMPETITORS. Except as disclosed in
Schedule 4.10, Owner does not own, directly or indirectly, any interests or has
any investment in any person that is a competitor of the Company.
SECTION 4.11. DISPOSITION OF AMP SHARES. No Owner presently intends to
dispose of any shares of AMP Common Stock received pursuant hereto or is a party
to any plan, arrangement or agreement for the disposition of such shares, other
than this Agreement and the Registration Rights Agreement.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF AMP AND AMP SUBSIDIARY
AMP and AMP Subsidiary each represent and warrant to the Company and the
Owners that the following are true and correct as of the Closing Date:
SECTION 5.1. ORGANIZATION AND GOOD STANDING. AMP 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 carry on the
business in which it is engaged, to own the properties it owns, to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
Prior to the Closing, neither AMP nor AMP Subsidiary will have had any
operations, other than in connection with its formation and capitalization and
the transactions contemplated by this Agreement and the Other Agreements.
SECTION 5.2. CAPITALIZATION OF AMP. The authorized and outstanding
capital stock of AMP are as disclosed in the Registration Statement.
SECTION 5.3. CAPITALIZATION OF AMP SUBSIDIARY. AMP owns all of the
outstanding capital stock of AMP Subsidiary. AMP Subsidiary does not have any
bonds, debentures, notes or other obligations the holders of which will have the
right to vote (or will be convertible into or exercisable for securities having
the right to vote) with the stockholders of AMP Subsidiary on any matter. There
exist no options, warrants, subscriptions or other rights to purchase, or
securities convertible into or exchangeable for, any of the authorized or
outstanding securities of AMP Subsidiary, and no option, warrant, call,
conversion right or commitment of any kind will exist that obligates AMP
Subsidiary to issue any of its authorized but unissued capital stock. AMP
Subsidiary has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay a dividend or make any distribution in respect thereof. No stockholder of
AMP Subsidiary has granted options or other rights to purchase any shares of AMP
Subsidiary Common Stock from such stockholder.
SECTION 5.4. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by AMP and AMP Subsidiary of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by AMP and AMP Subsidiary. This
Agreement and each other agreement contemplated hereby to be executed by AMP and
AMP Subsidiary have been or will be, as the case may be, as of the Closing Date
duly executed and delivered by AMP and AMP Subsidiary and constitute or will
constitute, as the case may be, legal, valid and binding obligations of AMP and
AMP Subsidiary.
SECTION 5.5. NO VIOLATION. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will (a)
conflict with, result in a violation or breach
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of the terms, conditions and provisions of or constitute a default under the
Certificate of Incorporation or Bylaws of AMP or AMP Subsidiary or any
agreement, indenture or other instrument by which AMP or AMP Subsidiary is or
will be, as of the Closing, bound or (b) except as would not, individually or in
the aggregate, have a material adverse effect on the business, operations,
condition (financial or otherwise) or results of operations of AMP or AMP
Subsidiary, violate or conflict with any judgment, decree, order, statute, rule
or regulation of any court or any public, governmental or regulatory agency or
body having jurisdiction over AMP or AMP Subsidiary or the properties or assets
of AMP or AMP Subsidiary.
SECTION 5.6. FINDER'S FEE. To their actual knowledge, neither AMP nor
AMP Subsidiary has incurred any obligation for any finder's, broker's, agent's
or similar fee in connection with the transactions contemplated hereby.
SECTION 5.7. CAPITAL STOCK. The issuance and delivery by AMP of shares
of AMP Common Stock in connection with the Acquisition will be duly and validly
authorized by all necessary corporate action on the part of AMP. The shares of
AMP Common Stock to be issued in connection with the Acquisition, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable and will not have been issued in violation of any preemptive
rights, rights of first refusal or similar rights of any AMP stockholders.
SECTION 5.8. CONSENTS. Except as have been obtained or as may be
required by the exchange or automated quotation system on which the AMP Common
Stock may be listed or under the applicable state Business Corporation Act, the
Exchange Act, the Securities Act or state securities laws, no consent,
authorization, approval, permit or license of, or filing with, any governmental
or public body or authority, any lender, any lessor or any other person is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement or the agreements contemplated hereby
on the part of AMP or AMP Subsidiary.
SECTION 5.9. LIABILITIES AND OBLIGATIONS. To the actual knowledge of
AMP, the Registration Statement will reflect material liabilities of AMP, except
for liabilities or obligations incurred in the ordinary course of business
consistent with reasonable past practice. To its actual knowledge, AMP is not
liable upon or with respect to, or obligated in any other way to provide a
material amount of funds in respect of or to guarantee or assume in any manner,
any debt, obligation or dividend of any person, corporation, association,
partnership, joint venture, trust or other entity, and AMP does not know of any
valid basis for the assertion of any claims or liabilities of any nature or in
any amount.
SECTION 5.10. EMPLOYEE BENEFIT PLANS. Schedule 5.10 contains a complete
and accurate list of all employee benefit plans (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) sponsored by AMP or to which AMP contributes on behalf of its
employees and all employee benefit plans previously sponsored or contributed to
on behalf of its employees within the five years preceding the date hereof (the
"AMP Employee Benefit Plans").
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SECTION 5.11. TAXES.
(a) FILING OF TAX RETURNS. To its actual knowledge, AMP 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 material Tax Returns and reports required to be filed in the United States,
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 AMP for the periods covered thereby.
(b) PAYMENT OF TAXES. To its actual knowledge, except for such items as
AMP may be disputing in good faith by proceedings in compliance with applicable
law, (i) AMP has paid all Taxes, penalties, assessments and interest that have
become due with respect to any Tax Return that it has filed (including those
related to employment) and has properly accrued on its books and records for all
of the same that have not yet become due and (ii) AMP is not delinquent in the
payment of any Tax, assessment or governmental charge.
(c) NO PENDING DEFICIENCIES, DELINQUENCIES, ASSESSMENTS OR AUDITS. To
its actual knowledge, AMP has not received any notice that any Tax deficiency or
delinquency has been asserted against AMP. There is no unpaid assessment,
proposal for additional Taxes, deficiency or delinquency in the payment of any
of the Taxes of AMP that could be asserted by any Taxing authority. There is no
Taxing authority audit of AMP pending, or, to the actual knowledge of AMP,
threatened, and the results of any completed audits are properly reflected in
the Financial Statements. AMP has not violated in any material respect any
federal, state, local or foreign Tax law.
(d) NO EXTENSION OF LIMITATION PERIOD. AMP has not granted an extension
to any taxing authority of the limitation period during which any Tax liability
may be assessed or collected.
SECTION 5.12. COMPLIANCE WITH LAWS. Except as disclosed in the
Registration Statement and to the actual knowledge of AMP, AMP and its
predecessors have complied in all material respects with, and are in compliance
in all material respects with, all applicable laws, regulations (including
applicable state and federal securities laws) and licensing requirements and has
filed with the proper authorities all necessary statements and reports, except
where the failure to so comply or file would not, and is not reasonably expected
to, individually or in the aggregate, result in a Material Adverse Effect. There
are no existing violations by AMP of any federal, state or local law or
regulation that could, individually or in the aggregate, result in a Material
Adverse Effect. To its actual knowledge, AMP has not received any notice from
any federal, state or other governmental authority or agency having jurisdiction
over its, his or her properties or activities, or any insurance or inspection
body, that its, his or her operations or any of its, his or her properties,
facilities, equipment or business practices fail to comply with any applicable
law, ordinance, regulation, building or zoning law or requirement of any public
or quasi-public authority or body, except where failure to so comply would not,
and is not reasonably expected to, individually or in the aggregate, have a
Material Adverse Effect.
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SECTION 5.13. LITIGATION. Except as disclosed in the Registration
Statement and to the actual knowledge of AMP, there are no material legal
actions, administrative proceedings or investigations instituted, or, to the
actual knowledge of AMP, threatened, against AMP. AMP is not (a) subject to any
material court or administrative order, judgment, writ, injunction or decree or
(b) in default with respect to any such order, judgment, writ, injunction or
decree. AMP has no actual knowledge of any valid basis for any such material
action, proceeding or investigation. To the actual knowledge of AMP, all
material claims asserted against AMP, general liability incidents and incident
reports have been submitted on a timely basis and in the proper manner to AMP's
insurer therefor. To AMP's knowledge, all material claims made or threatened
against AMP in excess of its deductible would be covered under insurance
policies.
ARTICLE VI
COVENANTS OF THE COMPANY AND THE OWNERS
The Company and the Owners (in proportion to each such Owner's
respective ownership of the Company) agree that between the date hereof and the
Closing:
SECTION 6.1. CONSUMMATION OF AGREEMENT. The Company and the Owners will
use their commercially reasonable best efforts to cause the consummation of the
transactions contemplated hereby in accordance with their terms and conditions.
SECTION 6.2. BUSINESS OPERATIONS. The Company will operate its business
in the ordinary course. The Company and the Owners will use their commercially
reasonable best efforts to preserve the businesses of the Company intact.
Neither the Company nor any Owners will knowingly take any action that would,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect. Except as set forth in Schedule 6.2, the Company will use its
commercially reasonable best efforts to preserve intact its relationships with
Payors, referral sources, customers, suppliers, patients, employees and others
having significant business relations with it, unless doing so would impair its
goodwill or, individually or in the aggregate, result in a Material Adverse
Effect. The Company will collect its receivables and pay its trade payables in
the ordinary course of business consistent with reasonable past practice. On or
before the Closing Date, immediately prior to Closing, the Company will not
knowingly be engaged in the practice of medicine and will not knowingly provide
medical services.
SECTION 6.3. ACCESS. The Company and the Owners will, at reasonable
times during normal business hours and on reasonable notice, permit AMP and its
authorized representatives reasonable access to, and make available for
inspection, all of the assets and business of the Company, including its
employees, and permit AMP and its authorized representatives to inspect and make
copies of all documents, records (other than confidential portions of patient
medical records) and information with respect to the affairs of the Company as
AMP and its representatives may reasonably request, all for the sole purpose of
permitting AMP to become familiar with the businesses and assets and liabilities
of the Company.
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SECTION 6.4. TAX RETURNS. AMP will have the right to review the Tax
Returns of the Company after the Tax Return for the period through the Closing
Date has been filed.
SECTION 6.5. NOTIFICATION OF CERTAIN MATTERS. The Company and the Owners
will promptly inform AMP in writing of (a) any notice of, or other communication
relating to, a default or event that, with notice or lapse of time or both,
would become a default, received by the Company or any Owner subsequent to the
date of this Agreement and prior to Closing under any Commitment material to the
Company's condition (financial or otherwise), operations, assets, liabilities,
business or prospects and to which it is subject, (b) any event or information
that would cause the Company or any Owner to believe reasonably that any of
their respective representations and warranties under this Agreement to be
untrue or (c) any material adverse change in the Company's condition (financial
or otherwise), operations, assets, liabilities, business or prospects.
SECTION 6.6. APPROVALS OF THIRD PARTIES. The Company and the Owners will
use their commercially reasonable best efforts to secure, as soon as practicable
after the date hereof, all necessary approvals and consents of third parties to
the consummation of the transactions contemplated hereby, including, without
limitation, all necessary approvals and consents required under any real
property and personal property leases.
SECTION 6.7. EMPLOYEE MATTERS. Except as set forth in Schedule 6.7 or as
otherwise specifically contemplated by this Agreement, the Company will not,
without the prior written approval of AMP, which approval shall not be delayed
or unreasonably withheld, except as required by law:
(a) increase the Cash Compensation of any Owner or other employee of the
Company;
(b) adopt, amend or terminate any Compensation Plan;
(c) adopt, amend or terminate any Employment Agreement;
(d) adopt, amend or terminate any Employee Policies and Procedures;
(e) adopt, amend or terminate any Employee Benefit Plan;
(f) take any action that could deplete the assets of any Employee
Benefit Plan, other than payment of benefits in the ordinary course to
participants and beneficiaries;
(g) fail to pay any premium or contribution due or with respect to any
Employee Benefit Plan;
(h) fail to file any return or report with respect to any Employee
Benefit Plan;
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(i) institute, settle or dismiss any employment litigation, except as
could not, individually or in the aggregate, result in a Material Adverse
Effect;
(j) enter into, modify, amend or terminate any agreement with any union,
labor organization or collective bargaining unit; or
(k) take or fail to take any action with respect to any past or present
employee of the Company that would, individually or in the aggregate, result in
a Material Adverse Effect.
SECTION 6.8. CONTRACTS. Except with AMP's prior written consent, which
consent shall not be delayed or unreasonably withheld, the Company will not
assume or enter into any contract, lease, license, obligation, indebtedness,
commitment, purchase or sale that is material to the Company's business nor will
it waive any material right or cancel any material contract, debt or claim.
SECTION 6.9. CAPITAL ASSETS; PAYMENTS OF LIABILITIES. The Company will
not, without the prior written approval of AMP (a) acquire or dispose of any
capital asset having a fair market value of $5,000 or more or acquire or dispose
of any capital asset outside of the ordinary course of business or (b) discharge
or satisfy any lien or encumbrance or pay or perform any obligation or
liability, other than (i) liabilities and obligations reflected in the Financial
Statements or (ii) current liabilities and obligations incurred in the usual and
ordinary course of business since the Balance Sheet Date and, in either case (i)
or (ii) above, only as required by the express terms of the agreement or other
instrument pursuant to which the liability or obligation was incurred.
SECTION 6.10. MORTGAGES, LIENS AND GUARANTIES. The Company will not,
without the prior written approval of AMP, which consent shall not be delayed or
unreasonably withheld, enter into or assume any mortgage, pledge, conditional
sale or other title retention agreement, permit any security interest, lien,
encumbrance or claim of any kind to attach to any of its assets (other than
statutory liens and contractual liens of landlords arising in the ordinary
course of business and other liens that do not materially detract from the value
or interfere with the use of such assets), whether now owned or hereafter
acquired, or guarantee or otherwise become contingently liable for any
obligation of another, except obligations arising by reason of enforcement for
collection and other similar transactions in the ordinary course of business, or
make any capital contribution or investment in any person.
SECTION 6.11. ACQUISITION PROPOSALS. From the date of this Agreement
through November 1, 1997 (a) no Owner nor the Company nor any of their
respective officers, directors or partners will, and the Owners and the Company
will direct and use their best efforts to cause the Company's employees, agents
and representatives not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets, any equity securities or partnership interests of the Company (any such
proposal or offer being hereinafter referred to as an
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"Acquisition Proposal") or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal; (b) each Owner and the
Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing, and each will take the necessary steps to
inform the individuals or entities referred to in the first sentence hereof of
the obligations undertaken in this Section; and (c) the Owners and the Company
will notify AMP immediately if any such inquiries or proposals are received by,
any such information is requested from or any such negotiations or discussions
are sought to be initiated or continued with the Company or any Owner.
SECTION 6.12. DISTRIBUTIONS AND REPURCHASES. Except as set forth on
Schedule 6.12, no distribution, payment or dividend of any kind will be declared
or paid by the Company in respect of its partnership interests, nor will any
repurchase of any partnership interests of the Company be approved or effected.
SECTION 6.13. REQUIREMENTS TO EFFECT ACQUISITION. The Company and the
Owners will use their best efforts to take, or cause to be taken, all actions
necessary to effect the Acquisition under applicable law, including, without
limitation, the filing with the appropriate government officials of all
necessary documents in form approved by counsel for the parties to this
Agreement.
SECTION 6.14. FORMATION OF THE GROUP PRACTICE. The Owners, together with
other Doctors of Podiatric Medicine, will form and organize a group practice
(the "Group Practice"), which will be a professional limited liability company
whose operating agreement and other constitutive documents will be in form and
substance satisfactory to AMP. On the Closing Date, immediately prior to
Closing, the Company will transfer to the Owners all of the Company's right,
title and interest in and to, and obligations under, the Employee Benefit Plans.
On the Closing Date, immediately prior to Closing, the Company will transfer to
the Owners all contracts, agreements and other assets listed on Schedule 6.14
(to be delivered by the Company and the Owners prior to Closing, which schedule
will be subject to the approval of AMP, which approval shall not be unreasonably
withheld) which by law cannot be acquired by AMP Subsidiary because they relate
to the practice of medicine or podiatry, and the Owners will immediately
contribute such assets listed on Schedule 6.14 to the Group Practice, together
with such other assets as may be legally required, in exchange for the issuance
of all of the membership interests in the Group Practice. The Owners will not
permit the Group Practice to commence business until the Closing Date.
SECTION 6.15. ACCESS. The Company and the Owners will, at reasonable
times during normal business hours and on reasonable notice, permit AMP and its
authorized representatives reasonable access to, and make available for
inspection, all of the assets and records of the Group Practice, including tax
returns and related information, and permit AMP and its authorized
representatives to inspect and make copies of all such documents, records (other
than
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confidential portions of patient medical records) and information with respect
to the affairs of the Group Practice as AMP and its representatives may request.
SECTION 6.16. LICENSES AND PERMITS. The Company and the Owners will use
their best efforts to obtain all licenses, permits, approvals or other
authorizations required under any law, statute, rule, regulation or ordinance,
or otherwise necessary or desirable, to provide the services of the Group
Practice, the Owners and the Physician Employees contemplated by the Management
Agreement, the Physician Engagement Agreements and the Physician Employment
Agreements and to conduct the intended business of the Group Practice.
SECTION 6.17. PHYSICIAN EMPLOYMENT AGREEMENTS. The Company and the
Owners will use their commercially reasonable best efforts to cause, at or
immediately prior to Closing, each Physician Employee (i) to terminate his or
her employment agreement, if any, with the Company by mutual consent without any
liability therefor on the part of the Company and (ii) to enter into a Physician
Employment Agreement with the Group Practice.
SECTION 6.18. DELIVERY OF SCHEDULES. The Company and the Owners will
deliver to AMP all schedules required to be delivered by them prior to the
Closing.
ARTICLE VII
COVENANTS OF AMP AND AMP SUBSIDIARY
AMP and AMP Subsidiary agree that between the date hereof and the
Closing:
SECTION 7.1. CONSUMMATION OF AGREEMENT. AMP will use its commercially
reasonable efforts to cause the consummation of the transactions contemplated
hereby in accordance with their terms and conditions and take all corporate and
other action necessary to approve the Acquisition.
SECTION 7.2. REQUIREMENTS TO EFFECT ACQUISITION. AMP will use its best
efforts to take, or cause to be taken, all actions necessary to effect the
Acquisition under applicable law, including, without limitation, the filing with
the appropriate government officials of all necessary documents in form approved
by counsel for the parties to this Agreement.
SECTION 7.3. NOTIFICATION OF CERTAIN MATTERS. AMP will promptly inform
the Company and the Owners in writing of any material adverse change in AMP's
prospects, proposed public offering, condition (financial or otherwise),
operations, assets, liabilities or business or (b) any event or information that
would cause AMP to believe reasonably that any of its respective representations
and warranties under this Agreement to be untrue.
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SECTION 7.4. APPROVALS OF THIRD PARTIES. AMP will use its best efforts
to secure, as soon as practicable after the date hereof, all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby.
SECTION 7.5. STOCK OPTION PLAN FOR ADVISORS AND CONSULTANTS. Prior to
Closing, AMP will adopt a non-statutory stock option plan for the benefit of
advisors and consultants to AMP (the "Advisors Plan"). Physician Employees who
agree to and serve as advisors or consultants to AMP may be eligible to receive
non-statutory options under the Advisors Plan.
SECTION 7.6. LICENSES AND PERMITS. AMP will use its best efforts to
obtain all licenses, permits, approvals or other authorizations required under
any law, statute, rule, regulation or ordinance, or otherwise necessary or
desirable, to consummate the transactions or provide the services contemplated
by the Management Agreement and to conduct the intended businesses of AMP and
AMP Subsidiary.
SECTION 7.7. DELIVERY OF SCHEDULES. AMP will deliver to the Company and
the Owners all schedules required to be delivered by it prior to the Closing.
SECTION 7.8. PROFESSIONAL LIABILITY INSURANCE. AMP will use commercially
reasonable methods to obtain for each Physician professional liability insurance
with a benefit date retroactive prior to the Closing Date ("Nose Coverage").
ARTICLE VIII
COVENANTS OF AMP, THE COMPANY AND THE OWNERS
AMP, the Company and the Owners agree as follows:
SECTION 8.1. FILINGS; OTHER ACTION.
(a) AMP will promptly prepare and file with the SEC the Registration
Statement on Form S-1 (or other appropriate Form) to be filed by AMP in
connection with its Initial Public Offering (including the prospectus
constituting a part thereof, the "Registration Statement"). AMP will obtain all
necessary state securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement. The Company and the
Owners will cooperate as may be reasonably requested in connection with any such
action.
(b) Each of the Company, each Owner and AMP represents and warrants that
none of the documents supplied or to be supplied by it for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment and supplement thereto, if any,
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or
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necessary to make the statements therein, in the light of circumstances under
which they were made, not misleading.
(c) The Company will, upon request, furnish AMP with all information
concerning itself, its subsidiaries, directors, officers, partners and
stockholders and such other matters as may be reasonably requested by AMP in
connection with the preparation of the Registration Statement and each amendment
or supplement thereto, or any other statement, filing, notice or application
made by or on behalf of each such party or any of its subsidiaries to any
governmental entity in connection with the Acquisition and the other
transactions contemplated by this Agreement.
SECTION 8.2. AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party will have the continuing obligation until the Closing to
supplement or amend promptly the Schedules with respect to any matter that would
have been or would be required to be set forth or described in the Schedules in
order to not materially breach any representation, warranty or covenant of such
party contained herein; provided, that no amendment or supplement to a Schedule
that constitutes or reflects a material adverse change to the Company may be
made unless AMP consents to such amendment or supplement, and no amendment or
supplement to a Schedule that constitutes or reflects a material adverse change
to AMP may be made unless the Company and the Owners consent to such amendment
or supplement. For all purposes of this Agreement, including, without
limitation, for purposes of determining whether the conditions set forth herein
have been fulfilled, the Schedules hereto will be deemed to be the Schedules as
amended or supplemented with consent pursuant to this Section.
SECTION 8.3. PRORATION OF COSTS AND RENTS. All rents, personal property
taxes and other sums actually paid under the lease agreements between the
Company and its lessors pertaining to the Assets and all expenses and costs
related to the Assets for the month of Closing will be prorated as of the
Closing Date.
SECTION 8.4. MANAGEMENT AGREEMENT. At Closing, the Owners, on behalf of
and as members of the Group Practice, agree to cause the Group Practice to enter
into the Management Agreement with AMP.
SECTION 8.5. PHYSICIAN ENGAGEMENT AGREEMENTS. At or immediately prior to
Closing, each Owner will terminate his or her employment agreement, if any, with
the Company by mutual consent without any liability on the part of the Company
therefor and will enter into his or her Physician Engagement Agreement with the
Group Practice.
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ARTICLE IX
CONDITIONS PRECEDENT OF AMP
Except as may be waived in writing by AMP, or if this Agreement is
terminated pursuant to Article XIV, the obligations of AMP hereunder are subject
to the fulfillment at or prior to the Effective Date of each of the following
conditions:
SECTION 9.1. PROCEEDINGS. No action, proceeding or order by any court or
governmental body or agency will have been threatened, orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
SECTION 9.2. NO MATERIAL ADVERSE EFFECT. No Material Adverse Effect will
have occurred, whether or not such effect shall have been caused by the
deliberate act or omission of the Company or any Owner.
SECTION 9.3. GOVERNMENT APPROVALS AND REQUIRED CONSENTS. The Company,
the Owners, the Group Practice and AMP will have obtained all necessary
government and other third-party approvals and consents.
SECTION 9.4. SECURITIES APPROVALS. The Registration Statement will have
become effective under the Securities Act, and no stop order suspending the
effectiveness of the Registration Statement will have been issued and no
proceedings for that purpose will have been initiated or threatened by the SEC.
At or prior to the Effective Date, AMP will have received all state securities
and "Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The AMP Common Stock will have been approved for listing on The Nasdaq
Stock Market, subject only to official notification of issuance.
SECTION 9.5. CLOSING DELIVERIES. AMP will have received all documents
and agreements, duly executed and delivered in form satisfactory to AMP,
referred to in Section 11.1.
SECTION 9.6. CHARTER AMENDMENT. The Company will have amended its
charter or other constitutive documents so that the Company is no longer a
"professional" corporation or other such "professional" legal entity.
ARTICLE X
CONDITIONS PRECEDENT OF THE COMPANY AND THE OWNERS
Except as may be waived in writing by the Company and the Owners, or if
this Agreement is terminated pursuant to Article XIV, the obligations of the
Company and the
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Owners hereunder are subject to fulfillment at or prior to the Effective Date of
each of the following conditions:
SECTION 10.1. PROCEEDINGS. No action, proceeding or order by any court
or governmental body or agency will have been threatened, orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
SECTION 10.2. GOVERNMENT APPROVALS AND REQUIRED CONSENTS. The Company,
the Owners, the Group Practice and AMP will have obtained all necessary
government and other third-party approvals and consents.
SECTION 10.3. SECURITIES APPROVALS. The Registration Statement will have
become effective under the Securities Act, and no stop order suspending the
effectiveness of the Registration Statement will have been issued and no
proceedings for that purpose will have been initiated or threatened by the SEC.
At or prior to the Effective Date, AMP will have received all state securities
and "Blue Sky" permits necessary to consummate the transactions contemplated
hereby. At or prior to the Effective Date, the AMP Common Stock will have been
approved for listing on The Nasdaq Stock Market, subject only to official
notification of issuance.
ARTICLE XI
CLOSING DELIVERIES
SECTION 11.1. DELIVERIES OF THE COMPANY AND THE OWNERS. At or prior to
the Closing Date, the Company and the Owners will deliver to AMP c/o Baker &
Hostetler LLP, counsel to AMP, the following, all of which will be in a form
satisfactory to AMP and will be held by Baker & Hostetler in escrow pending
Closing, pursuant to an escrow agreement in form and substance mutually
acceptable to the parties hereto:
(a) a copy of resolutions of the Board of Directors of the Company
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements and consummation of the Merger, certified by
the Secretary of the Company as being true and correct copies of the originals
thereof subject to no modification or amendment;
(b) a copy of resolutions or other consents of the Owners as members of
the Group Practice authorizing the execution, delivery and performance of the
Management Agreement, the Physician Engagement Agreements and the Physician
Employment Agreements, each certified by the Secretary of the Group Practice as
being true and correct copies of the originals thereof subject to no
modifications or amendments;
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(c) a certificate of the President of the Company and each Owner, dated
the Closing Date, as to the truth and correctness of the representations and
warranties of the Company and the Owners contained herein on and as of the
Closing Date;
(d) a certificate of the President or Managing Partner, as the case may
be, of the Company and each Owner, dated the Closing Date, (i) as to the
performance of and compliance in all material respects by the Company and the
Owners with all covenants contained herein on and as of the Closing Date and
(ii) certifying that all conditions precedent of the Company and the Owners to
the Closing Date have been satisfied;
(e) a certificate of the Secretary of the Company certifying as to the
incumbency of the directors and officers of the Company and as to the signatures
of such directors and officers who have executed documents delivered at Closing
on behalf of the Company;
(f) a certificate of the Group Practice certifying as to the incumbency
of the members of the Group Practice and as to the signatures of such members
who have executed documents delivered at the Closing on behalf of the Group
Practice;
(g) a certificate, dated within five days prior to the Closing Date, of
the Secretary of State of the respective states of organization of the Company
and the Group Practice establishing that such corporation or partnership is in
existence, has paid all franchise or similar taxes, if any, and, if applicable,
otherwise is in good standing to transact business in its state of organization;
(h) certificates, dated within five days prior to the Closing Date, of
the Secretaries of State of the states in which the Company or the Group
Practice is qualified to do business, to the effect that such corporation or
partnership is qualified to do business and, if applicable, is in good standing
as foreign corporation or partnership, as the case may be, in each of such
states;
(i) an opinion of counsel to the Company and the Owners, dated as of the
Closing Date;
(j) all authorizations, consents, approvals, permits and licenses
referenced in Section 3.8;
(k) the resignations of the partners of the Company as requested by AMP;
(l) the executed Management Services Agreement in substantially the form
attached hereto as Exhibit 11.1(l) (the "Management Agreement");
(m) an executed Physician Engagement Agreement between the Group
Practice and each Owner in substantially the form attached hereto as Exhibit
11.1(m) (the "Physician Engagement Agreements");
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(n) an executed Physician Employment Agreement between the Group
Practice and each Physician Employee in substantially the form attached hereto
as Exhibit 11.1(n) (the "Physician Employment Agreements");
(o) an executed Registration Rights Agreement among AMP, the Owners and
the Company in substantially the form attached hereto as Exhibit 11.1(o) (the
"Registration Rights Agreement");
(p) a nonforeign affidavit, as such affidavit is referred to in Section
1445(b)(2) of the Code, of each Owner, signed under a penalty of perjury and
dated as of the Closing Date, to the effect that such Owner is a United States
citizen or a resident alien (and thus not a foreign person) and providing such
Owner's United States taxpayer identification number; and
(q) such other instrument or instruments as may be necessary or
appropriate, as AMP or its counsel will reasonably request, to carry out and
effect the purpose and intent of this Agreement.
SECTION 11.2. DELIVERIES OF AMP. At or prior to the Closing Date, AMP
will deliver to the Company and the Owners c/o Baker & Hostetler LLP, counsel to
AMP, the following, all of which will be in a form satisfactory to the Company
and the Owners and will be held by Baker & Hostetler in escrow pending Closing,
pursuant to an escrow agreement in form and substance mutually acceptable to the
parties hereto:
(a) a copy of the resolution of the Board of Directors of AMP
authorizing the execution, delivery and performance of this Agreement, and all
related documents and agreements, certified by AMP's Secretary 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 AMP authorizing
the execution, delivery and performance of the Management Agreement, certified
by the Secretary of AMP as being true correct copies of the originals thereof
subject to no modification or amendments;
(c) a certificate of an officer of AMP dated the Closing Date as to the
truth and correctness of the representations and warranties of AMP contained
herein on and as of the Closing Date;
(d) a certificate of an officer of AMP dated the Closing Date (i) as to
the performance and compliance by AMP with all covenants contained herein on and
as of the Closing Date and (ii) certifying that all conditions precedent of AMP
to the Closing have been satisfied;
(e) a certificate of the Secretary of AMP certifying as to the
incumbency of the officers of AMP who have executed documents delivered at the
Closing on behalf of AMP;
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(f) a certificate, dated within five days prior to the Closing Date, of
the Secretary of State of the respective states of incorporation of AMP and AMP
Subsidiary establishing that such corporation is in existence, has paid all
franchise or similar taxes, if any, and, if applicable, otherwise is in good
standing to transact business in its state of incorporation;
(g) certificates, dated within five days prior to the Closing Date, of
the Secretaries of State of the states in which AMP is qualified to do business,
to the effect that AMP is qualified to do business and, if applicable, is in
good standing as a foreign corporation in such state;
(h) an opinion of Baker & Hostetler, counsel to AMP, dated as of the
Closing Date;
(i) the executed Management Agreement;
(j) the executed Registration Rights Agreement;
(k) the Acquisition Consideration in accordance with Article II and
Annex I hereof; and
(l) such other instrument or instruments as may be necessary or
appropriate, as the Company, the Owners or their counsel may reasonably request,
to carry out and effect the purpose and intent of this Agreement.
ARTICLE XII
POST CLOSING MATTERS
SECTION 12.1. FURTHER INSTRUMENTS OF TRANSFER. Following the Closing, at
the request of AMP, the Owners and the Company will 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 12.2. ACQUISITION TAX COVENANT.
(a) The parties intend that the Acquisition, together with the
transactions contemplated by Other Agreements, will qualify as a transfer
pursuant to the requirements of Section 351 of the Code (a "Transfer").
(b) Both prior to and after the Closing, all books and records shall be
maintained, and all Tax Returns and schedules thereto shall be filed in a manner
consistent with the Acquisition being treated as a Transfer. Each party shall
provide to each other such tax information, reports, returns, or schedules as
may be reasonably required to assist such party in accounting for and reporting
the Acquisition as a Transfer.
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ARTICLE XIII
REMEDIES
SECTION 13.1. INDEMNIFICATION BY THE OWNERS AND THE COMPANY. Subject to
the terms and conditions of this Article XIII, each Owner to the extent of their
proportionate interest in the Company, and the Company agree to indemnify,
defend and hold AMP, AMP Subsidiary 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"), as incurred, asserted against or incurred by such
indemnities arising out of or resulting from:
(a) a breach of any representation, warranty or covenant of the Company
or any Owner contained herein or in any schedule or certificate delivered
hereunder;
(b) any violation (or alleged violation) by the Owners, the Company
and/or any of their past or present directors, officers, members, partners,
managers, shareholders, employees (including, without limitation, Physician
Employees), agents, consultants and Affiliates of state or federal laws
governing healthcare 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 third party payor
(including the Medicare and Medicaid programs) on or before the Closing Date; or
(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 any Owner, the Company
(including its subsidiaries) or the Group Practice and provided to AMP or its
counsel by the Company or the Owners specifically for inclusion in any
preliminary prospectus, the Registration Statement or any prospectus forming a
part thereof, or any amendment thereof or supplement thereto, or arising out of
or based upon any omission or alleged omission to state therein a material fact
relating to any Owner, the Company (including its subsidiaries) or the Group
Practice required to be stated therein or necessary to make the statements
therein not misleading and not provided to AMP or its counsel by the Company or
any Owner.
(d) any obligation under a lease to which the Company is a party, which
arises after the Closing Date.
SECTION 13.2. INDEMNIFICATION BY AMP AND AMP SUBSIDIARY. Subject to the
terms and conditions of this Article XIII, AMP and AMP Subsidiary hereby agree
to indemnify, defend and hold the Owners and their respective agents, attorneys
and Affiliates harmless from and
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against all Damages, as incurred, asserted against or incurred by such
indemnities arising out of or resulting from:
(a) a breach by AMP and AMP Subsidiary of any representation, warranty
or covenant of AMP or AMP Subsidiary contained herein or in any schedule or
certificate delivered hereunder; or
(b) 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, or arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to AMP contained in the Private
Placement Memorandum, any preliminary prospectus, the Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to AMP and the transactions contemplated
hereby (including its subsidiaries) required to be stated therein or necessary
to make the statements therein not misleading.
SECTION 13.3. INDEMNIFICATION PROCEDURES. All claims for indemnification
under this Agreement will be asserted and resolved as follows:
(a) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (and, in any event, at least 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. 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.
Within 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 XIII with respect to such Third Party Claim or (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, with the consent of the
Indemnified Party.
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The Indemnifying 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 Indemnifying Party shall deem necessary or
appropriate to protect its interests or those of the Indemnified Party and not
prejudicial to the Indemnified Party. If requested by the Indemnifying Party,
the Indemnified Party agrees, at the sole cost and expense of the Indemnifying
Party, to cooperate with the Indemnifying Party and its counsel in contesting
any Third Party Claim that the Indemnifying Party elects to contest, including,
without limitation, the making of any related counterclaim against the person
asserting the Third Party Claim or any cross-complaint against any person. The
Indemnified Party may participate in, but not control, any defense or settlement
of any Third Party Claim controlled by the Indemnifying Party pursuant to this
Section 13.3(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
Indemnifying 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 13.3(b), or if the Indemnifying Party
elects to defend the Indemnified Party pursuant to Section 13.3(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 if 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. The Indemnifying Party may participate in, but not
control, any defense or settlement controlled by the Indemnified Party pursuant
to this Section 13.3(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 Indemnified 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.
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(d) If 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 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.
(e) Payments of all amounts owing by an Indemnifying Party pursuant to
this Article XIII relating to a Third Party Claim shall be made within 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 13.3(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.
SECTION 13.4. INDEMNIFICATION LIMITATIONS. All claims for
indemnification under this Agreement shall be subject to the following
limitations:
(a) The initial Claim Notice for indemnification must have been
transmitted to the Indemnifying Party within two (2) years of the Closing Date,
unless the subject matter upon which the claim for indemnification is based
involves income tax, environmental or ERISA matters, in which event the initial
Claim Notice must have been transmitted within the applicable statute of
limitations;
(b) The total amount of indemnification to be paid by an Indemnifying
Party pursuant to this Agreement shall not exceed the total consideration either
paid or received, as appropriate, for the transaction contemplated herein; and
(c) No Indemnifying Party shall be liable for payment to an Indemnified
Party pursuant to this Agreement unless and until the aggregate amount of
damages attributable to said Indemnifying Party shall exceed Twenty-Five
Thousand Dollars ($25,000), with the Owners being considered as one aggregate
Indemnifying Party.
SECTION 13.5. REMEDIES NOT EXCLUSIVE. 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.
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SECTION 13.6. 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.
ARTICLE XIV
TERMINATION
SECTION 14.1. TERMINATION. This Agreement may be terminated:
(a) by the Company, seventy-two hours after receipt of AMP's draft
Registration Statement on Form S-1;
(b) at any time prior to the Effective Date by AMP, if, as a result of
its due diligence, AMP reasonably deems termination to be advisable; or
(c) by AMP or the Company if the Acquisition has not been consummated
due to the failure of the Initial Public Offering.
SECTION 14.2. EFFECT OF TERMINATION. In the event this Agreement is
terminated pursuant to Sections 14.1(b) or 14.1(c) above, AMP, the Company and
the Owners shall each be entitled to pursue, exercise and enforce any and all
remedies, rights, powers and privileges available at law or in equity. In the
event of a termination of this Agreement under the provisions of this Article, a
party not then in material breach of this Agreement shall stand fully released
and discharged of any and all obligations under this Agreement.
ARTICLE XV
NONCOMPETITION
SECTION 15.1. PROHIBITED ACTIVITIES. In order to protect AMP against the
unauthorized use or the disclosure of any of its Confidential Information
presently known or hereinafter obtained by the Owners, and other good and
valuable consideration, each Owner hereby agrees that, subject to adjustment
pursuant to Section 15.5, for a period of five years following the Closing Date,
neither the Owner nor any of his or her Affiliates, shall knowingly, directly or
indirectly, for himself or herself or on behalf of any other corporation,
person, firm, partnership, association or any other entity (whether as an
individual, agent, servant, employee, employer, officer, director, shareholder,
investor, principal, consultant or in any other capacity):
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(a) establish, operate or provide physician services at any medical
office, clinic or out-patient and/or ambulatory treatment or diagnostic facility
providing services similar to those provided by the Group Practice or engage or
participate in or finance any business which engages in competition with the
business being conducted by AMP (unless the Owner participated in such business
(other than the practice of medicine) within the geographical area designated
below prior to the Closing Date or the date the Owner became aware of planning
for such business operations by AMP), anywhere within twenty (20) miles of any
location of the Group Practice at which Owner has practiced podiatric medicine
in the prior year; or
(b) induce or attempt to influence any employee of the Group Practice or
AMP to terminate his or her employment or hire any such employee, whether or not
so induced or influenced.
SECTION 15.2. DAMAGES. Because of the difficulty of measuring economic
losses to AMP as a result of the breach of the foregoing covenant and because of
the immediate and irreparable damage that would be caused to AMP for which it
would have no other adequate remedy, each Owner agrees that, in the event of a
breach by him or her of the foregoing covenant, the covenant may be enforced by
AMP by injunctions and restraining orders.
SECTION 15.3. REASONABLE RESTRAINT. It is agreed by the parties that the
foregoing covenants in this Article XV impose a reasonable restraint on the
Owners in light of the activities and businesses of the Company on the date of
the execution of this Agreement and the future plans of the Group Practice.
SECTION 15.4. SEVERABILITY; REFORMATION. The covenants in this Article
XV are severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
SECTION 15.5. TERM. It is specifically agreed that the period of five
years stated above shall be computed by excluding from such computation any time
during which an Owner is in violation of any provision of this Article XV. The
covenants contained in this Article XV shall have no effect if the transactions
contemplated by this Agreement are not consummated for any reason (including
termination pursuant to Section 14.1(b)), but otherwise shall not be affected by
any breach of any other provision hereof by any party hereto.
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ARTICLE XVI
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
SECTION 16.1. NONDISCLOSURE. Each of the parties hereto recognize and
acknowledge that they had in the past, currently have and in the future may
possibly have access to certain Confidential Information of the other that is
valuable, special and a unique asset. Each of the parties hereto 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 the other and (b) to counsel and
other advisors, respectively, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section, unless (i) such
information becomes available to or known by the public generally through no
fault of any party, (ii) disclosure is required by law or the order of any
governmental authority, provided, that, prior to disclosing any information
pursuant to this clause, (iii), each party, as the case may be, shall, if
possible, give prior written notice thereof to the other and provide the other
with the opportunity to contest such disclosure, (iv) 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. In the event of a breach or threatened breach by any party of
the provisions of this Section, the other parties shall be entitled to an
injunction restraining such party from disclosing, in whole or in part, such
Confidential Information. Nothing herein shall be construed as prohibiting any
party 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 no other
adequate remedy would exist, the parties 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 or restraining orders.
SECTION 16.3. SURVIVAL. The obligations of the parties under this
Article XVI shall survive the termination of this Agreement.
ARTICLE XVII
TRANSFER RESTRICTIONS
SECTION 17.1. TRANSFER RESTRICTIONS. For a period of one year following
the Closing, unless the minimum holding period under Rule 144 promulgated under
the Securities Act is shortened, in which case, for such shortened period,
except pursuant to the Registration Rights Agreement, no Owner shall voluntarily
(a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint, or
otherwise dispose of (i) any shares of AMP Common Stock received by
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the Company in the Acquisition, or (ii) any interest (including, without
limitation, an option to buy or sell) in any such shares of AMP Common Stock, in
whole or in part, and no such attempted transfer shall be treated as effective
for any purpose or (b) engage in any transaction, whether or not with respect to
any shares of AMP Common Stock or any interest therein, the intent or effect of
which is to reduce the risk of owning shares of AMP Common Stock. The
certificates evidencing the AMP Common Stock delivered to the Company pursuant
to this Agreement will bear a legend substantially in the form set forth below
and containing such other information as AMP may deem necessary or appropriate:
Except pursuant to the terms of the Registration Rights Agreement
and the Business Purchase Agreement among the issuer, the holder
of this certificate and the other parties thereto, the shares
represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged,
distributed, appointed or otherwise disposed of, and the issuer
shall not be required to give effect to any attempted voluntary
sale, assignment, exchange, transfer, encumbrance, pledge,
distribution, appointment or other disposition prior to one year
after their date of issuance. Upon the written request of the
holder of this certificate, the issuer agrees to remove this
restrictive legend (and any stop order placed with the transfer
agent) after the date specified above.
ARTICLE XVIII
FEDERAL SECURITIES LAW RESTRICTIONS ON AMP COMMON STOCK
SECTION 18.1. INVESTMENT REPRESENTATION. The Company and the Owners
acknowledge that the shares of AMP Common Stock to be delivered to the Company
and the Owners pursuant to this Agreement have not been and will not be
registered under the Securities Act and may not be resold without compliance
with the Securities Act. The AMP Common Stock to be acquired by the Company and
the Owners pursuant to this Agreement is being acquired solely for its own
account, for investment purposes only and with no present intention of
distributing, selling or otherwise disposing of it in connection with a
distribution.
SECTION 18.2. COMPLIANCE WITH LAW. The Company and the Owners covenant,
warrant and represent that none of the shares of AMP Common Stock issued to the
Company and the Owners will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all of
the applicable provisions of the Securities Act and the rules and regulations of
the SEC and applicable state securities laws and regulations. All certificates
evidencing shares of AMP Common Stock shall bear the following legend, in
addition to the legends under Article XVIII:
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The shares represented hereby have not been registered under the
Securities Act of 1933 (the "Act") and may only be sold or
otherwise transferred if the holder hereof complies with the Act
and applicable state securities law.
In addition, certificates evidencing shares of AMP Common Stock shall bear any
legend required by the securities or applicable blue sky laws of any state.
SECTION 18.3. ECONOMIC RISK; SOPHISTICATION. The Company and the Owners
are able to bear the economic risk of an investment in AMP Common Stock acquired
pursuant to this Agreement and can afford to sustain a total loss of such
investment and has such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of the proposed
investment and therefore has the capacity to protect his, her or its own
interests in connection with the acquisition of the AMP Common Stock. The
Company and the Owners or their purchaser representatives have had an adequate
opportunity to ask questions and receive answers from the officers of AMP
concerning any and all matters relating to the transactions described in the
Registration Statement, including, without limitation, the background and
experience of the officers and directors of AMP, the plans for the operations of
the business of AMP and any plans for additional acquisitions and the like. The
Company and the Owners or their purchaser representatives have asked any and all
questions in the nature described in the preceding sentence and all questions
have been answered to his, her or their satisfaction.
ARTICLE XIX
GENERAL
SECTION 19.1. 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
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 19.2. 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 AMP to a
wholly owned subsidiary of AMP; provided, that any such assignment shall not
relieve AMP of its obligations hereunder.
SECTION 19.3. PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES. Except
as otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and permitted assigns of the parties hereto. Neither
this Agreement nor any other agreement contemplated hereby shall be
49
<PAGE>
deemed to confer upon any person not a party hereto or thereto, except AMP
Subsidiary, any rights or remedies hereunder or thereunder.
SECTION 19.4. NO JOINT LIABILITY OF OWNERS. The parties hereto agree
that the Owners shall not be jointly liable for breaches of this Agreement, but
shall each have liability in proportion to their respective ownership of the
Company.
SECTION 19.5. 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 19.6. SEVERABILITY. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under present or future laws effecting
during the term hereof, such provisions 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 19.7. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants contained herein shall survive the
Closing but only as provided herein. All statements contained in any
certificate, exhibit or other instrument delivered by or on behalf of the
Company, any Owner or AMP pursuant to this Agreement shall be deemed to have
been an integral part of this Agreement by such Company, such Owner or AMP, as
the case may be.
SECTION 19.8. 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 19.9. CAPTIONS. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of the
terms or provisions hereof.
SECTION 19.10. GENDER AND NUMBER. When the context requires, the gender
of all words used herein shall include the masculine, feminine and neuter and
the number of all words shall include the singular and plural.
SECTION 19.11. 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
50
<PAGE>
a whole and not to any particular Article, Section or provision of this
Agreement, unless otherwise noted.
SECTION 19.12. CONFIDENTIALITY; PUBLICITY AND DISCLOSURES. Each party
shall keep this Agreement and its terms confidential, and shall make no press
release or public disclosure, either written or oral, regarding the transactions
contemplated by this Agreement without the prior knowledge and consent of the
other parties hereto; provided that the foregoing shall not prohibit any
disclosure (a) by press release, filing or otherwise that AMP 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 AMP in connection with the conduct of its Initial Public Offering and
conducting an examination of the operations and assets of the Company. 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 19.13. NOTICE. Whenever this Agreement requires 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
when actually received by the party to whom notice is sent, 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 AMP: American Medical Providers, Inc.
3555 Timmons Lane, Suite 1550
Houston, Texas 77027
Attn: Mr. Jack N. McCrary
with a copy to: Baker & Hostetler LLP
1000 Louisiana, Suite 2000
Houston, Texas 77002
Attn: Ivan Wood, Esq.
If to the Company
or any Owner: __________________________, D.P.M., P.A.
__________________________
__________________________
Attn: ____________________, D.P.M.
51
<PAGE>
with a copy to: __________________________
__________________________
__________________________
__________________________
SECTION 19.14. CHOICE OF FORUM. The parties hereto agree that should any
suit, action or proceeding arising out of this Agreement be instituted by any
party hereto (other than a suit, action or proceeding to enforce or realize upon
any final court judgment arising out of this Agreement), such suit, action or
proceeding shall be instituted only in a state or federal court in Harris
County, Texas. Each of the parties hereto consents to the in personam
jurisdiction of any state or federal court in Harris County, Texas and waives
any objection to the venue of any such suit, action or proceeding. The parties
hereto recognize that courts outside Harris County, Texas may also have
jurisdiction over suits, actions or proceedings arising out of this Agreement,
and in the event that any party hereto shall institute a proceeding involving
this Agreement in a jurisdiction outside Harris County, Texas, the party
instituting such proceeding shall indemnify any other party hereto for any
losses and expenses that may result from the breach of the foregoing covenant to
institute such proceeding only in a state or federal court in Harris County,
Texas, including without limitation any additional expenses incurred as a result
of litigating in another jurisdiction, such as reasonable fees and expenses of
local counsel and travel and lodging expenses for parties, witnesses, experts
and support personnel.
SECTION 19.15. NO WAIVER; REMEDIES. No party hereto shall by any act
(except by written instrument pursuant to Section 19.1 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 19.16. 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 19.17. DEFINED TERMS. Terms used in Annex I and the Schedules
attached hereto with their initial letter capitalized and not otherwise defined
therein shall have the meanings assigned to such terms in this Agreement.
52
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first written above.
AMERICAN MEDICAL PROVIDERS, INC.:
AMERICAN MEDICAL PROVIDERS, INC.
By: ____________________________
Name: __________________________
Office: ________________________
THE COMPANY:
________________________________
By: ____________________________
Name: __________________________
Office: ________________________
THE OWNERS:
________________________________
53
<PAGE>
ANNEX I
ACQUISITION CONSIDERATION
AGGREGATE CONSIDERATION:
Practice Value $ ____________
Accounts Receivable (Est.) ____________
Aggregate Consideration $ ============
The aggregate Acquisition Consideration to be received by the Company is:
Cash Value of
AMP Shares Total
Cash* At Ipo Price Consideration
----- ------------ -------------
$ $ $
*Cash consideration consists of the net realizable value of net accounts
receivable plus __% of non-monetary assets, not to exceed __% of the total
valuation.
Split of cash and stock is subject to final conversion of the cash to accrual
financial statements for Company at June 30, 1997. Total consideration is fixed,
subject to confirmation by AMP that the information, including but not limited
to financial information, presented to AMP by Owner is accurate, and further
subject to the adjustment as set forth in Section 2.3(b).
_______
Initial
1
<PAGE>
SCHEDULE TO FORM OF STOCK PURCHASE AGREEMENT
The following lists (i) the Affiliated Practices that are parties to Stock
Purchase Agreements with the Company (with the exception of the Stock Purchase
Agreement between Dr. Jerald Kramer and the Company which has been filed
separately as Exhibit 10.15 to the Registration Statement) (ii) the value of
assets contributed by such Affiliated Practices to the Company and (iii) the
various components of consideration to be received by the Affiliated Practices
pursuant to the Stock Purchase Agreements. Other than the assets contributed and
the consideration received by the Affiliated Practices, there are no material
differences among the Stock Purchase Agreements executed by the Affiliated
Practices.
In addition, this schedule sets forth a summary of the material terms of
the Stock Purchase Agreements.
<TABLE>
<CAPTION>
CONSIDERATION TO BE RECEIVED BY AFFILIATED
PRACTICES
---------------------------------------------------
CASH
ASSETS TO BE VALUE OF NUMBER OF DEBT
AFFILIATED PRACTICES CONTRIBUTED SHARES SHARES CASH PAID ASSUMED
- ------------------------------------- ------------- ----------- --------- ----------- --------
<S> <C> <C> <C>
Douglas M. Beek, D.P.M............... $ 21,600 $ 299,735 $ 141,716 --
William B. Bradbury, D.P.M........... 400,190 602,645 202,539 62,500
Karen E. Brooks, D.P.M............... 119,469 336,862 154,140 --
David K. Cantor, D.P.M............... 91,345 375,946 173,981 --
Anthony Halinski, D.P.M.............. 323,870 982,655 395,183 --
S.F. Hartley, D.P.M.................. 65,263 675,226 311,343 --
Dale S. Herman, D.P.M................ 227,228 309,197 150,429 --
Richard Hochman, D.P.M............... 22,717 98,095 52,906 --
Stanley R. Kalish, D.P.M............. 479,735 945,261 443,888 --
Gregory L. Mangum, D.P.M. (1)........ 409,256 770,725 278,195 62,500
Bruce Miller, D.P.M. (2)............. 440,305 912,301 320,162 62,500
Michael Mineo, D.P.M. (2)............ 465,992 1,003,493 380,847 62,500
Robert J. Morris, D.P.M.............. 63,447 121,539 120,385 --
Steven A. Moskowitz, D.P.M........... 465,275 964,944 354,417 62,500
Jeffrey R. Murray, D.P.M............. 28,566 519,187 267,882 --
Sherman Nagler, D.P.M. (1)........... 429,110 805,276 283,707 62,500
Robert G. Parker, D.P.M.............. 519,343 804,522 289,290 118,500
Steven P. Richman, D.P.M............. 97,454 481,189 219,001 --
Charles P. Sanicola, D.P.M........... 45,066 278,863 136,204 --
Mark R. Sands D.P.M. (2)............. 163,897 822,300 367,588 --
Jerry S. Silverman, D.P.M............ 180,865 394,267 106,422 100,000
Donald C. Stran, D.P.M. (2).......... 108,420 760,575 330,992 --
Barry M. Tuvel, D.P.M................ 62,037 471,119 211,706 --
Richard A. Weissman, D.P.M........... 21,600 299,735 141,716 --
------------- ----------- ----------- --------
Total........................... $ 5,252,050 $14,035,657 $ 5,834,639 $593,500
============= =========== =========== ========
</TABLE>
- ------------
(1) Such DPM signed a Stock Purchase Agreement although the purchase related to
the purchase of assets of a sole proprietorship and the stock of a
corporation.
(2) Such DPM signed Stock Purchase Agreement(s) and Business Purchase
Agreement(s) because the Company purchased the stock of podiatric entity(s)
owned by such DPM and the assets of sole proprietorship(s) owned by such
DPM. The consideration and assets contributed listed herein includes the
total amount of consideration and assets contributed under both types of
agreements for such DPM. For the material terms of the Business Purchase
Agreements, see Exhibit 10.9 filed herewith.
MATERIAL TERMS OF STOCK PURCHASE AGREEMENTS
The Stock Purchase Agreements provide that the Company will acquire, and
each DPM will transfer to AMP, stock of each of the Affiliated Practices. If the
conditions to closing in the Stock Purchase Agreements are satisfied, the
Company's affiliations with the Affiliated Practices are expected to be
consummated simultaneously with the closing of the Offering.
A
<PAGE>
CONSIDERATION. The consideration to be paid by the Company for all of the
initial Affiliated Practices is being determined by arms-length negotiations
between the Company and a representative of each Affiliated Practice. The
aggregate consideration to be paid by the Company for all initial Affiliated
Practices is approximately $33.1 million, including the assumption of $656,000
in indebtedness. The consideration is based upon the Affiliated Practice's gross
revenue, growth potential, quality of patients and service delivery and depth of
presence in its local market.
The consideration to be paid for the initial Affiliated Practices will be
paid by a combination of cash, Common Stock of the Company and the assumption of
certain debt.
COVENANTS. Each DPM agrees under their relevant Stock Purchase Agreement
that, for a period of five years, he or she will not compete with the business
of the Affiliated Practice within 20 miles of any location of the Affiliated
Practice's Regional Group Practice at which the DPM has practiced podiatric
medicine in the prior year. Each DPM also will agree that during this time
period, he or she will not induce or attempt to induce any employee of the
Regional Group Practice or any of its affiliates to terminate his or her
employment with the Regional Practice Group. Additionally, the parties to the
Stock Purchase Agreement agree not to disclose each other's confidential
information.
INDEMNIFICATION. Under the Stock Purchase Agreements, each DPM (to the
extent of their proportionate interest in the Affiliated Practice) and each
Affiliated Practice will be obligated to indemnify the Company and its
subsidiaries for (i) a breach of any representation, warranty or covenant of the
Affiliated Practice or any owner, (ii) any violation (or alleged violation) by
the DPMs, the Affiliated Practice or past or present affiliates of state or
federal laws governing healthcare fraud and abuse (including, but not limited
to, fraud and abuse in the Medicare and Medicaid programs) occurring on or
before the Closing or any overpayment or obligation (or alleged overpayment or
obligation) arising out of or resulting from claims submitted to any third party
payor (including the Medicare and Medicaid programs) on or before the Closing,
or (iii) any liability under any federal or state securities law or regulation
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact relating to any DPM, the Affiliated Practice (including its
subsidiaries) or their Regional Group Practice and provided to the Company or
its counsel by the Affiliated Practice or its DPMs.
The Company will be obligated under the Stock Purchase Agreements to
indemnify DPMs and the Affiliated Practices for (i) a breach by the Company of
any of its representations, warranties or covenants in the Purchase Agreement
and (ii) any liability under any federal or state securities law or regulation
arising out of or based upon an untrue statement or alleged untrue statement of
a material fact relative to the Company contained in the Prospectus, any
preliminary prospectus, the Registration Statement or any amendment or
supplement arising out of or based upon any omission or alleged omission to
state a material fact necessary to make the statements not misleading.
ACCOUNTING TREATMENT. As a result of the transactions contemplated by the
Stock Purchase Agreements, the historical balance sheet information of the
Affiliated Practices will be combined on an historical cost basis in accordance
with generally accepted accounting principles as if the Affiliated Practices had
always been members of the same group. Cash payments attributed to non-monetary
assets made to DPMs of Affiliated Practices will be accounted for as a cash
dividend. The monetary assets of all the Affiliated Practices will be acquired
at their fair market value which is expected to be approximately $4.8 million.
CONDITIONS TO CONSUMMATION. The Company's obligation to consummate the
Closing under the Stock Purchase Agreements is subject to a variety of
conditions, including, but not limited to, the following: (i) the formation of
the Regional Group Practice; (ii) the execution by the Regional Group Practice
of a management services agreement; (iii) the delivery of documents of
conveyance; (iv) the acquisition by the Company of all licenses, consents and
permits, and the provision of all notices, necessary for the Company and the
Affiliated Practices to continue their operations; (v) the absence of any
injunction or other proceeding to prohibit the Closing; and (vi) the
satisfactory completion by the Company of its due diligence investigation of the
Affiliated Practices through the Closing.
B
<PAGE>
CONDUCT OF BUSINESS PENDING CLOSING. Pursuant to each Stock Purchase
Agreement, each Affiliated Practice and its DPMs will agree that, until the
Closing, the Affiliated Practice will operate its business only in the usual,
regular and ordinary course, consistent with past practices, and will restrict
certain activities except with the prior written consent of the Company.
TERMINATION. Each Stock Purchase Agreement and the transactions
contemplated thereby may be terminated prior to the Closing by the DPM or the
Company if the acquisition has not been consummated due to the failure of the
Offering made hereby.
RESALES. The Company's Common Stock to be delivered to DPMs under the
Stock Purchase Agreements will not be registered under the Securities Act or any
state securities act and will be offered and sold in reliance upon exemptions
from the registration requirements of the Securities Act and such laws. Thus,
Common Stock issued pursuant to the Purchase Agreements will not be readily
transferable immediately.
Pursuant to each Stock Purchase Agreement, each DPM receiving Common Stock
has agreed not to sell or otherwise dispose of any Common Stock during a 180-day
period after the Closing without the prior written consent of the underwriters
of the Offering made hereby.
C
EXHIBIT 10.9
- --------------------------------------------------------------------------------
FORM OF
BUSINESS PURCHASE AGREEMENT
AMONG
AMERICAN MEDICAL PROVIDERS, INC.,
------------------------------------,
AND
THE OWNERS NAMED HEREIN
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I Definitions....................................................... 1
Section 1.1. Definitions........................................... 1
ARTICLE II The Acquisition.................................................. 7
Section 2.1. The Acquisition....................................... 7
Section 2.2. The Closing........................................... 7
Section 2.3. Acquisition Consideration............................. 8
Section 2.4. Fractional Shares..................................... 8
Section 2.5. Subsequent Actions.................................... 8
ARTICLE III Representations and Warranties of the Company and the Owners.... 9
Section 3.1. Organization and Good Standing; Qualification......... 9
Section 3.2. Capital Structure..................................... 9
Section 3.3. Transactions in Capital............................... 9
Section 3.4. Continuity of Business Enterprise..................... 10
Section 3.5. Records............................................... 10
Section 3.6. Authorization and Validity............................ 10
Section 3.7. No Violation.......................................... 10
Section 3.8. Consents.............................................. 10
Section 3.9. Financial Statements.................................. 11
Section 3.10. Liabilities and Obligations........................... 11
Section 3.11. Employee Matters...................................... 11
Section 3.12. Aliens................................................ 13
Section 3.13. Employee Benefit Plans................................ 13
Section 3.14. Absence of Certain Changes............................ 15
Section 3.15. Title; Leased Assets.................................. 16
Section 3.16. Commitments........................................... 17
Section 3.17. Insurance............................................. 18
Section 3.18. Proprietary Rights and Information.................... 19
Section 3.19. Taxes................................................. 19
Section 3.20. Compliance with Laws.................................. 21
Section 3.21. Finder's Fee.......................................... 21
Section 3.22. Litigation............................................ 21
Section 3.23. Condition of Fixed Assets............................. 22
Section 3.24. Distributions and Repurchases......................... 22
Section 3.25. Banking Relations..................................... 22
Section 3.26. Interested Persons; Affiliations...................... 22
i
<PAGE>
Section 3.27. Environmental Matters................................. 22
Section 3.28. Certain Payments...................................... 23
Section 3.29. Medical Waste......................................... 23
Section 3.30. Medicare and Medicaid Programs........................ 23
Section 3.31. Fraud and Abuse....................................... 24
Section 3.32. Payors................................................ 24
ARTICLE IV Representations and Warranties of the Owners..................... 25
Section 4.1. Validity; Owner's Capacity............................ 25
Section 4.2. No Violation.......................................... 25
Section 4.3. Personal Holding Companies; Control of Related
Businesses.......................................... 25
Section 4.4. Transfers of Ownership Interests...................... 25
Section 4.5. Accredited Investor Status............................ 25
Section 4.6. Consents.............................................. 26
Section 4.7. Certain Payments...................................... 26
Section 4.8. Finder's Fee.......................................... 26
Section 4.9. Interested Persons; Affiliations...................... 26
Section 4.10. Investments in Competitors............................ 26
Section 4.11. Disposition of AMP Shares............................. 26
ARTICLE V Representations and Warranties of AMP and AMP Subsidiary.......... 27
Section 5.1. Organization and Good Standing........................ 27
Section 5.2. Capitalization of AMP................................. 27
Section 5.3. Capitalization of AMP Subsidiary...................... 27
Section 5.4. Authorization and Validity............................ 27
Section 5.5. No Violation.......................................... 27
Section 5.6. Finder's Fee.......................................... 28
Section 5.7. Capital Stock......................................... 28
Section 5.8. Consents.............................................. 28
Section 5.9. Liabilities and Obligations........................... 28
Section 5.10. Employee Benefit Plans................................ 28
Section 5.11. Taxes................................................. 29
Section 5.12. Compliance with Laws.................................. 29
Section 5.13. Litigation............................................ 30
ARTICLE VI Covenants of the Company and the Owner........................... 30
Section 6.1. Consummation of Agreement............................. 30
Section 6.2. Business Operations................................... 30
Section 6.3. Access................................................ 30
Section 6.4. Tax Returns........................................... 31
Section 6.5. Notification of Certain Matters....................... 31
Section 6.6. Approvals of Third Parties............................ 31
Section 6.7. Employee Matters...................................... 31
Section 6.8. Contracts............................................. 32
ii
<PAGE>
Section 6.9. Capital Assets; Payments of Liabilities............... 32
Section 6.10. Mortgages, Liens and Guaranties....................... 32
Section 6.11. Acquisition Proposals................................. 32
Section 6.12. Distributions and Repurchases......................... 33
Section 6.13. Requirements to Effect Acquisition.................... 33
Section 6.14. Formation of the Group Practice....................... 33
Section 6.15. Access................................................ 33
Section 6.16. Licenses and Permits.................................. 34
Section 6.17. Physician Employment Agreements....................... 34
Section 6.18. Delivery of Schedules................................. 34
ARTICLE VII Covenants of AMP and AMP Subsidiary............................. 34
Section 7.1. Consummation of Agreement............................. 34
Section 7.2. Requirements to Effect Acquisition.................... 34
Section 7.3. Notification of Certain Matters....................... 34
Section 7.4. Approvals of Third Parties............................ 35
Section 7.5. Stock Option Plan for Advisors and Consultants........ 35
Section 7.6. Licenses and Permits.................................. 35
Section 7.7. Delivery of Schedules................................. 35
Section 7.8. Professional Liability Insurance...................... 35
ARTICLE VIII Covenants of AMP, the Company and the Owners................... 35
Section 8.1. Filings; Other Action................................. 35
Section 8.2. Amendment of Schedules................................ 36
Section 8.3. Proration of Costs and Rents.......................... 36
Section 8.4. Management Agreement.................................. 36
Section 8.5. Physician Engagement Agreements....................... 36
ARTICLE IX Conditions Precedent of AMP...................................... 37
Section 9.1. Proceedings........................................... 37
Section 9.2. No Material Adverse Effect............................ 37
Section 9.3. Government Approvals and Required Consents............ 37
Section 9.4. Securities Approvals.................................. 37
Section 9.5. Closing Deliveries.................................... 37
Section 9.6. Charter Amendment..................................... 37
ARTICLE X Conditions Precedent of the Company and the Owners................ 37
Section 10.1. Proceedings........................................... 38
Section 10.2. Government Approvals and Required Consents............ 38
Section 10.3. Securities Approvals.................................. 38
ARTICLE XI Closing Deliveries............................................... 38
Section 11.1. Deliveries of the Company and the Owners.............. 38
Section 11.2. Deliveries of AMP..................................... 40
iii
<PAGE>
ARTICLE XII Post Closing Matters............................................ 42
Section 12.1. Further Instruments of Transfer....................... 42
Section 12.2. Acquisition Tax Covenant.............................. 42
ARTICLE XIII Remedies....................................................... 42
Section 13.1. Indemnification by the Owners and the Company......... 42
Section 13.2. Indemnification by AMP and AMP Subsidiary............. 43
Section 13.3. Indemnification Procedures............................ 43
Section 13.4. Indemnification Limitations........................... 45
Section 13.5. Remedies Not Exclusive................................ 46
Section 13.6. Costs, Expenses and Legal Fees........................ 46
ARTICLE XIV Termination..................................................... 46
Section 14.1. Termination........................................... 46
Section 14.2. Effect of Termination................................. 46
ARTICLE XV Noncompetition................................................... 47
Section 15.1. Prohibited Activities................................. 47
Section 15.2. Damages............................................... 47
Section 15.3. Reasonable Restraint.................................. 47
Section 15.4. Severability; Reformation............................. 48
Section 15.5. Term.................................................. 48
ARTICLE XVI Nondisclosure of Confidential Information....................... 48
Section 16.1. Nondisclosure......................................... 48
Section 16.2. Damages............................................... 48
Section 16.3. Survival.............................................. 49
ARTICLE XVII Transfer Restrictions.......................................... 49
Section 17.1. Transfer Restrictions................................. 49
ARTICLE XVIII Federal Securities Law Restrictions on AMP Common Stock....... 49
Section 18.1. Investment Representation............................. 49
Section 18.2. Compliance with Law................................... 50
Section 18.3. Economic Risk; Sophistication......................... 50
ARTICLE XIX General......................................................... 50
Section 19.1. Amendment; Waivers.................................... 50
Section 19.2. Assignment............................................ 51
Section 19.3. Parties in Interest; No Third Party Beneficiaries..... 51
Section 19.4. No Joint Liability of Owners.......................... 51
Section 19.5. Entire Agreement...................................... 51
Section 19.6. Severability.......................................... 51
Section 19.7. Survival of Representations, Warranties and Covenants. 51
iv
<PAGE>
Section 19.8. Governing Law......................................... 51
Section 19.9. Captions.............................................. 52
Section 19.10. Gender and Number.................................... 52
Section 19.11. Reference to Agreement............................... 52
Section 19.12. Confidentiality; Publicity and Disclosures........... 52
Section 19.13. Notice............................................... 52
Section 19.14. Choice of Forum...................................... 53
Section 19.15. No Waiver; Remedies.................................. 53
Section 19.16. Counterparts......................................... 54
Section 19.17. Defined Terms........................................ 54
v
<PAGE>
FORM OF
BUSINESS PURCHASE AGREEMENT
Business Purchase Agreement (this "Agreement"), dated as of
_____________, 1997, among ______________________________ P.C., a Texas
professional corporation ("the "Company"), ___________________, D.P.M.,
(collectively the "Owners" and individually an "Owner"), and American Medical
Providers, Inc., a Delaware corporation, its affiliates, successors or assigns
("AMP").
The Company and the Owners of the Company desire to contribute, and AMP
desires to receive, certain assets of the Company, and, accordingly, the Owners,
the Company and AMP desire to effect the Acquisition (defined below) upon the
terms and subject to the conditions contained herein.
It is intended that for federal income tax purposes the Acquisition,
together with the transactions contemplated by the Other Agreements (defined
below) will qualify as a transfer of assets pursuant to the requirements of
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code").
AMP intends to enter into business purchase agreements or other
acquisition agreements (collectively, the "Other Agreements") similar to this
Agreement, in order to acquire other podiatry or other medical practices.
To provide AMP with the necessary working capital and funds to
consummate the transactions contemplated hereby and by the Other Agreements, AMP
expects to, subject to the terms and conditions of this Agreement, enter into an
underwriting agreement with an Underwriter Representative (defined below) in
connection with a proposed Initial Public Offering (defined below).
In consideration of the mutual representations, warranties and
covenants herein contained and such other good and valuable consideration, the
receipt and sufficiency of which are hereby mutually 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. The following terms have the meanings set
forth below:
"Acquisition" has the meaning set forth in Section 2.1.
"Acquisition Consideration" has the meaning set forth in Section 2.3.
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"actual knowledge," "have no actual knowledge of," "do not actually
know of" and similar phrases mean (i) in the case of a natural person, the
actual conscious awareness, or not, as the context requires, of the particular
fact by such person or (ii) in the case of an entity, the actual conscious
awareness, or not, as the context requires, of the particular fact by any
stockholder, partner, owner, director or officer of such entity.
"Advisors Plan" has the meaning set forth in Section 7.5.
"Affiliate," with respect to any person, means a person that directly
or indirectly through one or more intermediaries controls, is controlled by or
is under common control with such person.
"AMP Commitment" has the meaning set forth in Section 5.11.
"AMP Common Stock" means the common stock, par value $0.01 per share,
of AMP.
"AMP Employee Benefit Plans" has the meaning set forth in Section 5.10.
"AMP Subsidiary" means the wholly-owned subsidiary of AMP formed prior
to Closing identified in Section 2.1.
"AMP Subsidiary Common Stock" means the common stock, par value $0.01
per share, of AMP Subsidiary.
"Arthur Andersen" means Arthur Andersen LLP, independent certified
public accountants.
"Assets" means the Equipment and all properties and assets (tangible
and intangible) of every kind and wherever situated that are owned by the
Company or in which the Company has any right or interest (including, without
limitation, rights under its insurance policies and warranties related thereto;
its causes of action, judgments, claims and demands of whatever nature related
thereto; its deferred charges, security deposits, advance payments, prepaid
items, claims for refunds, rights of offset and credits of all kinds related
thereto; its rights under all Assigned Commitments; all personal property of
every kind and character as used in connection with Equipment or otherwise and
its files, papers and records relating to the aforesaid properties and assets),
other than the Excluded Assets.
"Assignment and Assumption Agreement" has the meaning set forth in
Section 11.1(r).
"Assumed Liabilities" means those fixed and determinable liabilities of
the Company listed on Schedule 1.1. Except for the Assumed Liabilities, AMP
shall not and does not assume or agree to pay, perform or discharge any
liabilities or obligations of the Company, whether accrued, absolute, contingent
or otherwise.
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"Balance Sheet" has the meaning set forth in Section 3.9.
"Balance Sheet Date" has the meaning set forth in Section 3.9.
"best knowledge," "have no knowledge of," "do not know of" or "to the
knowledge of" and similar phrases mean (i) in the case of a natural person, the
particular fact was known, or not known, as the context requires, to such person
or (ii) in the case of an entity, the particular fact was known, or not known,
as the context requires, to any stockholder, partner, owner, director or officer
of such entity.
"Cash Compensation" has the meaning set forth in Section 3.11(a).
"Claim Notice" has the meaning set forth in Section 13.3.
"Closing" means the closing of the transactions contemplated by this
Agreement.
"Closing Date" has the meaning set forth in Section 2.2.
"Code" has the meaning set forth in the recitals to this Agreement.
"Commitments" has the meaning set forth in Section 3.16.
"Company" has the meaning set forth in the recitals hereto.
"Compensation Plans" has the meaning set forth in Section 3.11(b).
"Confidential Information" means all trade secrets and other
confidential and/or proprietary information of the particular person, including
information derived from reports and investigations, research, work in progress,
codes, marketing and sales programs, referral sources, patient lists, financial
projections, cost summaries, pricing formulae, 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 such person by such
person's stockholders, owners, partners, employees, officers, directors, agents,
representatives or consultants.
"Controlled Group" has the meaning set forth in Section 3.13(g).
"Damages" has the meaning set forth in Section 13.1.
"Effective Date" means the date that the Registration Statement is
declared effective by the SEC.
"Election Period" has the meaning set forth in Section 13.3.
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"Employee Benefit Plans" has the meaning set forth in Section 3.13(a).
"Employee Policies and Procedures" has the meaning set forth in Section
3.11(d).
"Employment Agreements" has the meaning set forth in Section 3.11(c).
"Environmental Laws" means any laws or regulations pertaining to the
environment as in effect on the date hereof and the Closing Date, including
without limitation (i) the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (42 U.S.C. ss.ss. 9601 ET SEQ.), as amended (including
without limitation as amended pursuant to the Superfund Amendments and
Reauthorization Act of 1986) and any regulations promulgated thereunder, (ii)
the Resource Conservation and Recovery Act of 1976 (42 U.S.C. ss.ss. 6901 ET
SEQ.), as amended, and any regulations promulgated thereunder, and (iii) the
provisions contained in any similar federal, state or local statutes or
regulations relating to environmental matters applicable to the Company's assets
or operations.
"Equipment" means all equipment, machinery, tools and similar assets
owned by the Company and used by the Company in its business, including, without
limitation, all supplies of the Company related thereto.
"ERISA" has the meaning set forth in Section 3.13(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" means the following assets and properties of the
Company: (i) the Acquisition Consideration, (ii) the Company's right to enforce
AMP's representations, warranties and covenants hereunder and the obligations of
AMP to pay, perform or discharge the Assumed Liabilities and all other rights,
including rights of indemnification, of the Company under this Agreement or any
instrument executed pursuant hereto and (iii) the Employee Benefit Plans.
"Financial Statements" has the meaning set forth in Section 3.9.
"Fixed Assets" has the meaning set forth in Section 3.23.
"Group Practice" means the professional limited liability company to be
formed pursuant to Section 6.14.
"Indemnified Party" has the meaning set forth in Section 13.3.
"Indemnifying Party" has the meaning set forth in Section 13.3.
"Indemnity Notice" has the meaning set forth in Section 13.3.
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"Initial Public Offering" means the initial underwritten public
offering of AMP Common Stock contemplated by the Registration Statement.
"Initial Public Offering Price" means the price per share of AMP Common
Stock received by AMP in connection with its Initial Public Offering.
"Insurance Policies" has the meaning set forth in Section 3.17.
"IRS" means the Internal Revenue Service.
"Lease Assignments" has the meaning set forth in Section 11.1(s).
"Management Agreement" has the meaning set forth in Section 11.1(1).
"Material Adverse Effect" means a material adverse effect on the
business, operations, condition (financial or otherwise), results of operations
or prospects of the Company in consideration of all relevant facts and
circumstances.
"Medical Waste" means (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" means the following, including regulations
promulgated and orders issued thereunder, as in effect on the date hereof and
the Closing Date: (i) the MWTA, (ii) the U.S. Public Vessel Medical Waste
Anti-Dumping Act of 1988, 33 U.S.C.A. ss.ss. 2501 ET SEQ., (iii) the Marine
Protection, Research and Sanctuaries Act of 1972, 33 U.S.C.A. ss.ss. 1401 ET
SEQ., (iv) the Occupational Safety and Health Act, 29 U.S.C.A. ss.ss. 651 ET
SEQ., (v) the United States Department of Health and Human Services, National
Institute for Occupational Safety and Health, Infectious Waste Disposal
Guidelines, Publication No. 88-119 and (vi) any other federal, state, regional,
county, municipal or other local laws, regulations and ordinances insofar as
they are applicable to the Company's assets or operations and purport to
regulate Medical Waste or impose requirements relating to Medical Waste.
"MWTA" means the Medical Waste Tracing Act of 1988, 42 U.S.C. ss.ss.
6992, ET SEQ.
"Nose Coverage" has the meaning set forth in Section 7.8.
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"ordinary course of business" means the usual and customary way in
which the particular entity has conducted its business in the past, in all
cases, in compliance with law.
"Other Agreements" has the meaning set forth in the recitals to this
Agreement.
"Owner(s)" means those person(s), all of whom are identified in the
first paragraph of this Agreement, who own, beneficially and of record, all of
the ownership interests in the Company, whatever form those interests may take,
including, without limitation, capital stock, partnership interests, units,
shares in profit, membership interests or the like.
"Payors" has the meaning set forth in Section 3.30.
"person" means any natural person, corporation, partnership, joint
venture, limited liability company, association, group, organization or other
entity.
"Physician Employee" means any physician of the Company executing a
Physician Employment Agreement.
"Physician Employment Agreements" has the meaning set forth in Section
11.1(n).
"Physician Engagement Agreements" has the meaning set forth in Section
11.1(m).
"Private Placement Memorandum" means the Confidential Private Placement
Memorandum, dated June, 1997, provided by AMP to the Owners and the Company.
"Proprietary Rights" has the meaning set forth in Section 3.18.
"Registration Rights Agreement" has the meaning set forth in Section
11.1(o).
"Registration Statement" has the meaning set forth in Section 8.1(a).
"Related Acquisitions" means, collectively, the Acquisition and the
mergers and acquisitions of entities and assets contemplated by the Other
Agreements.
"Reorganization" has the meaning set forth in Section 12.2.
"Schedules" means 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.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
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"Surviving Corporation" has the meaning set forth in Section 2.1.
"Surviving Corporation Common Stock" means the common stock, par value
$0.01 per share, of the Surviving Corporation.
"Taxes" means all taxes, however denominated, including any interest,
penalties or other additions to tax that may become payable in respect thereof,
imposed by any federal, state, territorial, state, local or foreign government
or any agency or political subdivision of any such government, which taxes shall
include, without limiting the generality of the foregoing, all income or profits
taxes, real property gains taxes, payroll and employee withholding taxes,
unemployment insurance taxes, social security taxes, sales and use taxes, ad
valorem taxes, excise taxes, franchise taxes, gross receipts taxes, occupation
taxes, real and personal property taxes, stamp taxes, environmental taxes,
alternative minimum taxes, transfer taxes, workers compensation or Pension
Benefit Guaranty Corporation premiums, and other obligations of the same or of a
similar nature, which the Company is required to pay, withhold or collect.
"Tax Returns" shall mean all reports, estimates, information statements
and returns relating to, or required to be filed in connection with, any Taxes,
including information returns or reports with respect to backup withholding and
other payments to third parties.
"Third Party Claim" has the meaning set forth in Section 13.3.
"Transfer" has the meaning set forth in Section 12.2.
"Underwriter Representative" means the underwriter in the Initial
Public Offering who acts as the lead managing underwriter of the Initial Public
Offering.
ARTICLE II
THE ACQUISITION
SECTION 2.1. THE ACQUISITION. Subject to the terms and conditions of
this Agreement, on the Closing Date, the Company shall transfer, assign, convey
and deliver the Assets to AMP or its subsidiary ("AMP Subsidiary"), free and
clear of all security interests, liens, claims and encumbrances (other than
statutory liens and contractual liens of landlords arising in the ordinary
course of business or other liens that do not materially detract from the value
or interference with the use of such properties or assets), and AMP Subsidiary
shall accept and acquire from the Company the Assets and assume the Assumed
Liabilities (the "Acquisition").
SECTION 2.2. THE CLOSING. The Closing of the Acquisition will take
place at 10:00 a.m., local time, at the offices of Baker & Hostetler, Suite
2000, 1000 Louisiana, Houston, Texas on the day on which the transactions
contemplated by the Initial Public Offering are consummated.
The date on which the Closing occurs is the "Closing Date."
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SECTION 2.3. ACQUISITION CONSIDERATION.
(a) CONSIDERATION. Subject to post-closing adjustments under Section
2.3(b) below, the total consideration for the Assets will be: (i) the cash and
shares of AMP Common Stock in the amounts set forth on Annex I hereto (the
"Acquisition Consideration") and (ii) the assumption of the Assumed Liabilities,
if any. The cash portion of the Acquisition Consideration consists of net
realizable value of net accounts receivable plus __% of non-monetary assets, not
to exceed __% of the total valuation ("Cash Consideration"). Annex I attached
hereto shows an estimate of the net accounts receivable as of the Balance Sheet
Date.
(b) POST-CLOSING ADJUSTMENTS OF NET ACCOUNTS RECEIVABLE CONSIDERATION.
On the six month anniversary of the Closing Date, AMP will review the estimate
of net accounts receivable. If AMP has collected more than the estimated
accounts receivable, such amount will be paid to the Owners according to their
percentage ownership in the Company as of the Closing Date. If AMP has collected
less than the estimate of net accounts receivable, the Owners will be jointly
and severally liable and will repay the deficit amount. All amounts under this
Section 2.3(b) shall be payable in cash within sixty (60) days of written notice
sent by AMP to the Owners. The Owners agree that AMP may offset the accounts
receivable deficit against any other amounts owed by AMP to Owners under any
other agreements.
(c) ALLOCATION OF PURCHASE PRICE. The Acquisition Consideration shall
be allocated among the Assets as set forth in Schedule 2.3(c) to be delivered by
the Company prior to Closing, which schedule will be subject to the approval of
AMP. AMP, the Company and the Owners will not take any position on their
respective income tax returns that is inconsistent with such allocation.
SECTION 2.4. FRACTIONAL SHARES. Notwithstanding any other provision
herein, no fractional shares of AMP Common Stock shall be issued, and the person
entitled hereunder to receive a fractional share of AMP Common Stock but for
this Section 2.4 will be entitled to receive a cash payment in lieu thereof
reflecting such person's proportionate interest in a share of AMP Common Stock
multiplied by the Initial Public Offering Price.
SECTION 2.5. SUBSEQUENT ACTIONS. If, at any time after the Closing, AMP
shall 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 AMP Subsidiary its right, title or interest in, to or
under any of the rights, properties or assets of the Company acquired or to be
acquired by AMP Subsidiary as a result of, or in connection with, the
Acquisition or otherwise to carry out this Agreement, and to transfer the Assets
of the Company in return for the consideration set forth in this Agreement, the
officers and directors of AMP Subsidiary shall be authorized to execute and
deliver, in the name and on behalf of the Company, all such deeds, bills of
sale, assignments and assurances and to take and do, in the name and on behalf
of the Company, 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 such rights, properties or assets in AMP Subsidiary or otherwise to
carry out this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE OWNERS
The Company and the Owners (in proportion to each such Owner's
respective ownership of the Company) represent and warrant to AMP and AMP
Subsidiary that the following are true and correct as of the Closing Date:
SECTION 3.1. ORGANIZATION AND GOOD STANDING; QUALIFICATION. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of its state of organization with all requisite power and authority to
carry on the business in which it is engaged, to own the properties it owns, to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The Company is not qualified or licensed to do business in
any other jurisdiction. The Company has no assets, employees or offices in a
state other than the state of its organization. Except as set forth in Schedule
3.1, none of the Company, any Owner or any Physician Employee owns, directly or
indirectly, any of the capital stock of any other corporation or any entity or a
profit sharing, participation or other interest in any corporation, partnership,
joint venture or other entity that is engaged in a business that is in or
related to the healthcare industry.
SECTION 3.2. CAPITAL STRUCTURE. The Owners own all of the Company's
issued and outstanding common stock in the respective amounts set forth in
Schedule 3.2, free and clear of all security interests, liens, adverse claims,
encumbrances, equities, proxies and shareholders' agreements, except to the
extent specifically disclosed in detail on Schedule 3.2. Each outstanding share
of common stock of the Company has been legally and validly issued and is fully
paid and nonassessable. No share of capital stock is owned by the Company in
treasury. No shares of capital stock of the Company has been issued or disposed
of in violation of the preemptive rights, rights of first refusal or similar
rights of any of the Company's stockholders. The Company has no bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or are convertible into or exercisable for securities having the right to
vote) with the stockholders of the Company on any matter.
SECTION 3.3. TRANSACTIONS IN CAPITAL. The Company has not acquired any
of its capital stock. Except as set forth in Schedule 3.3, there exist no
options, warrants, subscriptions or other rights to purchase, or securities
convertible into or exchangeable for, any of the authorized or outstanding
securities of the Company, and no option, warrant, call, conversion right or
commitment of any kind exists that obligates the Company to issue any of its
authorized but unissued capital stock. Except as set forth in Schedule 3.3, the
Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof. Except as set
forth in Schedule 3.3, neither the equity structure of the Company nor the
relative ownership of shares among any of its stockholders has been altered or
changed in contemplation of the transactions contemplated hereby.
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SECTION 3.4. CONTINUITY OF BUSINESS ENTERPRISE. Except as set forth in
Schedule 3.4 and except as contemplated by Section 6.14, there has not been any
sale, distribution or spin-off of assets of the Company or any of its
Affiliates, other than in the ordinary course of business within the five years
preceding the date of this Agreement. The Owners shall be responsible for any
and all tax liability of all such sales, distributions or spin-offs.
SECTION 3.5. RECORDS. The copies of the Articles of Incorporation or
Articles of Association, as the case may be, and Bylaws, and all amendment
thereto, of the Company that have been delivered to AMP are true, correct and
complete copies thereof, as in effect on the date hereof. The minute books of
the Company, copies of which have been delivered to AMP, contain materially
accurate minutes of meetings of, and accurate consents to all actions taken
without meetings by, the Board of Directors (and any committees thereof) and the
stockholders of the Company since its formation as to material matters reflected
therein.
SECTION 3.6. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Company of this Agreement and the other agreements expressly
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by the Company. This Agreement has
been duly executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms. The Company has obtained, in accordance with
applicable law and its Bylaws and its Articles of Incorporation the approval of
its stockholders necessary to consummate the transactions contemplated hereby.
SECTION 3.7. NO VIOLATION. Except as set forth specifically in detail
in Schedule 3.7 or Schedule 3.8, neither the execution, delivery or performance
of this Agreement or the other agreements contemplated hereby nor the
consummation of the transactions contemplated hereby or thereby will (a)
conflict with, result in a violation or breach of the terms, conditions or
provisions of or constitute a default under the Bylaws or the Articles of
Incorporation of the Company, (b) except as would not, individually or in the
aggregate, result in a Material Adverse Effect, conflict with, result in a
violation or breach of the terms conditions or provisions of or constitute a
default under any agreement, indenture or other instrument by which the Company
is bound or to which any of the assets of the Company is subject, or result in
the creation or imposition of any security interest, lien, charge or encumbrance
upon any assets of the Company or (c) except as would not, individually or in
the aggregate, result in a Material Adverse Effect, violate or conflict with any
judgment, decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body.
SECTION 3.8. CONSENTS. Except as set forth in Schedule 3.8, no consent,
authorization, approval, permit or license of, or filing with, any governmental
or public body or authority, any lender, any lessor or any other person or
entity is required to authorize, or is required in connection with, the
execution, delivery or performance of this Agreement or the agreements
contemplated hereby.
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SECTION 3.9. FINANCIAL STATEMENTS. The Company will furnish AMP its
balance sheet and related statements of income, retained earnings and cash flows
for its prior three full fiscal years and its balance sheet dated as of June 30,
1997 (the "Balance Sheet," and the date thereof the "Balance Sheet Date") and
related statements of income, retained earnings and cash flows for the six (6)
months then ended (all such financial information, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly present
the financial condition and results of operations of the Company as of the dates
and for the periods indicated and have been prepared in conformity with
generally accepted accounting principles (subject to normal year-end adjustments
and the absence of notes for any unaudited interim financial statement for any
interim periods presented) applied on a consistent basis with prior periods,
except as otherwise specifically indicated in the Financial Statements.
SECTION 3.10. LIABILITIES AND OBLIGATIONS. Except as set forth in
Schedule 3.10, the Financial Statements reflect all material liabilities of the
Company, accrued, contingent or otherwise, required to be reflected on a balance
sheet, or in the notes thereto, prepared in accordance with generally accepted
accounting principles, except for liabilities or obligations incurred in the
ordinary course of business consistent with reasonable past practice since the
Balance Sheet Date. Except as specifically set forth in the Financial Statements
or Schedule 3.10, the Company is not liable upon or with respect to, or
obligated in any other way to provide funds in respect of or to guarantee or
assume in any manner, any debt, obligation or dividend of any person,
corporation, association, partnership, joint venture, trust or other entity, and
the Company does not know of any valid basis for the assertion of any claims or
liabilities of any nature or in any amount.
SECTION 3.11. EMPLOYEE MATTERS.
(a) CASH COMPENSATION. Schedule 3.11(a) contains a complete and
accurate list of the names, titles and annual cash compensation as of June 30,
1997, including, without limitation, wages, salaries, bonuses (discretionary and
formula) and other cash compensation (the "Cash Compensation"), of all full and
part-time employees of the Company. In addition, Schedule 3.11(a) contains a
complete and accurate description of (i) all increases in Cash Compensation of
employees of the Company during the current fiscal year and the immediately
preceding fiscal year and (ii) any promised increases in Cash Compensation of
employees of the Company that have not yet been effected.
(b) COMPENSATION PLANS. Schedule 3.11(b) contains a complete and
accurate list of all compensation plans, arrangements or practices (the
"Compensation Plans") sponsored by the Company or to which the Company
contributes on behalf of its employees, other than Employment Agreements listed
in Schedule 3.11(c) and Employee Benefit Plans listed in Schedule 3.13(a). The
Compensation Plans include, without limitation, plans, arrangements or practices
that provide for severance pay, deferred compensation, incentive, bonus or
performance awards and stock ownership or stock options. The Company has
provided to AMP a copy of each written Compensation Plan and a written
description of each unwritten
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Compensation Plan. Except as set forth on Schedule 3.11(b), each of the
Compensation Plans can be terminated or amended at will by the Company.
(c) EMPLOYMENT AGREEMENTS. Except as set forth in Schedule 3.11(c), the
Company is not a party to any employment agreement (the "Employment Agreements")
with respect to any of its employees. Employment Agreements include, without
limitation, employee leasing agreements, employee services agreements and
noncompetition agreements.
(d) EMPLOYEE POLICIES AND PROCEDURES. Schedule 3.11(d) contains a
complete and accurate list of all employee manuals and all policies, procedures
and work-related rules (the "Employee Policies and Procedures") that apply to
employees of the Company. The Company has provided or made available to AMP a
copy of all written Employee Policies and Procedures and a written description
of all unwritten Employee Policies and Procedures.
(e) UNWRITTEN AMENDMENTS. Except as described in Schedule 3.11(b),
3.11(c), or 3.11(d), no unwritten material amendments have been made, whether by
oral communication, pattern of conduct or otherwise, with respect to any
Compensation Plans, Employment Agreements or Employee Policies and Procedures.
(f) LABOR COMPLIANCE. To its actual knowledge, the Company has been and
is in compliance with all applicable laws, rules, regulations and ordinances
respecting employment and employment practices, terms and conditions of
employment and wages and hours, except for any such failures to be in compliance
that, individually or in the aggregate, would not result in a Material Adverse
Effect, and the Company is not liable for any arrears of wages or penalties for
failure to comply with any of the foregoing. To its actual knowledge, the
Company has not engaged in any unfair labor practice or discriminated on the
basis of race, color, religion, sex, national origin, age, disability or
handicap in its employment conditions or practices. Except as set forth in
Schedule 3.11(f), there are no (i) unfair labor practice charges or complaints
or racial, color, religious, sex, national origin, age, disability or handicap
discrimination charges or complaints pending or, to the knowledge of the
Company, threatened against the Company before any federal, state or local
court, board, department, commission or agency (nor, to the knowledge of the
Company, does any valid basis therefor exist) or (ii) existing or, to the
knowledge of the Company, threatened labor strikes, disputes, grievances,
controversies or other labor troubles affecting the Company (nor, to the
knowledge of the Company, does any valid basis therefor exist).
(g) UNIONS. The Company has never been a party to any agreement with
any union, labor organization or collective bargaining unit. No employees of the
Company are represented by any union, labor organization or collective
bargaining unit. Except as set forth in Schedule 3.11(g), to the knowledge of
the Company, none of the employees of the Company has threatened to organize or
join a union, labor organization or collective bargaining unit.
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SECTION 3.12. ALIENS. To the actual knowledge of the Company, all
employees of the Company are citizens of, or are authorized in accordance with
federal immigration laws to be employed in, the United States.
SECTION 3.13. EMPLOYEE BENEFIT PLANS.
(a) IDENTIFICATION. Schedule 3.13 contains a complete and accurate list
of all employee benefit plans (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) sponsored
by the Company or to which the Company contributes on behalf of its employees
and all employee benefit plans previously sponsored or contributed to on behalf
of its employees within the five years preceding the date hereof (the "Employee
Benefit Plans"). The Company has provided to AMP copies of all plan documents,
determination letters, pending determination letter applications, trust
instruments, insurance contracts, 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, the Company has provided AMP a written description of all existing
practices engaged in by the Company that constitute Employee Benefit Plans.
Except as set forth in Schedule 3.13 and subject to the requirements of ERISA,
each of the Employee Benefit Plans can be terminated or amended at will by the
Company. Except as set forth in Schedule 3.13, 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 3.13, the Company 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.
(d) PROHIBITED TRANSACTIONS. No prohibited transactions (within the
meaning of Section 4975 of the Code) have occurred with respect to any Employee
Benefit Plan.
(e) CLAIMS AND LITIGATION. Except as set forth in Schedule 3.13, no
pending or, to the actual knowledge of the Company, threatened, claims, suits or
other proceedings exist with respect to an Employee Benefit Plan, other than
normal benefit claims filed by participants or beneficiaries.
(f) QUALIFICATIONS. The Company has received a favorable determination
letter or ruling from the IRS for each of the Employee Benefit Plans intended to
be qualified within the meaning of Section 401(a) of the Code and/or tax-exempt
within the meaning of Section 501(a)
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of the Code. No proceedings exist or, to the actual knowledge of the Company,
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 3.13, 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 the Company is a member (a
"Controlled Group"). Except as set forth in Schedule 3.13, 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 funded as 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 90 days
prior to the date hereof. Schedule 3.13 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 the Company nor any member of a Controlled
Group has any liability to pay excise taxes with respect to any Employee Benefit
Plan under applicable provisions of the Code or ERISA.
(i) MULTIEMPLOYER PLANS. Neither the Company 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.
(j) PBGC. No facts or circumstances exist that would result in the
imposition of liability against AMP or AMP Subsidiary by the Pension Benefit
Guaranty Corporation as a result of any act or omission by the Company 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. The Company has no obligation or commitment to provide
medical, dental or life insurance benefits to or on behalf of any of its
employees who may retire or any of its former employees who have retired, except
as may be required pursuant to the continuation of coverage provisions of
Section 4980B of the Code and the applicable provisions of ERISA.
(l) OTHER COMPENSATION ARRANGEMENTS. Except as set forth in Schedules
3.11(a), 3.11(b), 3.11(c), 3.11(d), 3.13(a) and 3.13(l), none of the Company,
any Owner or any Physician Employee is a party to any compensation or other
arrangement with any person relating to the provision of healthcare related
services, other than arrangements with the Company.
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SECTION 3.14. ABSENCE OF CERTAIN CHANGES. Except as set forth on
Schedule 3.14 and as contemplated pursuant to Section 6.14, since the Balance
Sheet Date, the Company has not
(a) suffered a Material Adverse Effect, whether or not caused by any
deliberate act or omission of the Company or any Owner;
(b) contracted for the purchase of any capital asset having a cost in
excess of $5,000 or made any single capital expenditure in excess of $5,000;
(c) incurred any indebtedness for borrowed money (other than short-term
borrowings in the ordinary course of business consistent with reasonable past
practice) or issued or sold any debt securities;
(d) incurred or discharged any material liabilities or obligations,
except in the ordinary course of business consistent with reasonable past
practice;
(e) paid any amount on any indebtedness prior to the due date, forgiven
or cancelled any claims or any debt in excess of $5,000 or released or waived
any rights or claims, except in the ordinary course of business consistent with
reasonable past practice;
(f) mortgaged, pledged or subjected to any security interest, lien,
lease or other charge or encumbrance any of its properties or assets (other than
statutory liens arising in the ordinary course of business consistent with
reasonable past practice or other liens that do not materially detract from the
value or interfere with the use of such properties or assets);
(g) suffered any damages or destruction to or loss of any assets
(whether or not covered by insurance) that has resulted, or might reasonably be
expected to result, individually or in the aggregate, in a Material Adverse
Effect;
(h) acquired or disposed of any assets having an aggregate value in
excess of $5,000, except in the ordinary course of business consistent with
reasonable past practice or except as contemplated in this Agreement;
(i) written up or written down the carrying value of any of its assets,
other than accounts receivable in the ordinary course of business consistent
with reasonable past practice;
(j) changed the costing system or depreciation methods of accounting
for its assets;
(k) lost or terminated any employee, patient, customer or supplier that
has resulted, or might reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect;
(l) increased the compensation of any Owner, director, officer, key
employee or consultant;
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(m) increased the compensation of any employee (except for increases in
the ordinary course of business consistent with reasonable past practice) or
hired any new employee who, in either case, is expected to receive annualized
compensation of $15,000 or more;
(n) made any payments of cash or assets to or loaned any money or
assets to any person or entity referred to in Section 3.26;
(o) formed, or acquired or disposed of any interest in, any
corporation, partnership, joint venture, limited liability company or other
entity;
(p) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of its capital stock,
securities or other ownership interests or any rights to acquire such capital
stock, securities or other ownership interests, or agreed to change the terms
and conditions of any such capital stock, securities or other ownership
interests or rights;
(q) entered into any agreement providing for total payments in excess
of $5,000 in any 12 month period with any person or group, or modified or
amended in any material respect the terms of any such existing agreement, except
in the ordinary course of business consistent with reasonable past practice;
(r) entered into, adopted or amended any Employee Benefit Plan, except
as contemplated hereby; or
(s) entered into any commitment or transaction, or experienced any
event, that would materially interfere with its performance under this Agreement
or any other agreements or document executed or to be executed pursuant to this
Agreement or otherwise has resulted, or might reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Effect.
SECTION 3.15. TITLE; LEASED ASSETS.
(a) REAL PROPERTY. The Company does not own any interest in any real
property, other than leasehold interests referred to in Schedule 3.15. The
leased real property referred to in Schedule 3.15 constitutes the only real
property that has been necessary for the conduct of the Company's business.
(b) PERSONAL PROPERTY. Except as set forth in Schedule 3.15, the
Company has good and marketable title to all the personal property owned by it
and the Company has good and marketable title to the Assets. The Assets and the
leased personal property referred to in Section 3.15(c) constitute the only
personal property that has been necessary for the conduct of the Company's
business. Upon consummation of the transactions contemplated hereby, AMP
Subsidiary will have good and marketable title to the Assets, free and clear of
all security interests, liens, claims and encumbrances, other than statutory
liens and contractual liens of
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landlords arising in the ordinary course of business or other liens that do not
materially detract from the value or interfere with the use of such properties
or assets.
(c) LEASES. A list and brief description of (i) all leases of real
property and (ii) leases of personal property involving rental payments within
any 12-month period in excess of $5,000, in either case to which the Company is
a party, either as lessor or lessee, are set forth in Schedule 3.15. All such
leases are valid and, to the knowledge of the Company, enforceable in accordance
with their respective terms.
SECTION 3.16. COMMITMENTS. Except as set forth in Schedule 3.16, the
Company is not a party to nor is it bound by, nor are any of its partnership
interests subject to, nor are the assets or the business of the Company bound
by, whether or not in writing, any of the following (collectively, the
"Commitments"):
(i) partnership or joint venture agreement;
(ii) guaranty or suretyship, indemnification or contribution
agreement or performance bond;
(iii) debt instrument, loan agreement or other obligation
relating to indebtedness for borrowed money or money lent or to be lent
to another;
(iv) contract to purchase real property;
(v) agreement with dealers or sales or commission agents,
public relations or advertising agencies, accountants or attorneys
(other than in connection with this Agreement and the transactions
contemplated hereby) involving total payments within any 12-month
period in excess of $5,000 and that is not terminable on 30 days'
notice with or without penalty;
(vi) agreement relating to any matter or transaction involving
more than $5,000 in the aggregate;
(vii) powers of attorney;
(viii) contracts containing noncompetition covenants;
(ix) agreement providing for the purchase from a supplier of
all or substantially all of the requirements of the Company of a
particular product or service; or
(x) any other agreement or commitment not made in the ordinary
course of business or that is material to the Company's business,
operations, condition (financial or otherwise), results of operations
or prospects.
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True, correct and complete copies of the written Commitments, and true, correct
and complete written descriptions of the oral Commitments, have been delivered
to AMP. Except as set forth in Schedule 3.16, there are no existing or asserted
defaults, events of default or events, occurrences, acts or omissions that, with
the giving of notice or lapse of time or both, would constitute defaults by the
Company or, to the best knowledge of the Company, any other party to a material
Commitment, and no penalties have been incurred nor are amendments pending with
respect to any material Commitment, except as described in Schedule 3.16. The
Commitments are in full force and effect and are valid and enforceable
obligations of the Company and, to the best knowledge of the Company, the other
parties thereto in accordance with their respective terms, and no defenses,
off-sets or counterclaims have been asserted or, to the best knowledge of the
Company, may be made by any party thereto (other than by the Company) nor has
the Company waived any rights thereunder, except as described in Schedule 3.16.
Except as disclosed specifically in Schedule 3.16, (i) none of the Company or
any Owner has received notice of any plan or intention of any other party to any
Commitment to exercise any right to cancel or terminate any Commitment, and
neither the Company nor any Owner knows of any fact that would justify the
exercise of such a right and (ii) none of the Company or any Owner currently
contemplates, or has a reason to believe any other person currently
contemplates, any amendment or change to any Commitment.
SECTION 3.17. INSURANCE. The Company, each Owner and each Physician
Employee carry property, liability, malpractice, workers' compensation and such
other types of insurance pursuant to the insurance policies listed and described
in Schedule 3.17 (the "Insurance Policies"). The Insurance Policies are all of
the insurance policies of the Company, the Owners and the Physician Employees
relating to the Company. All of the Insurance Policies are issued by insurers of
recognized responsibility, and, to the best knowledge of the Company, are valid
and enforceable policies. All Insurance Policies have been maintained in force
without interruption up to and including the Closing Date. True, complete and
correct copies of all Insurance Policies have been provided to AMP. Except as
set forth in Schedule 3.17, none of the Company, any Owner or any Physician
Employee has received any notice or other communication from any issuer of any
Insurance 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 actual knowledge of the Company, no
such cancellation or increase of deductibles, retainages or premiums is
threatened. Except as set forth on Schedule 3.17, none of the Company, any Owner
or any Physician Employee has any outstanding claims, settlements or premiums
owed against any Insurance Policy, and the Company, each Owner and each
Physician Employee has given all notices or has presented all potential or
actual claims under any Insurance Policy in a due and timely fashion. Except as
set forth on Schedule 3.17, none of the Company, any Owner or any Physician
Employee has filed a written application for any professional liability
insurance coverage that has been denied by an insurance agency or carrier, and
the Company, each Owner and each Physician Employee has been continuously
insured for professional malpractice claims for at least the past seven years
(or such shorter periods of time that the Company has been in existence or any
Owner or Physician Employee has been licensed to practice medicine). Schedule
3.17 also sets forth a list
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of all claims under any Insurance Policy in excess of $5,000 per occurrence
filed by the Company, any Owner or any Physician Employee during the immediately
preceding five years.
SECTION 3.18. PROPRIETARY RIGHTS AND INFORMATION. Set forth in Schedule
3.18 is a true and correct description of the following (the "Proprietary
Rights"):
(a) all trademarks, trade-names, service marks and other trade
designations, including common law rights, registrations and applications
therefor, and all patents and applications therefor currently owned, in whole or
in part, by the Company, and all licenses, royalties, assignments and other
similar agreements relating to the foregoing to which the Company is a party
(including expiration date, if applicable); and
(b) to its actual knowledge, all agreements relating to technology,
know-how or processes that the Company is licensed or authorized to use by
others (other than technology, know-how or processes generally available to
other health care providers) or which it licenses or authorizes others to use.
To its actual knowledge, the Company owns or has the legal right to use the
Proprietary Rights, without conflicting, infringing or violating the rights of
any other person. Except as disclosed in Schedule 3.18, to the actual knowledge
of the Company no consent of any person will be required for the use of the
Proprietary Rights by AMP Subsidiary 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 or for infringement by
the Company of the proprietary right of any other person, and the Company does
not know of any valid basis for any such claim. To its actual knowledge, the
Company has the right to use, free and clear of any adverse claims or rights of
others, all trade secrets, customer lists and proprietary information required
for the marketing of all merchandise and services formerly or presently sold or
marketed by it.
SECTION 3.19. TAXES.
(a) FILING OF TAX RETURNS. The Company has duly and timely filed (in
accordance with any extensions duly granted by the appropriate governmental
agency, if applicable) with the appropriate governmental agencies all material
Tax Returns and reports required to be filed in the United States, 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 the Company for the periods covered thereby.
(b) PAYMENT OF TAXES. To the actual knowledge of the Company, except
for such items as the Company may be disputing in good faith by proceedings in
compliance with applicable law, which are described in Schedule 3.19(b) and are
adequately accrued for, (i) the Company has paid all Taxes that have become due
(including those related to employment) and has properly accrued, in accordance
with generally accepted accounting principles, on its books and records for all
of the same that have not yet become due and (ii) the Company is not delinquent
in the payment of any Tax.
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(c) NO PENDING DEFICIENCIES, DELINQUENCIES, ASSESSMENTS OR AUDITS.
Except as set forth in Schedule 3.19(c), the Company has not received any notice
that any Tax deficiency or delinquency has been asserted against the Company. To
the actual knowledge of the Company, there is no unpaid assessment, proposal for
additional Taxes, deficiency or delinquency in the payment of any of the Taxes
of the Company that could be asserted by any Taxing authority. There is no
Taxing authority audit of the Company pending, or, to the actual knowledge of
the Company, threatened, and the results of any completed audits are properly
reflected in the Financial Statements. To the actual knowledge of the Company,
the Company has not violated in any material respect any federal, state, local
or foreign Tax law.
(d) NO EXTENSION OF LIMITATION PERIOD. The Company has not granted an
extension to any taxing authority of the limitation period during which any Tax
liability may be assessed or collected.
(e) ALL WITHHOLDING REQUIREMENTS SATISFIED. To the actual knowledge of
the Company, all monies required to be withheld by the Company and paid to
governmental agencies for all income, social security, unemployment insurance,
sales, excise, use and other Taxes have been collected or withheld and paid to
the respective governmental agencies.
(f) FOREIGN PERSON. The Company is not a foreign person, as such term
is referred to in Section 1445(f)(3) of the Code.
(g) SAFE HARBOR LEASE. None of the Assets of the Company constitutes
property that the Company, AMP or any Affiliate of AMP 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 of the Company are subject to
a lease to a "tax exempt entity" as such term is defined in Section 168(h)(2) of
the Code.
(i) COLLAPSIBLE CORPORATION. The Company has not at any time consented,
and the Owners will not permit the Company to elect, to have the provisions of
Section 341(f)(2) of the Code apply to it.
(j) BOYCOTTS. The Company 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 the Company has been or will be characterized as an "excess parachute
payment" within the meaning of Section 280G(b)(1) of the Code.
(l) S CORPORATION. The Company [has] [has not] made an election to be
taxed as an "S" corporation under Section 1362(a) of the Code.
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(m) PERSONAL SERVICE CORPORATION. The Company is not nor has it been a
personal service corporation subject to the provisions of Section 269A of the
Code.
(n) PERSONAL HOLDING COMPANY. The Company is not nor has it been a
personal holding company within the meaning of Section 542 of the Code.
SECTION 3.20. COMPLIANCE WITH LAWS. To the actual knowledge of the
Company, the Company, each Owner and each Physician Employee have complied in
all material respects with, and are in compliance in all material respects with,
all applicable laws, regulations and licensing requirements and has filed with
the proper authorities all necessary statements and reports, except where the
failure to so comply or file would not, and is not reasonably expected to,
individually or in the aggregate, result in a Material Adverse Effect. To the
actual knowledge of the Company, there are no existing violations by the
Company, any Owner or any Physician Employee of any federal, state or local law
or regulation that could, individually or in the aggregate, result in a Material
Adverse Effect. To the actual knowledge of the Company, the Company, each Owner
and each Physician Employee possess all materially necessary licenses,
franchises, permits and governmental authorizations for the conduct of its, his
or her business as now conducted, all of which are listed (with expiration
dates, if applicable) in Schedule 3.20. Except as set forth in Schedule 3.20,
the transactions expressly contemplated by this Agreement will not result in a
default under or a breach or violation of, or adversely affect the rights and
benefits afforded by, any such licenses, franchises, permits or government
authorizations, except for any such default, breach or violation that would not,
and is not reasonably expected to, individually or in the aggregate, have a
Material Adverse Effect. Except as set forth in Schedule 3.20, none of the
Company, any Owner or any Physician Employee has received any notice from any
federal, state or other governmental authority or agency having jurisdiction
over its, his or her properties or activities, or any insurance or inspection
body, that its, his or her operations or any of its, his or her properties,
facilities, equipment or business practices fail to comply with any applicable
law, ordinance, regulation, building or zoning law or requirement of any public
or quasi-public authority or body, except where failure to so comply would not,
and is not reasonably expected to, individually or in the aggregate, have a
Material Adverse Effect.
SECTION 3.21. FINDER'S FEE. Except as set forth in Schedule 3.21, none
of the Company, any Owner or any of their Affiliates has incurred any obligation
for any finder's, broker's, agent's or similar fee in connection with the
transactions expressly contemplated hereby.
SECTION 3.22. LITIGATION. Except as described specifically in detail in
Schedule 3.22, there are no legal actions, administrative proceedings or
investigations instituted, or, to the actual knowledge of the Company,
threatened, affecting or that could affect the Company, any Owner, any Physician
Employee, the outstanding ownership interests in the Company, any of the assets
of the Company or the operations, business, condition (financial or otherwise),
results of operations or prospects of the Company which (i) if successful,
could, or might reasonably be expected to, individually or in the aggregate,
have a Material Adverse Effect or (ii) could adversely affect the ability of the
Company or any Owner to effect the transactions contemplated
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hereby. None of the Company, any Owner or any Physician Employee is (a) subject
to any court or administrative order, judgment, writ, injunction or decree or
(b) in default with respect to any such order, judgment, writ, injunction or
decree. The Company and the Owners have no actual knowledge of any valid basis
for any such action, proceeding or investigation. Except as set forth in
Schedule 3.22, to the actual knowledge of the Company, all medical malpractice
claims asserted against the Company or any of its Affiliates, general liability
incidents and incident reports have been submitted on a timely basis and in the
proper manner to the Company's insurer therefor. All claims made or threatened
against the Company in excess of its deductible are covered under its Insurance
Policies.
SECTION 3.23. CONDITION OF FIXED ASSETS. All of the plants, structures
and equipment (the "Fixed Assets") used by the Company in its business are in
good condition and repair, subject to normal wear and tear, and conform in all
material respects with all applicable ordinances, regulations and other laws,
and the Company and the Owners have no actual knowledge of any material latent
defects therein.
SECTION 3.24. DISTRIBUTIONS AND REPURCHASES. Except as described in
Schedule 3.24, no distribution, payment or dividend of any kind has been
declared or paid by the Company on any of its ownership interests since the
Balance Sheet Date. No repurchase of any of the Company's ownership interests
has been approved or effected or is pending or contemplated by the Board of
Directors of the Company.
SECTION 3.25. BANKING RELATIONS. Set forth in Schedule 3.25 is a
complete and accurate list of all borrowing and investing arrangements that the
Company 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 3.26. INTERESTED PERSONS; AFFILIATIONS. Except as set forth in
Schedule 3.26, no Owner, Physician Employee, officer, employee or director of
the Company, or any of their respective spouses, children or Affiliates, owns,
directly or indirectly, on an individual or joint basis, any interest in, has a
compensation or other financial arrangement with or serves as an officer or
director of any customer or supplier of the Company or any organization that has
a contract or arrangement with the Company. Except as set forth in Schedule
3.26, none of the Company, any of its directors, officers, employees or
consultants, any Owner, any Physician Employee or any Affiliate of any such
person is, or within the last five years was, a party to any contract, lease,
agreement or arrangement, including, but not limited to, any joint venture or
consulting agreement, with any physician, hospital, pharmacy, home health agency
or other person that is in a position to make or influence referrals to, or
otherwise generate business for, the Company.
SECTION 3.27. ENVIRONMENTAL MATTERS.
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(a) ENVIRONMENTAL LAWS. To the actual knowledge of the Company, neither
the Company nor any of its assets is currently in violation of, or subject to
any existing, pending or, to the actual knowledge of the Company, threatened
investigation or inquiry by any governmental authority or to any remedial
obligations under, any Environmental Law.
(b) PERMITS. To its actual knowledge, the Company is not required to
obtain, by reason of any Environmental Law, any permits, licenses or similar
authorizations to occupy, operate or use any buildings, improvements, fixtures
or equipment owned or leased by the Company.
(c) SUPERFUND LIST. None of the assets owned or leased by the Company
are on any federal or state "Superfund" list or subject to any environmentally
related liens.
SECTION 3.28. CERTAIN PAYMENTS. None of the Company, any director,
officer or employee of the Company, any Owner by his or her own act or any of
their respective Affiliates has paid, caused to be paid or received, directly or
indirectly:
(a) to or from any government or agency thereof or any agent of any
supplier or customer, any bribe, kick-back or other similar payment; or
(b) any contribution to any political party or candidate, other than
from personal funds not reimbursed by their respective employers or as otherwise
permitted by applicable law.
SECTION 3.29. MEDICAL WASTE. To the actual knowledge of the Company,
with respect to the generation, transportation, treatment, storage, disposal or
other handling of Medical Waste, the Company has complied with all Medical Waste
Laws.
SECTION 3.30. MEDICARE AND MEDICAID PROGRAMS. The Company, each Owner
and each Physician Employee are qualified for participation in the Medicare and
Medicaid programs and are parties to provider agreements for such programs that
are in full force and effect with no events of default having occurred
thereunder. To its actual knowledge, the Company, each Owner and each Physician
Employee have timely filed all claims or other reports required to be filed
prior to the Effective Date with respect to the purchase of services by
third-party payors ("Payors"), including but not limited to Medicare and
Medicaid programs. To the actual knowledge of the Company, all such claims or
reports are complete and accurate in all material respects. The Company, each
Owner and each Physician Employee has paid or has properly recorded on the
Financial Statements all actually known and undisputed refunds, discounts or
adjustments that have become due pursuant to such claims, and none of the
Company, any Owner or any Physician Employee has any material liability to any
Payor with respect thereto, except as has been reserved for in the Balance
Sheet. There are no pending appeals, overpayment determinations, adjustments,
challenges, audits, litigation or notices of intent to reopen Medicare and/or
Medicaid claims determinations or other reports required to be filed by the
Company, any Owner or any Physician Employee in order to be paid by a Payor for
services rendered. None of the Company, any of its directors, officers,
employees, consultants or
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Owners or any of their respective Affiliates has been convicted of, or pled
guilty or nolo contendere to, patient abuse or neglect or any other Medicare or
Medicaid program-related offense. None of the Company or any of its directors,
officers, Owners or, to the best of the Company's actual knowledge, its
employees, consultants or any of the aforesaid persons' respective Affiliates
has committed any offense that may serve as the basis for the Company's
suspension or exclusion from the Medicare and Medicaid programs, including, but
not limited to, defrauding a government program, loss of a license to provide
health care services or failure to provide quality care.
SECTION 3.31. FRAUD AND ABUSE. The Company, the Owners, the Physician
Employees and all other persons and entities providing professional services for
or on behalf of the Company, to their actual knowledge, have not engaged in any
activities that are prohibited under 42 U.S.C. ss.ss. 1320a-7, 7a or 7b or 42
U.S.C. ss. 1395nn (subject to the exceptions set forth in such legislation) or
the regulations promulgated thereunder or pursuant to similar state or local
statutes or regulations or that are prohibited by rules of professional conduct,
including, but not limited to, the following:
(a) 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;
(b) 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;
(c) failure to disclose knowledge by a Medicare or Medicaid claimant of
the occurrence of any event affecting the initial or continued right to any
benefit or payment on their own behalf or on behalf of another with intent to
fraudulently secure such benefit or payment;
(d) knowingly and willfully offering, paying or soliciting or receiving
any remuneration (including any kickback, bribe or rebate), directly or
indirectly, overtly or covertly, in cash or in kind (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 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; or
(e) referring a patient for designated health services (as defined in
42 U.S.C. ss. 1395nn) to or providing designated 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 and to which no exception
under 42 U.S.C. ss. 1395nn applies.
SECTION 3.32. PAYORS. Schedule 3.32 sets forth a true, correct and
complete list of the names and addresses of each Payor, including any private
pay patient as a single payor, of the Company's services that accounted for more
than 5% of the aggregate revenues of the Company in the five previous fiscal
years. Except as set forth in Section 3.32, the Company has good
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relations with such Payors, and none of such Payors has notified the Company
that it intends to discontinue its relationship with the Company or to deny any
claims submitted to such Payor for payment.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE OWNERS
Each of the Owners (in proportion to each such Owner's respective
ownership of the Company), severally, represents and warrants to AMP and AMP
Subsidiary that the following are true and correct as of the Closing Date:
SECTION 4.1. VALIDITY; OWNER'S CAPACITY. This Agreement and each other
agreement contemplated hereby has been or will be, as the case may be, as of the
Closing Date duly executed and delivered by the Owner and constitute or will
constitute, as the case may be, legal, valid and binding obligations of the
Owner, enforceable against the Owner in accordance with their respective terms.
The Owner has legal capacity to enter into and perform this Agreement and the
other such agreements to which the Owners are a party.
SECTION 4.2. NO VIOLATION. Neither the execution, delivery or
performance of this Agreement or the other agreements of the Owner contemplated
hereby nor the consummation of the transactions contemplated hereby or thereby
will (a) conflict with, result in a violation or breach of the terms, conditions
or provisions of or constitute a default under any agreement, indenture or other
instrument by which any Owner is bound or to which any of the ownership
interests in the Company are subject, or result in the creation or imposition of
any security interest, lien, charge or encumbrance upon any of the ownership
interests in the Company or (b) to the actual knowledge of each Owner, violate
or conflict with any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body.
SECTION 4.3. PERSONAL HOLDING COMPANIES; CONTROL OF RELATED BUSINESSES.
The Owner owns no ownership interests in the Company, directly or indirectly,
beneficially or of record, through a personal holding company. Except as set
forth in Schedule 4.3, the Owner controls no other business that is in the same
or similar line of business as the Company or that has or is engaged in a
transaction with the Company.
SECTION 4.4. TRANSFERS OF OWNERSHIP INTERESTS. Set forth in Schedule
4.4 is a list of all transfers or other transactions involving ownership
interests in the Company. All such transfers by the Owner were made for valid
business reasons and not in anticipation or contemplation of the consummation of
the transactions contemplated by this Agreement.
SECTION 4.5. ACCREDITED INVESTOR STATUS. Except as set forth in
Schedule 4.5, Owner is an "accredited investor" as defined in Rule 501(a) under
the Securities Act.
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SECTION 4.6. CONSENTS. Except as specifically disclosed pursuant to
Article III, no consent, authorization or approval of any person is required to
authorize, or is required in connection with, the Owner's execution, delivery
and performance of this Agreement or the agreements contemplated hereby.
SECTION 4.7. CERTAIN PAYMENTS. Owner has not paid, caused to be paid or
received, directly or indirectly, in connection with the business of the
Company:
(a) to or from any government or agency thereof or any agent of any
supplier or customer, any bribe, kick-back or similar payment; or
(b) any contribution to any political party or candidate, other than
from personal funds not reimbursed by the Company or as otherwise permitted by
applicable law.
SECTION 4.8. FINDER'S FEE. Except as set forth in Schedule 4.8, Owner
has not incurred any obligation for any finder's, broker's, agent's or similar
fee in connection with the transactions contemplated hereby.
SECTION 4.9. INTERESTED PERSONS; AFFILIATIONS. Except as set forth in
Schedule 4.9, no Owner and no Owner's spouse, children or Affiliates owns,
directly or indirectly, on an individual or joint basis, any interest in, has a
compensation or other financial arrangement with or serves as an officer or
director of, any customer or supplier of the Company or any organization that
has a contract or arrangement with the Company. No Owner or any of such Owner's
Affiliates is, or within the last five years was, a party to any contract,
lease, agreement or arrangement, including, but not limited to, any joint
venture or consulting agreement, with any physician, hospital, pharmacy, home
health agency or other person that is in a position to make or influence
referrals to, or otherwise generate business for, the Company.
SECTION 4.10. INVESTMENTS IN COMPETITORS. Except as disclosed in
Schedule 4.10, Owner does not own, directly or indirectly, any interests or has
any investment in any person that is a competitor of the Company.
SECTION 4.11. DISPOSITION OF AMP SHARES. No Owner presently intends to
dispose of any shares of AMP Common Stock received pursuant hereto or is a party
to any plan, arrangement or agreement for the disposition of such shares, other
than this Agreement and the Registration Rights Agreement.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF AMP AND AMP SUBSIDIARY
AMP and AMP Subsidiary each represent and warrant to the Company and
the Owners that the following are true and correct as of the Closing Date:
SECTION 5.1. ORGANIZATION AND GOOD STANDING. AMP 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 carry on the
business in which it is engaged, to own the properties it owns, to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
Prior to the Closing, neither AMP nor AMP Subsidiary will have had any
operations, other than in connection with its formation and capitalization and
the transactions contemplated by this Agreement and the Other Agreements.
SECTION 5.2. CAPITALIZATION OF AMP. The authorized and outstanding
capital stock of AMP are as disclosed in the Registration Statement.
SECTION 5.3. CAPITALIZATION OF AMP SUBSIDIARY. AMP owns all of the
outstanding capital stock of AMP Subsidiary. AMP Subsidiary does not have any
bonds, debentures, notes or other obligations the holders of which will have the
right to vote (or will be convertible into or exercisable for securities having
the right to vote) with the stockholders of AMP Subsidiary on any matter. There
exist no options, warrants, subscriptions or other rights to purchase, or
securities convertible into or exchangeable for, any of the authorized or
outstanding securities of AMP Subsidiary, and no option, warrant, call,
conversion right or commitment of any kind will exist that obligates AMP
Subsidiary to issue any of its authorized but unissued capital stock. AMP
Subsidiary has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay a dividend or make any distribution in respect thereof. No stockholder of
AMP Subsidiary has granted options or other rights to purchase any shares of AMP
Subsidiary Common Stock from such stockholder.
SECTION 5.4. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by AMP and AMP Subsidiary of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by AMP and AMP Subsidiary. This
Agreement and each other agreement contemplated hereby to be executed by AMP and
AMP Subsidiary have been or will be, as the case may be, as of the Closing Date
duly executed and delivered by AMP and AMP Subsidiary and constitute or will
constitute, as the case may be, legal, valid and binding obligations of AMP and
AMP Subsidiary.
SECTION 5.5. NO VIOLATION. Neither the execution, delivery or
performance of this Agreement or the other agreements contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will (a)
conflict with, result in a violation or breach
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of the terms, conditions and provisions of or constitute a default under the
Certificate of Incorporation or Bylaws of AMP or AMP Subsidiary or any
agreement, indenture or other instrument by which AMP or AMP Subsidiary is or
will be, as of the Closing, bound or (b) except as would not, individually or in
the aggregate, have a material adverse effect on the business, operations,
condition (financial or otherwise) or results of operations of AMP or AMP
Subsidiary, violate or conflict with any judgment, decree, order, statute, rule
or regulation of any court or any public, governmental or regulatory agency or
body having jurisdiction over AMP or AMP Subsidiary or the properties or assets
of AMP or AMP Subsidiary.
SECTION 5.6. FINDER'S FEE. To their actual knowledge, neither AMP nor
AMP Subsidiary has incurred any obligation for any finder's, broker's, agent's
or similar fee in connection with the transactions contemplated hereby.
SECTION 5.7. CAPITAL STOCK. The issuance and delivery by AMP of shares
of AMP Common Stock in connection with the Acquisition will be duly and validly
authorized by all necessary corporate action on the part of AMP. The shares of
AMP Common Stock to be issued in connection with the Acquisition, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable and will not have been issued in violation of any preemptive
rights, rights of first refusal or similar rights of any AMP stockholders.
SECTION 5.8. CONSENTS. Except as have been obtained or as may be
required by the exchange or automated quotation system on which the AMP Common
Stock may be listed or under the applicable state Business Corporation Act, the
Exchange Act, the Securities Act or state securities laws, no consent,
authorization, approval, permit or license of, or filing with, any governmental
or public body or authority, any lender, any lessor or any other person is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement or the agreements contemplated hereby
on the part of AMP or AMP Subsidiary.
SECTION 5.9. LIABILITIES AND OBLIGATIONS. To the actual knowledge of
AMP, the Registration Statement will reflect material liabilities of AMP, except
for liabilities or obligations incurred in the ordinary course of business
consistent with reasonable past practice. To its actual knowledge, AMP is not
liable upon or with respect to, or obligated in any other way to provide a
material amount of funds in respect of or to guarantee or assume in any manner,
any debt, obligation or dividend of any person, corporation, association,
partnership, joint venture, trust or other entity, and AMP does not know of any
valid basis for the assertion of any claims or liabilities of any nature or in
any amount.
SECTION 5.10. EMPLOYEE BENEFIT PLANS. Schedule 5.10 contains a complete
and accurate list of all employee benefit plans (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) sponsored by AMP or to which AMP contributes on behalf of its
employees and all employee benefit plans previously sponsored or contributed to
on behalf of its employees within the five years preceding the date hereof (the
"AMP Employee Benefit Plans").
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SECTION 5.11. TAXES.
(a) FILING OF TAX RETURNS. To its actual knowledge, AMP 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 material Tax Returns and reports required to be filed in the United States,
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 AMP for the periods covered thereby.
(b) PAYMENT OF TAXES. To its actual knowledge, except for such items as
AMP may be disputing in good faith by proceedings in compliance with applicable
law, (i) AMP has paid all Taxes, penalties, assessments and interest that have
become due with respect to any Tax Return that it has filed (including those
related to employment) and has properly accrued on its books and records for all
of the same that have not yet become due and (ii) AMP is not delinquent in the
payment of any Tax, assessment or governmental charge.
(c) NO PENDING DEFICIENCIES, DELINQUENCIES, ASSESSMENTS OR AUDITS. To
its actual knowledge, AMP has not received any notice that any Tax deficiency or
delinquency has been asserted against AMP. There is no unpaid assessment,
proposal for additional Taxes, deficiency or delinquency in the payment of any
of the Taxes of AMP that could be asserted by any Taxing authority. There is no
Taxing authority audit of AMP pending, or, to the actual knowledge of AMP,
threatened, and the results of any completed audits are properly reflected in
the Financial Statements. AMP has not violated in any material respect any
federal, state, local or foreign Tax law.
(d) NO EXTENSION OF LIMITATION PERIOD. AMP has not granted an extension
to any taxing authority of the limitation period during which any Tax liability
may be assessed or collected.
SECTION 5.12. COMPLIANCE WITH LAWS. Except as disclosed in the
Registration Statement and to the actual knowledge of AMP, AMP and its
predecessors have complied in all material respects with, and are in compliance
in all material respects with, all applicable laws, regulations (including
applicable state and federal securities laws) and licensing requirements and has
filed with the proper authorities all necessary statements and reports, except
where the failure to so comply or file would not, and is not reasonably expected
to, individually or in the aggregate, result in a Material Adverse Effect. There
are no existing violations by AMP of any federal, state or local law or
regulation that could, individually or in the aggregate, result in a Material
Adverse Effect. To its actual knowledge, AMP has not received any notice from
any federal, state or other governmental authority or agency having jurisdiction
over its, his or her properties or activities, or any insurance or inspection
body, that its, his or her operations or any of its, his or her properties,
facilities, equipment or business practices fail to comply with any applicable
law, ordinance, regulation, building or zoning law or requirement of any public
or quasi-public authority or body, except where failure to so comply would not,
and is not reasonably expected to, individually or in the aggregate, have a
Material Adverse Effect.
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SECTION 5.13. LITIGATION. Except as disclosed in the Registration
Statement and to the actual knowledge of AMP, there are no material legal
actions, administrative proceedings or investigations instituted, or, to the
actual knowledge of AMP, threatened, against AMP. AMP is not (a) subject to any
material court or administrative order, judgment, writ, injunction or decree or
(b) in default with respect to any such order, judgment, writ, injunction or
decree. AMP has no actual knowledge of any valid basis for any such material
action, proceeding or investigation. To the actual knowledge of AMP, all
material claims asserted against AMP, general liability incidents and incident
reports have been submitted on a timely basis and in the proper manner to AMP's
insurer therefor. To AMP's knowledge, all material claims made or threatened
against AMP in excess of its deductible would be covered under insurance
policies.
ARTICLE VI
COVENANTS OF THE COMPANY AND THE OWNERS
The Company and the Owners (in proportion to each such Owner's
respective ownership of the Company) agree that between the date hereof and the
Closing:
SECTION 6.1. CONSUMMATION OF AGREEMENT. The Company and the Owners will
use their commercially reasonable best efforts to cause the consummation of the
transactions contemplated hereby in accordance with their terms and conditions.
SECTION 6.2. BUSINESS OPERATIONS. The Company will operate its business
in the ordinary course. The Company and the Owners will use their commercially
reasonable best efforts to preserve the businesses of the Company intact.
Neither the Company nor any Owners will knowingly take any action that would,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect. Except as set forth in Schedule 6.2, the Company will use its
commercially reasonable best efforts to preserve intact its relationships with
Payors, referral sources, customers, suppliers, patients, employees and others
having significant business relations with it, unless doing so would impair its
goodwill or, individually or in the aggregate, result in a Material Adverse
Effect. The Company will collect its receivables and pay its trade payables in
the ordinary course of business consistent with reasonable past practice. On or
before the Closing Date, immediately prior to Closing, the Company will not
knowingly be engaged in the practice of medicine and will not knowingly provide
medical services.
SECTION 6.3. ACCESS. The Company and the Owners will, at reasonable
times during normal business hours and on reasonable notice, permit AMP and its
authorized representatives reasonable access to, and make available for
inspection, all of the assets and business of the Company, including its
employees, and permit AMP and its authorized representatives to inspect and make
copies of all documents, records (other than confidential portions of patient
medical records) and information with respect to the affairs of the Company as
AMP and its representatives may reasonably request, all for the sole purpose of
permitting AMP to become familiar with the businesses and assets and liabilities
of the Company.
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SECTION 6.4. TAX RETURNS. AMP will have the right to review the tax
returns of the Company after the tax return has been filed.
SECTION 6.5. NOTIFICATION OF CERTAIN MATTERS. The Company and the
Owners will promptly inform AMP in writing of (a) any notice of, or other
communication relating to, a default or event that, with notice or lapse of time
or both, would become a default, received by the Company or any Owner subsequent
to the date of this Agreement and prior to Closing under any Commitment material
to the Company's condition (financial or otherwise), operations, assets,
liabilities, business or prospects and to which it is subject, (b) any event or
information that would cause the Company or any Owner to believe reasonably that
any of their respective representations and warranties under this Agreement to
be untrue or (c) any material adverse change in the Company's condition
(financial or otherwise), operations, assets, liabilities, business or
prospects.
SECTION 6.6. APPROVALS OF THIRD PARTIES. The Company and the Owners
will use their commercially reasonable best efforts to secure, as soon as
practicable after the date hereof, all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby, including,
without limitation, all necessary approvals and consents required under any real
property and personal property leases.
SECTION 6.7. EMPLOYEE MATTERS. Except as set forth in Schedule 6.7 or
as otherwise specifically contemplated by this Agreement, the Company will not,
without the prior written approval of AMP, which approval shall not be delayed
or unreasonably withheld, except as required by law:
(a) increase the Cash Compensation of any Owner or other employee of
the Company;
(b) adopt, amend or terminate any Compensation Plan;
(c) adopt, amend or terminate any Employment Agreement;
(d) adopt, amend or terminate any Employee Policies and Procedures;
(e) adopt, amend or terminate any Employee Benefit Plan;
(f) take any action that could deplete the assets of any Employee
Benefit Plan, other than payment of benefits in the ordinary course to
participants and beneficiaries;
(g) fail to pay any premium or contribution due or with respect to any
Employee Benefit Plan;
(h) fail to file any return or report with respect to any Employee
Benefit Plan;
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(i) institute, settle or dismiss any employment litigation, except as
could not, individually or in the aggregate, result in a Material Adverse
Effect;
(j) enter into, modify, amend or terminate any agreement with any
union, labor organization or collective bargaining unit; or
(k) take or fail to take any action with respect to any past or present
employee of the Company that would, individually or in the aggregate, result in
a Material Adverse Effect.
SECTION 6.8. CONTRACTS. Except with AMP's prior written consent, which
consent shall not be delayed or unreasonably withheld, the Company will not
assume or enter into any contract, lease, license, obligation, indebtedness,
commitment, purchase or sale that is material to the Company's business nor will
it waive any material right or cancel any material contract, debt or claim.
SECTION 6.9. CAPITAL ASSETS; PAYMENTS OF LIABILITIES. The Company will
not, without the prior written approval of AMP (a) acquire or dispose of any
capital asset having a fair market value of $5,000 or more or acquire or dispose
of any capital asset outside of the ordinary course of business or (b) discharge
or satisfy any lien or encumbrance or pay or perform any obligation or
liability, other than (i) liabilities and obligations reflected in the Financial
Statements or (ii) current liabilities and obligations incurred in the usual and
ordinary course of business since the Balance Sheet Date and, in either case (i)
or (ii) above, only as required by the express terms of the agreement or other
instrument pursuant to which the liability or obligation was incurred.
SECTION 6.10. MORTGAGES, LIENS AND GUARANTIES. The Company will not,
without the prior written approval of AMP, which consent shall not be delayed or
unreasonably withheld, enter into or assume any mortgage, pledge, conditional
sale or other title retention agreement, permit any security interest, lien,
encumbrance or claim of any kind to attach to any of its assets (other than
statutory liens and contractual liens of landlords arising in the ordinary
course of business and other liens that do not materially detract from the value
or interfere with the use of such assets), whether now owned or hereafter
acquired, or guarantee or otherwise become contingently liable for any
obligation of another, except obligations arising by reason of enforcement for
collection and other similar transactions in the ordinary course of business, or
make any capital contribution or investment in any person.
SECTION 6.11. ACQUISITION PROPOSALS. From the date of this Agreement
through November 1, 1997 (a) no Owner nor the Company nor any of their
respective officers, directors or partners will, and the Owners and the Company
will direct and use their best efforts to cause the Company's employees, agents
and representatives not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets, any equity securities or partnership interests of the Company (any such
proposal or offer being hereinafter referred to as an
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"Acquisition Proposal") or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal; (b) each Owner and the
Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing, and each will take the necessary steps to
inform the individuals or entities referred to in the first sentence hereof of
the obligations undertaken in this Section; and (c) the Owners and the Company
will notify AMP immediately if any such inquiries or proposals are received by,
any such information is requested from or any such negotiations or discussions
are sought to be initiated or continued with the Company or any Owner.
SECTION 6.12. DISTRIBUTIONS AND REPURCHASES. Except as set forth on
Schedule 6.12, no distribution, payment or dividend of any kind will be declared
or paid by the Company in respect of its partnership interests, nor will any
repurchase of any partnership interests of the Company be approved or effected.
SECTION 6.13. REQUIREMENTS TO EFFECT ACQUISITION. The Company and the
Owners will use their best efforts to take, or cause to be taken, all actions
necessary to effect the Acquisition under applicable law, including, without
limitation, the filing with the appropriate government officials of all
necessary documents in form approved by counsel for the parties to this
Agreement.
SECTION 6.14. FORMATION OF THE GROUP PRACTICE. The Owners, together
with other Doctors of Podiatric Medicine, will form and organize a group
practice (the "Group Practice"), which will be a professional limited liability
company whose operating agreement and other constitutive documents will be in
form and substance satisfactory to AMP. On the Closing Date, immediately prior
to Closing, the Company will transfer to the Owners all of the Company's right,
title and interest in and to, and obligations under, the Employee Benefit Plans.
On the Closing Date, immediately prior to Closing, the Company will transfer to
the Owners all contracts, agreements and other assets listed on Schedule 6.14
(to be delivered by the Company and the Owners prior to Closing, which schedule
will be subject to the approval of AMP, which approval shall not be unreasonably
withheld) which by law cannot be acquired by AMP Subsidiary because they relate
to the practice of medicine or podiatry, and the Owners will immediately
contribute such assets listed on Schedule 6.14 to the Group Practice, together
with such other assets as may be legally required, in exchange for the issuance
of all of the membership interests in the Group Practice. The Owners will not
permit the Group Practice to commence business until the Closing Date.
SECTION 6.15. ACCESS. The Company and the Owners will, at reasonable
times during normal business hours and on reasonable notice, permit AMP and its
authorized representatives reasonable access to, and make available for
inspection, all of the assets and records of the Group Practice, including tax
returns and related information, and permit AMP and its authorized
representatives to inspect and make copies of all such documents, records (other
than
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confidential portions of patient medical records) and information with respect
to the affairs of the Group Practice as AMP and its representatives may request.
SECTION 6.16. LICENSES AND PERMITS. The Company and the Owners will use
their best efforts to obtain all licenses, permits, approvals or other
authorizations required under any law, statute, rule, regulation or ordinance,
or otherwise necessary or desirable, to provide the services of the Group
Practice, the Owners and the Physician Employees contemplated by the Management
Agreement, the Physician Engagement Agreements and the Physician Employment
Agreements and to conduct the intended business of the Group Practice.
SECTION 6.17. PHYSICIAN EMPLOYMENT AGREEMENTS. The Company and the
Owners will use their commercially reasonable best efforts to cause, at or
immediately prior to Closing, each Physician Employee (i) to terminate his or
her employment agreement, if any, with the Company by mutual consent without any
liability therefor on the part of the Company and (ii) to enter into a Physician
Employment Agreement with the Group Practice.
SECTION 6.18. DELIVERY OF SCHEDULES. The Company and the Owners will
deliver to AMP all schedules required to be delivered by them prior to the
Closing.
ARTICLE VII
COVENANTS OF AMP AND AMP SUBSIDIARY
AMP and AMP Subsidiary agree that between the date hereof and the
Closing:
SECTION 7.1. CONSUMMATION OF AGREEMENT. AMP will use its commercially
reasonable efforts to cause the consummation of the transactions contemplated
hereby in accordance with their terms and conditions and take all corporate and
other action necessary to approve the Acquisition.
SECTION 7.2. REQUIREMENTS TO EFFECT ACQUISITION. AMP will use its best
efforts to take, or cause to be taken, all actions necessary to effect the
Acquisition under applicable law, including, without limitation, the filing with
the appropriate government officials of all necessary documents in form approved
by counsel for the parties to this Agreement.
SECTION 7.3. NOTIFICATION OF CERTAIN MATTERS. AMP will promptly inform
the Company and the Owners in writing of any material adverse change in AMP's
prospects, proposed public offering, condition (financial or otherwise),
operations, assets, liabilities or business or (b) any event or information that
would cause AMP to believe reasonably that any of its respective representations
and warranties under this Agreement to be untrue.
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SECTION 7.4. APPROVALS OF THIRD PARTIES. AMP will use its best efforts
to secure, as soon as practicable after the date hereof, all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby.
SECTION 7.5. STOCK OPTION PLAN FOR ADVISORS AND CONSULTANTS. Prior to
Closing, AMP will adopt a non-statutory stock option plan for the benefit of
advisors and consultants to AMP (the "Advisors Plan"). Physician Employees who
agree to and serve as advisors or consultants to AMP may be eligible to receive
non-statutory options under the Advisors Plan.
SECTION 7.6. LICENSES AND PERMITS. AMP will use its best efforts to
obtain all licenses, permits, approvals or other authorizations required under
any law, statute, rule, regulation or ordinance, or otherwise necessary or
desirable, to consummate the transactions or provide the services contemplated
by the Management Agreement and to conduct the intended businesses of AMP and
AMP Subsidiary.
SECTION 7.7. DELIVERY OF SCHEDULES. AMP will deliver to the Company and
the Owners all schedules required to be delivered by it prior to the Closing.
SECTION 7.8. PROFESSIONAL LIABILITY INSURANCE. AMP will use
commercially reasonable methods to obtain for each Physician professional
liability insurance with a benefit date retroactive to the Closing Date ("Nose
Coverage").
ARTICLE VIII
COVENANTS OF AMP, THE COMPANY AND THE OWNERS
AMP, the Company and the Owners agree as follows:
SECTION 8.1. FILINGS; OTHER ACTION.
(a) AMP will promptly prepare and file with the SEC the Registration
Statement on Form S-1 (or other appropriate Form) to be filed by AMP in
connection with its Initial Public Offering (including the prospectus
constituting a part thereof, the "Registration Statement"). AMP will obtain all
necessary state securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement. The Company and the
Owners will cooperate as may be reasonably requested in connection with any such
action.
(b) Each of the Company, each Owner and AMP represents and warrants
that none of the documents supplied or to be supplied by it for inclusion in the
Registration Statement, by exhibit or otherwise, will, at the time the
Registration Statement and each amendment and supplement thereto, if any,
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or
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necessary to make the statements therein, in the light of circumstances under
which they were made, not misleading.
(c) The Company will, upon request, furnish AMP with all information
concerning itself, its subsidiaries, directors, officers, partners and
stockholders and such other matters as may be reasonably requested by AMP in
connection with the preparation of the Registration Statement and each amendment
or supplement thereto, or any other statement, filing, notice or application
made by or on behalf of each such party or any of its subsidiaries to any
governmental entity in connection with the Acquisition and the other
transactions contemplated by this Agreement.
SECTION 8.2. AMENDMENT OF SCHEDULES. Each party hereto agrees that,
with respect to the representations and warranties of such party contained in
this Agreement, such party will have the continuing obligation until the Closing
to supplement or amend promptly the Schedules with respect to any matter that
would have been or would be required to be set forth or described in the
Schedules in order to not materially breach any representation, warranty or
covenant of such party contained herein; provided, that no amendment or
supplement to a Schedule that constitutes or reflects a material adverse change
to the Company may be made unless AMP consents to such amendment or supplement,
and no amendment or supplement to a Schedule that constitutes or reflects a
material adverse change to AMP may be made unless the Company and the Owners
consent to such amendment or supplement. For all purposes of this Agreement,
including, without limitation, for purposes of determining whether the
conditions set forth herein have been fulfilled, the Schedules hereto will be
deemed to be the Schedules as amended or supplemented with consent pursuant to
this Section.
SECTION 8.3. PRORATION OF COSTS AND RENTS. All rents, personal property
taxes and other sums actually paid under the lease agreements between the
Company and its lessors pertaining to the Assets and all expenses and costs
related to the Assets for the month of Closing will be prorated as of the
Closing Date.
SECTION 8.4. MANAGEMENT AGREEMENT. At Closing, the Owners, on behalf of
and as members of the Group Practice, agree to cause the Group Practice to enter
into the Management Agreement with AMP.
SECTION 8.5. PHYSICIAN ENGAGEMENT AGREEMENTS. At or immediately prior
to Closing, each Owner will terminate his or her employment agreement, if any,
with the Company by mutual consent without any liability on the part of the
Company therefor and will enter into his or her Physician Engagement Agreement
with the Group Practice.
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ARTICLE IX
CONDITIONS PRECEDENT OF AMP
Except as may be waived in writing by AMP, or if this Agreement is
terminated pursuant to Article XIV, the obligations of AMP hereunder are subject
to the fulfillment at or prior to the Effective Date of each of the following
conditions:
SECTION 9.1. PROCEEDINGS. No action, proceeding or order by any court
or governmental body or agency will have been threatened, orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
SECTION 9.2. NO MATERIAL ADVERSE EFFECT. No Material Adverse Effect
will have occurred, whether or not such effect shall have been caused by the
deliberate act or omission of the Company or any Owner.
SECTION 9.3. GOVERNMENT APPROVALS AND REQUIRED CONSENTS. The Company,
the Owners, the Group Practice and AMP will have obtained all necessary
government and other third-party approvals and consents.
SECTION 9.4. SECURITIES APPROVALS. The Registration Statement will have
become effective under the Securities Act, and no stop order suspending the
effectiveness of the Registration Statement will have been issued and no
proceedings for that purpose will have been initiated or threatened by the SEC.
At or prior to the Effective Date, AMP will have received all state securities
and "Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The AMP Common Stock will have been approved for listing on The Nasdaq
Stock Market, subject only to official notification of issuance.
SECTION 9.5. CLOSING DELIVERIES. AMP will have received all documents
and agreements, duly executed and delivered in form satisfactory to AMP,
referred to in Section 11.1.
SECTION 9.6. CHARTER AMENDMENT. The Company will have amended its
charter or other constitutive documents so that the Company is no longer a
"professional" corporation or other such "professional" legal entity.
ARTICLE X
CONDITIONS PRECEDENT OF THE COMPANY AND THE OWNERS
Except as may be waived in writing by the Company and the Owners, or if
this Agreement is terminated pursuant to Article XIV, the obligations of the
Company and the
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Owners hereunder are subject to fulfillment at or prior to the Effective Date of
each of the following conditions:
SECTION 10.1. PROCEEDINGS. No action, proceeding or order by any court
or governmental body or agency will have been threatened, orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
SECTION 10.2. GOVERNMENT APPROVALS AND REQUIRED CONSENTS. The Company,
the Owners, the Group Practice and AMP will have obtained all necessary
government and other third-party approvals and consents.
SECTION 10.3. SECURITIES APPROVALS. The Registration Statement will
have become effective under the Securities Act, and no stop order suspending the
effectiveness of the Registration Statement will have been issued and no
proceedings for that purpose will have been initiated or threatened by the SEC.
At or prior to the Effective Date, AMP will have received all state securities
and "Blue Sky" permits necessary to consummate the transactions contemplated
hereby. At or prior to the Effective Date, the AMP Common Stock will have been
approved for listing on The Nasdaq Stock Market, subject only to official
notification of issuance.
ARTICLE XI
CLOSING DELIVERIES
SECTION 11.1. DELIVERIES OF THE COMPANY AND THE OWNERS. At or prior to
the Effective Date, the Company and the Owners will deliver to AMP c/o Baker &
Hostetler LLP, counsel to AMP, the following, all of which will be in a form
satisfactory to AMP and will be held by Baker & Hostetler in escrow pending
Closing, pursuant to an escrow agreement in form and substance mutually
acceptable to the parties hereto:
(a) a copy of resolutions of the Board of Directors of the Company
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements and consummation of the Merger, certified by
the Secretary of the Company as being true and correct copies of the originals
thereof subject to no modification or amendment;
(b) a copy of resolutions or other consents of the Owners as members of
the Group Practice authorizing the execution, delivery and performance of the
Management Agreement, the Physician Engagement Agreements and the Physician
Employment Agreements, each certified by the Secretary of the Group Practice as
being true and correct copies of the originals thereof subject to no
modifications or amendments;
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(c) a certificate of the President of the Company and each Owner, dated
the Closing Date, as to the truth and correctness of the representations and
warranties of the Company and the Owners contained herein on and as of the
Effective Date;
(d) a certificate of the President or Managing Partner, as the case may
be, of the Company and each Owner, dated the Closing Date, (i) as to the
performance of and compliance in all material respects by the Company and the
Owners with all covenants contained herein on and as of the Effective Date and
(ii) certifying that all conditions precedent of the Company and the Owners to
the Closing Date have been satisfied;
(e) a certificate of the Secretary of the Company certifying as to the
incumbency of the directors and officers of the Company and as to the signatures
of such directors and officers who have executed documents delivered at Closing
on behalf of the Company;
(f) a certificate of the Group Practice certifying as to the incumbency
of the members of the Group Practice and as to the signatures of such members
who have executed documents delivered at the Closing on behalf of the Group
Practice;
(g) a certificate, dated within five days prior to the Effective Date,
of the Secretary of State of the respective states of organization of the
Company and the Group Practice establishing that such corporation or partnership
is in existence, has paid all franchise or similar taxes, if any, and, if
applicable, otherwise is in good standing to transact business in its state of
organization;
(h) certificates, dated within five days prior to the Effective Date,
of the Secretaries of State of the states in which the Company or the Group
Practice is qualified to do business, to the effect that such corporation or
partnership is qualified to do business and, if applicable, is in good standing
as foreign corporation or partnership, as the case may be, in each of such
states;
(i) an opinion of counsel to the Company and the Owners, dated as of
the Effective Date, pursuant to Section 9.3;
(j) all authorizations, consents, approvals, permits and licenses
referenced in Section 3.8;
(k) the resignations of the partners of the Company as requested by
AMP;
(l) the executed Management Services Agreement in substantially the
form attached hereto as Exhibit 11.1(l) (the "Management Agreement");
(m) an executed Physician Engagement Agreement between the Group
Practice and each Owner in substantially the form attached hereto as Exhibit
11.1(m) (the "Physician Engagement Agreements");
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(n) an executed Physician Employment Agreement between the Group
Practice and each Physician Employee in substantially the form attached hereto
as Exhibit 11.1(n) (the "Physician Employment Agreements");
(o) an executed Registration Rights Agreement among AMP, the Owners and
the Company in substantially the form attached hereto as Exhibit 13.1(o) (the
"Registration Rights Agreement");
(p) a nonforeign affidavit, as such affidavit is referred to in Section
1445(b)(2) of the Code, of each Owner, signed under a penalty of perjury and
dated as of the Closing Date, to the effect that such Owner is a United States
citizen or a resident alien (and thus not a foreign person) and providing such
Owner's United States taxpayer identification number;
(q) an executed Bill of Sale conveying the Assets to AMP Subsidiary in
substantially the form attached hereto as Exhibit 11.1(q);
(r) an executed Assignment and Assumption Agreement in the form
attached hereto as Exhibit 11.1(r) with respect to the Assumed Liabilities (the
"Assignment and Assumption Agreement");
(s) an assignment to AMP or AMP Subsidiary of each lease for real
property, in form and substance satisfactory to AMP (the "Lease Assignments");
and
(t) such other instrument or instruments as may be necessary or
appropriate, as AMP or its counsel will reasonably request, to carry out and
effect the purpose and intent of this Agreement.
SECTION 11.2. DELIVERIES OF AMP. At or prior to the Effective Date, AMP
will deliver to the Company and the Owners c/o Baker & Hostetler LLP, counsel to
AMP, the following, all of which will be in a form satisfactory to the Company
and the Owners and will be held by Baker & Hostetler in escrow pending Closing,
pursuant to an escrow agreement in form and substance mutually acceptable to the
parties hereto:
(a) a copy of the resolution of the Board of Directors of AMP
authorizing the execution, delivery and performance of this Agreement, and all
related documents and agreements, certified by AMP's Secretary 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 AMP authorizing
the execution, delivery and performance of the Management Agreement, certified
by the Secretary of AMP as being true correct copies of the originals thereof
subject to no modification or amendments;
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(c) a certificate of an officer of AMP dated the Closing Date as to the
truth and correctness of the representations and warranties of AMP contained
herein on and as of the Effective Date;
(d) a certificate of an officer of AMP dated the Closing Date (i) as to
the performance and compliance by AMP with all covenants contained herein on and
as of the Effective Date and (ii) certifying that all conditions precedent of
AMP to the Closing have been satisfied;
(e) a certificate of the Secretary of AMP certifying as to the
incumbency of the officers of AMP who have executed documents delivered at the
Closing on behalf of AMP;
(f) a certificate, dated within five days prior to the Effective Date,
of the Secretary of State of the respective states of incorporation of AMP and
AMP Subsidiary establishing that such corporation is in existence, has paid all
franchise or similar taxes, if any, and, if applicable, otherwise is in good
standing to transact business in its state of incorporation;
(g) certificates, dated within five days prior to the Effective Date,
of the Secretaries of State of the states in which AMP is qualified to do
business, to the effect that AMP is qualified to do business and, if applicable,
is in good standing as a foreign corporation in such state;
(h) an opinion of Baker & Hostetler, counsel to AMP, dated as of the
Effective Date, pursuant to Section 10.3;
(i) the executed Management Agreement;
(j) the executed Registration Rights Agreement;
(k) the Acquisition Consideration in accordance with Article II and
Annex I hereof;
(l) the executed Assignment and Assumption Agreement;
(m) the executed Lease Assignments; and
(n) such other instrument or instruments as may be necessary or
appropriate, as the Company, the Owners or their counsel may reasonably request,
to carry out and effect the purpose and intent of this Agreement.
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ARTICLE XII
POST CLOSING MATTERS
SECTION 12.1. FURTHER INSTRUMENTS OF TRANSFER. Following the Closing,
at the request of AMP, the Owners and the Company will 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 12.2. ACQUISITION TAX COVENANT.
(a) The parties intend that the Acquisition, together with the
transactions contemplated by Other Agreements, will qualify as a transfer of
assets pursuant to the requirements of Section 351 of the Code (a "Transfer").
(b) Both prior to and after the Closing, all books and records shall be
maintained, and all Tax Returns and schedules thereto shall be filed in a manner
consistent with the Acquisition being treated as a Transfer. Each party shall
provide to each other such tax information, reports, returns, or schedules as
may be reasonably required to assist such party in accounting for and reporting
the Acquisition as a Transfer.
ARTICLE XIII
REMEDIES
SECTION 13.1. INDEMNIFICATION BY THE OWNERS AND THE COMPANY. Subject to
the terms and conditions of this Article XIII, each Owner to the extent of their
proportionate interest in the Company, and the Company agree to indemnify,
defend and hold AMP, AMP Subsidiary 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"), as incurred, asserted against or incurred by such
indemnities arising out of or resulting from:
(a) a breach of any representation, warranty or covenant of the Company
or any Owner contained herein or in any schedule or certificate delivered
hereunder;
(b) any violation (or alleged violation) by the Owners, the Company
and/or any of their past or present directors, officers, members, partners,
managers, shareholders, employees (including, without limitation, Physician
Employees), agents, consultants and Affiliates of state or federal laws
governing healthcare 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
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claims submitted to any third party payor (including the Medicare and Medicaid
programs) on or before the Closing Date; or
(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 any Owner, the Company
(including its subsidiaries) or the Group Practice and provided to AMP or its
counsel by the Company or the Owners specifically for inclusion in any
preliminary prospectus, the Registration Statement or any prospectus forming a
part thereof, or any amendment thereof or supplement thereto, or arising out of
or based upon any omission or alleged omission to state therein a material fact
relating to any Owner, the Company (including its subsidiaries) or the Group
Practice required to be stated therein or necessary to make the statements
therein not misleading and not provided to AMP or its counsel by the Company or
any Owner.
SECTION 13.2. INDEMNIFICATION BY AMP AND AMP SUBSIDIARY. Subject to the
terms and conditions of this Article XIII, AMP and AMP Subsidiary hereby agree
to indemnify, defend and hold the Owners and their respective agents, attorneys
and Affiliates harmless from and against all Damages, as incurred, asserted
against or incurred by such indemnities arising out of or resulting from:
(a) a breach by AMP and AMP Subsidiary of any representation, warranty
or covenant of AMP or AMP Subsidiary contained herein or in any schedule or
certificate delivered hereunder; or
(b) 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, or arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to AMP contained in the Private
Placement Memorandum, any preliminary prospectus, the Registration Statement or
any prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to AMP and the transactions contemplated
hereby (including its subsidiaries) required to be stated therein or necessary
to make the statements therein not misleading.
SECTION 13.3. INDEMNIFICATION PROCEDURES. All claims for
indemnification under this Agreement will be asserted and resolved as follows:
(a) A party claiming indemnification under this Agreement (an
"Indemnified Party") shall promptly (and, in any event, at least 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")
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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. 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.
Within 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 XIII with respect to such Third Party Claim or (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, with the consent of the
Indemnified Party. The Indemnifying 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 Indemnifying Party shall deem
necessary or appropriate to protect its interests or those of the Indemnified
Party and not prejudicial to the Indemnified Party. If requested by the
Indemnifying Party, the Indemnified Party agrees, at the sole cost and expense
of the Indemnifying Party, to cooperate with the Indemnifying Party and its
counsel in contesting any Third Party Claim that the Indemnifying Party elects
to contest, including, without limitation, the making of any related
counterclaim against the person asserting the Third Party Claim or any
cross-complaint against any person. The Indemnified Party may participate in,
but not control, any defense or settlement of any Third Party Claim controlled
by the Indemnifying Party pursuant to this Section 13.3(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 Indemnifying 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
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13.3(b), or if the Indemnifying Party elects to defend the Indemnified Party
pursuant to Section 13.3(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 if 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. The Indemnifying Party may
participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this Section 13.3(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 Indemnified 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) If 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 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.
(e) Payments of all amounts owing by an Indemnifying Party pursuant to
this Article XIII relating to a Third Party Claim shall be made within 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 13.3(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.
SECTION 13.4. INDEMNIFICATION LIMITATIONS. All claims for
indemnification under this Agreement shall be subject to the following
limitations:
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(a) The initial Claim Notice for indemnification must have been
transmitted to the Indemnifying Party within two (2) years of the Closing Date,
unless the subject matter upon which the claim for indemnification is based
involves income tax, environmental or ERISA matters, in which event the initial
Claim Notice must have been transmitted within the applicable statute of
limitations;
(b) The total amount of indemnification to be paid by an Indemnifying
Party pursuant to this Agreement shall not exceed the total consideration either
paid or received, as appropriate, for the transaction contemplated herein; and
(c) No Indemnifying Party shall be liable for payment to an Indemnified
Party pursuant to this Agreement unless and until the aggregate amount of
damages attributable to said Indemnifying Party shall exceed Twenty-Five
Thousand Dollars ($25,000), with the Owners being considered as one aggregate
Indemnifying Party.
SECTION 13.5. REMEDIES NOT EXCLUSIVE. 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 13.6. 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.
ARTICLE XIV
TERMINATION
SECTION 14.1. TERMINATION. This Agreement may be terminated:
(a) by the Company, seventy-two hours after receipt of AMP's draft
Registration Statement on Form S-1;
(b) at any time prior to the Effective Date by AMP, if, as a result of
its due diligence, AMP reasonably deems termination to be advisable; or
(c) by AMP or the Company if the Acquisition has not been consummated
due to the failure of the Initial Public Offering.
SECTION 14.2. EFFECT OF TERMINATION. In the event this Agreement is
terminated pursuant to Sections 14.1(b) or 14.1(c) above, AMP, the Company and
the Owners shall each be entitled
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to pursue, exercise and enforce any and all remedies, rights, powers and
privileges available at law or in equity. In the event of a termination of this
Agreement under the provisions of this Article, a party not then in material
breach of this Agreement shall stand fully released and discharged of any and
all obligations under this Agreement.
ARTICLE XV
NONCOMPETITION
SECTION 15.1. PROHIBITED ACTIVITIES. In order to protect AMP against
the unauthorized use or the disclosure of any of its Confidential Information
presently known or hereinafter obtained by the Owners, and other good and
valuable consideration, each Owner hereby agrees that, subject to adjustment
pursuant to Section 15.5, for a period of five years following the Closing Date,
neither the Owner nor any of his or her Affiliates, shall knowingly, directly or
indirectly, for himself or herself or on behalf of any other corporation,
person, firm, partnership, association or any other entity (whether as an
individual, agent, servant, employee, employer, officer, director, shareholder,
investor, principal, consultant or in any other capacity):
(a) establish, operate or provide physician services at any medical
office, clinic or out-patient and/or ambulatory treatment or diagnostic facility
providing services similar to those provided by the Group Practice or engage or
participate in or finance any business which engages in competition with the
business being conducted by AMP (unless the Owner participated in such business
(other than the practice of medicine) within the geographical area designated
below prior to the Closing Date or the date the Owner became aware of planning
for such business operations by AMP), anywhere within twenty (20) miles of any
location of the Group Practice at which Owner has practiced podiatric medicine
in the prior year; or
(b) induce or attempt to influence any employee of the Group Practice
or AMP to terminate his or her employment or hire any such employee, whether or
not so induced or influenced.
SECTION 15.2. DAMAGES. Because of the difficulty of measuring economic
losses to AMP as a result of the breach of the foregoing covenant and because of
the immediate and irreparable damage that would be caused to AMP for which it
would have no other adequate remedy, each Owner agrees that, in the event of a
breach by him or her of the foregoing covenant, the covenant may be enforced by
AMP by injunctions and restraining orders.
SECTION 15.3. REASONABLE RESTRAINT. It is agreed by the parties that
the foregoing covenants in this Article XV impose a reasonable restraint on the
Owners in light of the activities and businesses of the Company on the date of
the execution of this Agreement and the future plans of the Group Practice.
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SECTION 15.4. SEVERABILITY; REFORMATION. The covenants in this Article
XV are severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
SECTION 15.5. TERM. It is specifically agreed that the period of five
years stated above shall be computed by excluding from such computation any time
during which an Owner is in violation of any provision of this Article XV. The
covenants contained in this Article XV shall have no effect if the transactions
contemplated by this Agreement are not consummated for any reason (including
termination pursuant to Section 14.1(b)), but otherwise shall not be affected by
any breach of any other provision hereof by any party hereto.
ARTICLE XVI
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
SECTION 16.1. NONDISCLOSURE. Each of the parties hereto recognize and
acknowledge that they had in the past, currently have and in the future may
possibly have access to certain Confidential Information of the other that is
valuable, special and a unique asset. Each of the parties hereto 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 the other and (b) to counsel and
other advisors, respectively, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section, unless (i) such
information becomes available to or known by the public generally through no
fault of any party, (ii) disclosure is required by law or the order of any
governmental authority, provided, that, prior to disclosing any information
pursuant to this clause, (iii), each party, as the case may be, shall, if
possible, give prior written notice thereof to the other and provide the other
with the opportunity to contest such disclosure, (iv) 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. In the event of a breach or threatened breach by any party of
the provisions of this Section, the other parties shall be entitled to an
injunction restraining such party from disclosing, in whole or in part, such
Confidential Information. Nothing herein shall be construed as prohibiting any
party 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 no other
adequate remedy would exist, the parties 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 or restraining orders.
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SECTION 16.3. SURVIVAL. The obligations of the parties under this
Article XVI shall survive the termination of this Agreement.
ARTICLE XVII
TRANSFER RESTRICTIONS
SECTION 17.1. TRANSFER RESTRICTIONS. For a period of one year following
the Closing, unless the minimum holding period under Rule 144 promulgated under
the Securities Act is shortened, in which case, for such shortened period,
except pursuant to the Registration Rights Agreement, no Owner shall voluntarily
(a) sell, assign, exchange, transfer, encumber, pledge, distribute, appoint, or
otherwise dispose of (i) any shares of AMP Common Stock received by the Company
in the Acquisition, or (ii) any interest (including, without limitation, an
option to buy or sell) in any such shares of AMP Common Stock, in whole or in
part, and no such attempted transfer shall be treated as effective for any
purpose or (b) engage in any transaction, whether or not with respect to any
shares of AMP Common Stock or any interest therein, the intent or effect of
which is to reduce the risk of owning shares of AMP Common Stock. The
certificates evidencing the AMP Common Stock delivered to the Company pursuant
to this Agreement will bear a legend substantially in the form set forth below
and containing such other information as AMP may deem necessary or appropriate:
Except pursuant to the terms of the Registration Rights
Agreement and the Business Purchase Agreement among the
issuer, the holder of this certificate and the other parties
thereto, the shares represented by this certificate may not be
voluntarily sold, assigned, exchanged, transferred,
encumbered, pledged, distributed, appointed or otherwise
disposed of, and the issuer shall not be required to give
effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or
other disposition prior to one year after their date of
issuance. Upon the written request of the holder of this
certificate, the issuer agrees to remove this restrictive
legend (and any stop order placed with the transfer agent)
after the date specified above.
ARTICLE XVIII
FEDERAL SECURITIES LAW RESTRICTIONS ON AMP COMMON STOCK
SECTION 18.1. INVESTMENT REPRESENTATION. The Company and the Owners
acknowledge that the shares of AMP Common Stock to be delivered to the Company
and the Owners pursuant to this Agreement have not been and will not be
registered under the Securities Act and may not
49
<PAGE>
be resold without compliance with the Securities Act. The AMP Common Stock to be
acquired by the Company and the Owners pursuant to this Agreement is being
acquired solely for its own account, for investment purposes only and with no
present intention of distributing, selling or otherwise disposing of it in
connection with a distribution.
SECTION 18.2. COMPLIANCE WITH LAW. The Company and the Owners covenant,
warrant and represent that none of the shares of AMP Common Stock issued to the
Company and the Owners will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all of
the applicable provisions of the Securities Act and the rules and regulations of
the SEC and applicable state securities laws and regulations. All certificates
evidencing shares of AMP Common Stock shall bear the following legend, in
addition to the legends under Article XVIII:
The shares represented hereby have not been registered under
the Securities Act of 1933 (the "Act") and may only be sold or
otherwise transferred if the holder hereof complies with the
Act and applicable state securities law.
In addition, certificates evidencing shares of AMP Common Stock shall bear any
legend required by the securities or applicable blue sky laws of any state.
SECTION 18.3. ECONOMIC RISK; SOPHISTICATION. The Company and the Owners
are able to bear the economic risk of an investment in AMP Common Stock acquired
pursuant to this Agreement and can afford to sustain a total loss of such
investment and has such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of the proposed
investment and therefore has the capacity to protect his, her or its own
interests in connection with the acquisition of the AMP Common Stock. The
Company and the Owners or their purchaser representatives have had an adequate
opportunity to ask questions and receive answers from the officers of AMP
concerning any and all matters relating to the transactions described in the
Registration Statement, including, without limitation, the background and
experience of the officers and directors of AMP, the plans for the operations of
the business of AMP and any plans for additional acquisitions and the like. The
Company and the Owners or their purchaser representatives have asked any and all
questions in the nature described in the preceding sentence and all questions
have been answered to his, her or their satisfaction.
ARTICLE XIX
GENERAL
SECTION 19.1. 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
signed by the parties hereto. The waiver
50
<PAGE>
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 19.2. 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 AMP to a
wholly owned subsidiary of AMP; provided, that any such assignment shall not
relieve AMP of its obligations hereunder.
SECTION 19.3. PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES. Except
as otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and permitted assigns of the parties hereto. Neither
this Agreement nor any other agreement contemplated hereby shall be deemed to
confer upon any person not a party hereto or thereto, except AMP Subsidiary, any
rights or remedies hereunder or thereunder.
SECTION 19.4. NO JOINT LIABILITY OF OWNERS. The parties hereto agree
that the Owners shall not be jointly liable for breaches of this Agreement, but
shall each have liability in proportion to their respective ownership of the
Company.
SECTION 19.5. 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 19.6. SEVERABILITY. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under present or future laws effecting
during the term hereof, such provisions 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 19.7. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
The representations, warranties and covenants contained herein shall survive the
Closing but only as provided herein. All statements contained in any
certificate, exhibit or other instrument delivered by or on behalf of the
Company, any Owner or AMP pursuant to this Agreement shall be deemed to have
been an integral part of this Agreement by such Company, such Owner or AMP, as
the case may be.
SECTION 19.8. 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
51
<PAGE>
(BUT NOT THE RULES GOVERNING CONFLICTS OF LAWS) OF THE STATE OF TEXAS.
SECTION 19.9. CAPTIONS. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of the
terms or provisions hereof.
SECTION 19.10. GENDER AND NUMBER. When the context requires, the gender
of all words used herein shall include the masculine, feminine and neuter and
the number of all words shall include the singular and plural.
SECTION 19.11. 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 19.12. CONFIDENTIALITY; PUBLICITY AND DISCLOSURES. Each party
shall keep this Agreement and its terms confidential, and shall make no press
release or public disclosure, either written or oral, regarding the transactions
contemplated by this Agreement without the prior knowledge and consent of the
other parties hereto; provided that the foregoing shall not prohibit any
disclosure (a) by press release, filing or otherwise that AMP 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 AMP in connection with the conduct of its Initial Public Offering and
conducting an examination of the operations and assets of the Company. 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 19.13. NOTICE. Whenever this Agreement requires 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
when actually received by the party to whom notice is sent, 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 AMP: American Medical Providers, Inc.
3555 Timmons Lane, Suite 1550
Houston, Texas 77027
Attn: Mr. Jack N. McCrary
52
<PAGE>
with a copy to: Baker & Hostetler LLP
1000 Louisiana, Suite 2000
Houston, Texas 77002
Attn: Ivan Wood, Esq.
If to the Company
or any Owner: _____________________________
_____________________________
_____________________________
Attn: _______________________
with a copy to: _____________________________
_____________________________
_____________________________
SECTION 19.14. CHOICE OF FORUM. The parties hereto agree that should
any suit, action or proceeding arising out of this Agreement be instituted by
any party hereto (other than a suit, action or proceeding to enforce or realize
upon any final court judgment arising out of this Agreement), such suit, action
or proceeding shall be instituted only in a state or federal court in Harris
County, Texas. Each of the parties hereto consents to the in personam
jurisdiction of any state or federal court in Harris County, Texas and waives
any objection to the venue of any such suit, action or proceeding. The parties
hereto recognize that courts outside Harris County, Texas may also have
jurisdiction over suits, actions or proceedings arising out of this Agreement,
and in the event that any party hereto shall institute a proceeding involving
this Agreement in a jurisdiction outside Harris County, Texas, the party
instituting such proceeding shall indemnify any other party hereto for any
losses and expenses that may result from the breach of the foregoing covenant to
institute such proceeding only in a state or federal court in Harris County,
Texas, including without limitation any additional expenses incurred as a result
of litigating in another jurisdiction, such as reasonable fees and expenses of
local counsel and travel and lodging expenses for parties, witnesses, experts
and support personnel.
SECTION 19.15. NO WAIVER; REMEDIES. No party hereto shall by any act
(except by written instrument pursuant to Section 19.1 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.
53
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SECTION 19.16. 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 19.17. DEFINED TERMS. Terms used in Annex I and the Schedules
attached hereto with their initial letter capitalized and not otherwise defined
therein shall have the meanings assigned to such terms in this Agreement.
54
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
AMERICAN MEDICAL PROVIDERS, INC.:
AMERICAN MEDICAL PROVIDERS, INC.
By: _____________________________
Name: ___________________________
Office: _________________________
THE COMPANY:
_________________________________
By: _____________________________
Name: ___________________________
Office: _________________________
THE OWNERS:
By: _____________________________
____________________, D.P.M.
55
<PAGE>
ANNEX I
ACQUISITION CONSIDERATION
AGGREGATE CONSIDERATION:
Practice Value _____________________
Accounts Receivable (Est.) _____________________
Aggregate Consideration =====================
The aggregate Acquisition Consideration to be received by the Company is:
Cash Value of
AMP Shares Total
Cash* At Ipo Price Consideration
----- ------------ -------------
$ $ $
*Cash consideration consists of the net realizable value of net accounts
receivable plus __% of non-monetary assets, not to exceed __% of the total
valuation.
Split of cash and stock is subject to final conversion of the cash to accrual
financial statements for Company at June 30, 1997. Total consideration is fixed,
subject to confirmation by AMP that the information, including but not limited
to financial information, presented to AMP by Owner is accurate, and further
subject to the adjustment as set forth in Section 2.3(b).
_______
Initial
1
<PAGE>
SCHEDULE TO FORM OF BUSINESS PURCHASE AGREEMENT
The following lists: (i) the Affiliated Practices that are parties to
Business Purchase Agreements with the Company (ii) the value of assets
contributed by such Affiliated Practices to the Company and (iii) the various
components of consideration to be received by the Affiliated Practices pursuant
to the Business Purchase Agreements. Other than the assets contributed and the
consideration received by the Affiliated Practices, there are no material
differences among the Business Purchase Agreements executed by the Affiliated
Practices.
In addition, this schedule sets forth a summary of material terms of the
Business Purchase Agreements.
<TABLE>
<CAPTION>
CONSIDERATION TO BE RECEIVED BY AFFILIATED
PRACTICES
------------------------------------------------
CASH
ASSETS TO BE VALUE OF NUMBER OF DEBT
AFFILIATED PRACTICES CONTRIBUTED SHARES SHARES CASH PAID ASSUMED
- ------------------------------------- ------------- ---------- --------- ---------- -------
<S> <C> <C> <C>
Louis M. Antahades, D.P.M............ $ 6,000 $ 41,324 $ 10,331 --
Stephan Bard, D.P.M.................. 28,218 122,919 53,572 --
David L. Blumfield, D.P.M............ 465,992 1,003,493 380,847 62,500
Armida deBelvill, D.P.M.............. -- 80,652 20,163 --
Peter R. DeFrank, D.P.M.............. 17,108 206,115 93,200 --
Salvatore DeFrank, D.P.M............. 21,063 405,786 165,882 --
Kenrick J. Dennis, D.P.M............. 207,259 217,978 108,444 --
Stephen R. Densen, D.P.M............. 51,197 161,800 81,252 --
Laurence I. Dorman, D.P.M............ 6,323 145,102 72,277 --
Alan I. Ettinger, D.P.M.............. 24,554 172,956 77,174 --
Gerald I. Falke, D.P.M............... 177,929 724,420 306,806 --
Thomas S. Garrison, D.P.M............ 66,873 413,185 185,588 --
Norman W. Goldman, D.P.M............. 63,060 328,354 151,636 --
Todd Harrison, D.P.M................. 117,646 482,946 204,537 --
Bernard J. Hersh, D.P.M.............. 225,605 501,275 224,125 --
Michael W. Kendall, D.P.M............ 193,804 551,148 351,094 --
Kirk Koepsel, D.P.M.................. 66,872 413,185 185,588 --
Paul D. Leon, D.P.M.................. 21,465 250,558 106,806 --
James E. Miller, D.P.M............... 74,770 93,260 53,940 --
Donald E. Robinson, D.P.M............ 75,207 275,064 143,108 --
George R. Vito, D.P.M................ 268,885 1,734,362 1,278,121 --
------------- ---------- ---------- -------
Total........................... $ 2,179,830 $8,325,882 $4,254,491 $62,500
============= ========== ========== =======
</TABLE>
MATERIAL TERMS OF THE BUSINESS PURCHASE AGREEMENTS
The Business Purchase Agreements provide that the Company will acquire, and
each DPM will transfer to AMP, certain operating assets and receivables of each
of the Affiliated Practices. If the conditions to closing in the Business
Purchase Agreements are satisfied, the Company's affiliations with the
Affiliated Practices are expected to be consummated simultaneously with the
closing of the Offering.
CONSIDERATION. The consideration to be paid by the Company for all of the
initial Affiliated Practices is being determined by arms-length negotiations
between the Company and a representative of each Affiliated Practice. The
aggregate consideration to be paid by the Company for all initial Affiliated
Practices is approximately $33.1 million, including the assumption of $656,000
in indebtedness. The consideration is based upon the Affiliated Practice's gross
revenue, growth potential, quality of patients and service delivery and depth of
presence in its local market.
The consideration to be paid for the initial Affiliated Practices will be
paid by a combination of cash, Common Stock of the Company and the assumption of
certain debt.
A
<PAGE>
COVENANTS. Each DPM agrees under their relevant Business Purchase
Agreement that, for a period of five years, he or she will not compete with the
business of the Affiliated Practice within 20 miles of any location of the
Affiliated Practice's Regional Group Practice at which the DPM has practiced
podiatric medicine in the prior year. Each DPM also will agree that during this
time period, he or she will not induce or attempt to induce any employee of the
Regional Group Practice or any of its affiliates to terminate his or her
employment with the Regional Practice Group. Additionally, the parties to the
Business Purchase Agreement agree not to disclose each other's confidential
information.
INDEMNIFICATION. Under the Business Purchase Agreements, each DPM (to the
extent of their proportionate interest in the Affiliated Practice) and each
Affiliated Practice will be obligated to indemnify the Company and its
subsidiaries for (i) a breach of any representation, warranty or covenant of the
Affiliated Practice or any owner, (ii) any violation (or alleged violation) by
the DPMs, the Affiliated Practice or past or present affiliates of state or
federal laws governing healthcare fraud and abuse (including, but not limited
to, fraud and abuse in the Medicare and Medicaid programs) occurring on or
before the Closing or any overpayment or obligation (or alleged overpayment or
obligation) arising out of or resulting from claims submitted to any third party
payor (including the Medicare and Medicaid programs) on or before the Closing,
or (iii) any liability under any federal or state securities law or regulation
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact relating to any DPM, the Affiliated Practice (including its
subsidiaries) or their Regional Group Practice and provided to the Company or
its counsel by the Affiliated Practice or its DPMs.
The Company will be obligated under the Business Purchase Agreements to
indemnify DPMs and the Affiliated Practices for (i) a breach by the Company of
any of its representations, warranties or covenants in the Purchase Agreement
and (ii) any liability under any federal or state securities law or regulation
arising out of or based upon an untrue statement or alleged untrue statement of
a material fact relative to the Company contained in the Prospectus, any
preliminary prospectus, the Registration Statement or any amendment or
supplement arising out of or based upon any omission or alleged omission to
state a material fact necessary to make the statements not misleading.
ACCOUNTING TREATMENT. As a result of the transactions contemplated by the
Business Purchase Agreements, the historical balance sheet information of the
Affiliated Practices will be combined on an historical cost basis in accordance
with generally accepted accounting principles as if the Affiliated Practices had
always been members of the same group. Cash payments attributed to non-monetary
assets made to DPMs of Affiliated Practices will be accounted for as a cash
dividend. The monetary assets of all the Affiliated Practices will be acquired
at their fair market value which is expected to be approximately $4.8 million.
CONDITIONS TO CONSUMMATION. The Company's obligation to consummate the
Closing under the Business Purchase Agreements is subject to a variety of
conditions, including, but not limited to, the following: (i) the formation of
the Regional Group Practice; (ii) the execution by the Regional Group Practice
of a management services agreement; (iii) the delivery of documents of
conveyance; (iv) the acquisition by the Company of all licenses, consents and
permits, and the provision of all notices, necessary for the Company and the
Affiliated Practices to continue their operations; (v) the absence of any
injunction or other proceeding to prohibit the Closing; and (vi) the
satisfactory completion by the Company of its due diligence investigation of the
Affiliated Practices through the Closing.
CONDUCT OF BUSINESS PENDING CLOSING. Pursuant to each Business Purchase
Agreement, each Affiliated Practice and its DPMs will agree that, until the
Closing, the Affiliated Practice will operate its business only in the usual,
regular and ordinary course, consistent with past practices, and will restrict
certain activities except with the prior written consent of the Company.
TERMINATION. Each Business Purchase Agreement and the transactions
contemplated thereby may be terminated prior to the Closing by the DPM or the
Company if the acquisition has not been consummated due to the failure of the
Offering made hereby.
B
<PAGE>
RESALES. The Company's Common Stock to be delivered to DPMs under the
Business Purchase Agreements will not be registered under the Securities Act or
any state securities act and will be offered and sold in reliance upon
exemptions from the registration requirements of the Securities Act and such
laws. Thus, Common Stock issued pursuant to the Purchase Agreements will not be
readily transferable immediately.
Pursuant to each Business Purchase Agreement, each DPM receiving Common
Stock has agreed not to sell or otherwise dispose of any Common Stock during a
180-day period after the Closing without the prior written consent of the
underwriters of the Offering made hereby.
C
EXHIBIT 10.10
ASSET PURCHASE AGREEMENT
AMONG
AMERICAN MEDICAL PROVIDERS, INC.
PYRAMID ANESTHESIOLOGY GROUP, INC.,
AND
THE OWNERS NAMED HEREIN
OCTOBER 31, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I Definitions ................................................ 1
Section 1.1. Definitions ........................................ 1
ARTICLE II The Acquisition ........................................... 7
Section 2.1. The Acquisition .................................... 7
Section 2.2. The Closing ........................................ 7
Section 2.3. Acquisition Consideration; Allocation
of Purchase Price ................................. 7
Section 2.4. Escrow Amount ...................................... 7
Section 2.5. Fractional Shares .................................. 8
Section 2.6. Subsequent Actions ................................. 8
Section 2.7. Assumed Liabilities ................................ 8
ARTICLE III Representations and Warranties of the Company
and the Owners .......................................... 8
Section 3.1. Organization and Good Standing; Qualification ...... 8
Section 3.2. Capital Structure .................................. 8
Section 3.3. Transactions in Capital ............................ 9
Section 3.4. Continuity of Business Enterprise .................. 9
Section 3.5. Records ............................................ 9
Section 3.6. Authorization and Validity ......................... 9
Section 3.7. No Violation ....................................... 9
Section 3.8. Consents ........................................... 10
Section 3.9. Financial Statements ............................... 10
Section 3.10. Liabilities and Obligations ....................... 10
Section 3.11. Employee Matters .................................. 10
Section 3.12. Aliens ............................................ 12
Section 3.13. Employee Benefit Plans ............................ 12
Section 3.14. Absence of Certain Changes ........................ 14
Section 3.15. Title; Leased Assets .............................. 16
Section 3.16. Commitments ....................................... 16
Section 3.17. Insurance ......................................... 17
Section 3.18. Proprietary Rights and Information ................ 18
Section 3.19. Taxes ............................................. 18
Section 3.20. Compliance with Laws .............................. 20
Section 3.21. Finder's Fee ...................................... 20
Section 3.22. Litigation ........................................ 20
Section 3.23. Condition of Fixed Assets ......................... 21
Section 3.24. Distributions and Repurchases ..................... 21
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Section 3.25. Banking Relations ................................. 21
Section 3.26. Interested Persons; Affiliations .................. 21
Section 3.27. Environmental Matters ............................. 21
Section 3.28. Certain Payments .................................. 22
Section 3.29. Medical Waste ..................................... 22
Section 3.30. Medicare and Medicaid Programs .................... 22
Section 3.31. Fraud and Abuse ................................... 23
Section 3.32. Payors ............................................ 23
ARTICLE IV Representations and Warranties of the Owners .............. 24
Section 4.1. Validity; Owners' Capacity ......................... 24
Section 4.2. No Violation ....................................... 24
Section 4.3. Personal Holding Companies; Control of
Related Businesses. 24
Section 4.4. Transfers of Ownership Interests ................... 24
Section 4.5. Accredited Investor Status ......................... 24
Section 4.6. Consents ........................................... 24
Section 4.7. Certain Payments ................................... 25
Section 4.8. Finder's Fee ....................................... 25
Section 4.9. Interested Persons; Affiliations ................... 25
Section 4.10. Investments in Competitors ........................ 25
Section 4.11. Disposition of AMP Shares ......................... 25
ARTICLE V Representations and Warranties of AMP ...................... 25
Section 5.1. Organization and Good Standing ..................... 25
Section 5.2. Capitalization ..................................... 26
Section 5.3. Authorization and Validity ......................... 26
Section 5.4. No Violation ....................................... 26
Section 5.5. Finder's Fee ....................................... 26
Section 5.6. Capital Stock ...................................... 27
Section 5.7. Consents ........................................... 27
ARTICLE VI Covenants of the Company and the Owner .................... 27
Section 6.1. Consummation of Agreement .......................... 27
Section 6.2. Business Operations ................................ 27
Section 6.3. Access ............................................. 27
Section 6.4. Notification of Certain Matters .................... 28
Section 6.5. Tax Returns ........................................ 28
Section 6.6. Approvals of Third Parties ......................... 28
Section 6.7. Employee Matters ................................... 28
Section 6.8. Contracts .......................................... 29
Section 6.9. Capital Assets; Payments of Liabilities ............ 29
Section 6.10. Mortgages, Liens and Guaranties ................... 29
Section 6.11. Acquisition Proposals ............................. 29
Section 6.12. Distributions and Repurchases ..................... 30
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Section 6.13. Requirements to Effect Acquisition ................ 30
Section 6.14. Access ............................................ 30
Section 6.15. Licenses and Permits .............................. 30
Section 6.16. New Employment Agreements ......................... 30
Section 6.17. Delivery of Schedules ............................. 31
ARTICLE VII Covenants of AMP ......................................... 31
Section 7.1. Consummation of Agreement .......................... 31
Section 7.2. Requirements to Effect Acquisition ................. 31
Section 7.3. Notification of Certain Matters .................... 31
Section 7.4. Approvals of Third Parties ......................... 31
Section 7.5. Licenses and Permits ............................... 31
ARTICLE VIII Covenants of AMP, the Company and the Owners ............ 31
Section 8.1. Filings; Other Action .............................. 31
Section 8.2. Amendment of Schedules ............................. 32
Section 8.3. Proration of Costs and Rents ....................... 32
ARTICLE IX Conditions Precedent of AMP ............................... 33
Section 9.1. Representations and Warranties ..................... 33
Section 9.2. Covenants .......................................... 33
Section 9.3. Legal Opinion ...................................... 33
Section 9.4. Proceedings ........................................ 33
Section 9.5. No Material Adverse Effect ......................... 33
Section 9.6. Government Approvals and Required Consents ......... 33
Section 9.7. Securities Approvals ............................... 33
Section 9.8. Closing Deliveries ................................. 33
Section 9.9. Charter Amendment .................................. 34
ARTICLE X Conditions Precedent of the Company and the Owners ......... 34
Section 10.1. Representations and Warranties .................... 34
Section 10.2. Covenants ......................................... 34
Section 10.3. Legal Opinion ..................................... 34
Section 10.4. Proceedings ....................................... 34
Section 10.5. Government Approvals and Required Consents ........ 34
Section 10.6. Securities Approvals .............................. 34
Section 10.7. Closing Deliveries ................................ 35
ARTICLE XI Closing Deliveries ........................................ 35
Section 11.1. Deliveries of the Company and the Owners .......... 35
Section 11.2. Deliveries of AMP ................................. 36
ARTICLE XII Post Closing Matters ..................................... 37
Section 12.1. Further Instruments of Transfer ................... 37
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Section 12.2. Guaranty of Payment of Liquidated Damages ......... 38
ARTICLE XIII Remedies ................................................ 38
Section 13.1. Indemnification by the Owners and the Company ..... 38
Section 13.2. Indemnification by AMP ............................ 38
Section 13.3. Indemnification Procedures ........................ 39
Section 13.4. Remedies Not Exclusive ............................ 41
Section 13.5. Costs, Expenses and Legal Fees .................... 41
ARTICLE XIV Termination .............................................. 41
Section 14.1. Termination ....................................... 41
Section 14.2. Effect of Termination ............................. 42
ARTICLE XV Noncompetition ............................................ 42
Section 15.1. Prohibited Activities ............................. 42
Section 15.2. Damages ........................................... 43
Section 15.3. Reasonable Restraint .............................. 43
Section 15.4. Severability; Reformation ......................... 43
Section 15.5. Term .............................................. 43
ARTICLE XVI Nondisclosure of Confidential Information ................ 43
Section 16.1. Nondisclosure ..................................... 43
Section 16.2. Damages ........................................... 44
Section 16.3. Survival .......................................... 44
Section 16.4. AMP Nondisclousr .................................. 44
ARTICLE XVII Transfer Restrictions ................................... 44
Section 17.1. Transfer Restrictions ............................. 44
ARTICLE XVIII Federal Securities Law Restrictions on
AMP Common Stock ...................................... 45
Section 18.1. Investment Representation ......................... 45
Section 18.2. Compliance with Law ............................... 45
Section 18.3. Economic Risk; Sophistication ..................... 46
ARTICLE XX General ................................................... 47
Section 20.1. Amendment; Waivers ................................ 47
Section 20.2. Assignment ........................................ 47
Section 20.3. Parties in Interest; No Third Party Beneficiaries . 47
Section 20.4. Entire Agreement .................................. 47
Section 20.5. Severability ...................................... 47
Section 20.6. Survival of Representations, Warranties
and Covenants .................................... 48
Section 20.7. Governing Law ..................................... 48
Section 20.8. Captions .......................................... 48
Section 20.9. Gender and Number ................................. 48
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Section 20.10. Reference to Agreement ........................... 48
Section 20.11. Confidentiality; Publicity and Disclosures ....... 48
Section 20.12. Notice ........................................... 49
Section 20.13. Choice of Forum .................................. 49
Section 20.14. No Waiver; Remedies .............................. 50
Section 20.15. Counterparts ..................................... 50
Section 20.16. Defined Terms .................................... 50
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ASSET PURCHASE AGREEMENT
Asset Purchase Agreement (this "Agreement"), dated as of October 31, 1997,
among Pyramid Anesthesiology Group, Inc., a Georgia corporation (the "Company"),
Roger Bigham and David LaGuardia (collectively the "Owners" and individually an
"Owner"), and American Medical Providers, Inc., a Delaware corporation, its
affiliates, successors or assigns ("AMP").
The Company and the Owners of the Company desire to sell, and AMP desires
to purchase, certain assets of the Company, and, accordingly, the Owners, the
Company and AMP desire to effect the Acquisition (defined below) upon the terms
and subject to the conditions contained herein.
AMP intends to enter into business purchase agreements or other
acquisition agreements (collectively, the "Other Agreements") similar to this
Agreement, in order to acquire medical practices.
To provide AMP with the necessary working capital and funds to consummate
the transactions contemplated hereby and by the Other Agreements, AMP expects
to, subject to the terms and conditions of this Agreement, enter into an
underwriting agreement with an Underwriter Representative (defined below) in
connection with a proposed Initial Public Offering (defined below).
In consideration of the mutual representations, warranties and covenants
herein contained and such other good and valuable consideration, the receipt and
sufficiency of which are hereby mutually 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. The following terms have the meanings set forth
below:
"Acquisition" has the meaning set forth in Section 2.1.
"Acquisition Consideration" has the meaning set forth in Section 2.3.
"actual knowledge," "have no actual knowledge of," "do not actually know
of" and similar phrases mean (i) in the case of a natural person, the actual
conscious awareness, or not, as the context requires, of the particular fact by
such person or (ii) in the case of an entity, the actual conscious awareness, or
not, as the context requires, of the particular fact by any stockholder,
partner, owner, director or officer of such entity.
"Affiliate," with respect to any person, means a person that directly or
indirectly through one or more intermediaries controls, is controlled by or is
under common control with such person.
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"AMP Common Stock" means the common stock, par value $0.01 per share, of
AMP.
"AMP Subsidiary" means the wholly-owned subsidiary of AMP formed prior to
Closing identified in Section 2.1.
"AMP Subsidiary Common Stock" means the common stock, par value $0.01 per
share, of AMP Subsidiary.
"Arthur Andersen" means Arthur Andersen, LLP, independent certified public
accountants.
"Assets" means the Equipment and all properties and assets (tangible and
intangible) of every kind and wherever situated that are owned by the Company or
in which the Company has any right or interest (including, without limitation,
rights under its insurance policies and warranties related thereto; its causes
of action, judgments, claims and demands of whatever nature related thereto; its
deferred charges, security deposits, advance payments, prepaid items, claims for
refunds, rights of offset and credits of all kinds related thereto certain of
its Contracts and Agreements; its intellectual property, trademarks, tradenames,
tradesecrets and other intellectual property rights of any kind whatsoever
including the name Anesthecare or any derivative thereof; all personal property
of every kind and character used in connection with Equipment and its files,
papers and records relating to the aforesaid properties and assets), other than
the Excluded Assets.
"Balance Sheet" has the meaning set forth in Section 3.9.
"Balance Sheet Date" has the meaning set forth in Section 3.9.
"best knowledge," "have no knowledge of," "do not know of" or "to the
knowledge of" and similar phrases 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 or (ii) in the case of
an entity, the particular fact was known, or not known, as the context requires,
to any stockholder, partner, owner, director or officer of such entity after
diligent investigation and inquiry b the officers of such entity.
"Cash Compensation" has the meaning set forth in Section 3.11(a).
"Claim Notice" has the meaning set forth in Section 13.3.
"Closing" means the closing of the transactions contemplated by this
Agreement.
"Closing Date" has the meaning set forth in Section 2.2.
"Code" has the meaning set forth in the recitals to this Agreement.
"Commitments" has the meaning set forth in Section 3.16.
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"Company" has the meaning set forth in the recitals hereto.
"Compensation Plans" has the meaning set forth in Section 3.11(b).
"Confidential Information" means all trade secrets and other confidential
and/or proprietary information of the particular person, including information
derived from reports, investigations, research, work in progress, codes,
marketing and sales programs, financial projections, cost summaries, pricing
formulae, contract analyses, financial information, projections, confidential
filings with any state or federal agency and all other confidential concepts,
methods of doing business, ideas, materials o information prepared or performed
for, by or on behalf of such person by such person's stockholders, owners,
partners, employees, officers, directors, agents, representatives or
consultants.
"Controlled Group" has the meaning set forth in Section 3.13(g).
"Damages" has the meaning set forth in Section 13.1.
"Effective Date" means the date that the Registration Statement is
declared effective by the SEC.
"Election Period" has the meaning set forth in Section 13.3.
"Employee Benefit Plans" has the meaning set forth in Section 3.13(a).
"Employee Policies and Procedures" has the meaning set forth in Section
3.11(d).
"Employment Agreements" has the meaning set forth in Section 3.11(c).
"Environmental Laws" means any laws or regulations pertaining to health or
the environment as in effect on the date hereof and the Closing Date, including
without limitation (i) the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (42 U.S.C. ss. 9601 ET SEQ.), as amended (including
without limitation as amended pursuant to the Superfund Amendments and
Reauthorization Act of 1986) and any regulations promulgated thereunder, (ii)
the Resource Conservation and Recovery Act of 1976 (42 U.S.C. ss. 6901 ET SEQ.),
as amended, and any regulations promulgated thereunder, (iii) statutes, rules or
regulations, whether federal, state or local, applicable to the Company's Assets
or operations that relate to asbestos or polychlorinated biphenyls and (iv) the
provisions contained in any similar federal, state or local statutes or
regulations relating to environmental matters applicable to the Company's Assets
or operations.
"Equipment" means all equipment, machinery, tools and similar Assets owned
by the Company and used by the Company in its business, including, without
limitation, all supplies of the Company related thereto.
"Escrow Amount" means the portion of Acquisition Consideration withheld by
AMP under
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Section 2.4 pending certain performance targets or any substituted
collateral permitted by AMP with respect to the Escrow.
"ERISA" has the meaning set forth in Section 3.13(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" means the following Assets and properties of the
Company: (i) the Acquisition Consideration, (ii) the Company's right to enforce
AMP's representations, warranties and covenants hereunder and the obligations of
AMP to pay, perform or discharge the Assumed Liabilities and all other rights,
including rights of indemnification, of the Company under this Agreement or any
instrument executed pursuant hereto and (iii) the Employee Benefit Plans.
"Financial Statements" has the meaning set forth in Section 3.9.
"Fixed Assets" has the meaning set forth in Section 3.23.
"Indemnified Party" has the meaning set forth in Section 13.3.
"Indemnifying Party" has the meaning set forth in Section 13.3.
"Indemnity Notice" has the meaning set forth in Section 13.3.
"Initial Public Offering" means the initial underwritten public offering
of AMP Common Stock contemplated by the Registration Statement.
"Initial Public Offering Price" means the price per share of AMP Common
Stock received by AMP in connection with its Initial Public Offering.
"Insurance Policies" has the meaning set forth in Section 3.17.
"IRS" means the Internal Revenue Service.
"Lease Assignments" has the meaning set forth in Section 11.1(n).
"Material Adverse Effect" means a material adverse effect on the business,
operations, condition (financial or otherwise), results of operations or
prospects of the Company in consideration of all relevant facts and
circumstances that is likely to impact the Company by more than $80,000.00
during any 12-month period.
"New Employment Agreements" has the meaning set forth in Section 6.16.
"ordinary course of business" means the usual and customary way in which
the particular entity
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has conducted its business in the past, in all cases, in compliance with law.
"Other Agreements" has the meaning set forth in the recitals to this
Agreement.
"Owner(s)" means those person(s), all of whom are identified in the first
paragraph of this Agreement, who own, beneficially and of record, all of the
ownership interests in the Company, whatever form those interests may take,
including, without limitation, capital stock, partnership interests, units,
shares in profit, membership interests or the like.
"Payors" has the meaning set forth in Section 3.30.
"person" means any natural person, corporation, partnership, joint
venture, limited liability company, association, group, organization or other
entity.
"Personal Property" has the meaning set forth in Section 3.15(b).
"Private Placement Memorandum" means the Confidential Private Placement
Memorandum, dated June 25, 1997, provided by AMP to the Owners and the Company.
"Proprietary Rights" has the meaning set forth in Section 3.18.
"Registration Rights Agreement" has the meaning set forth in Section
11.1(k).
"Registration Statement" has the meaning set forth in Section 8.1.
"Related Acquisitions" means, collectively, the Acquisition and the
mergers and acquisitions of entities and assets contemplated by the Other
Agreements.
"Schedules" means 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.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Taxes" means all taxes, however denominated, including any interest,
penalties or other additions to tax that may become payable in respect thereof,
imposed by any federal, state, territorial, local or foreign government or any
agency or political subdivision of any such government, which taxes shall
include, without limiting the generality of the foregoing, all income or profits
taxes, real property gains taxes, payroll and employee withholding taxes,
unemployment insurance taxes, social security taxes, sales and use taxes, ad
valorem taxes, excise taxes, franchise taxes, gross receipts taxes, business
license taxes, occupation taxes, real and personal property taxes, stamp taxes,
environmental taxes,
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alternative minimum taxes, transfer taxes, workers compensation or Pension
Benefit Guaranty Corporation premiums, and other obligations of the same or of a
similar nature, which the Company is required to pay, withhold or collect.
"Tax Returns" shall mean all reports, estimates, declarations of estimated
Tax, information statements and returns relating to, or required to be filed in
connection with, any Taxes, including information returns or reports with
respect to backup withholding and other payments to third parties.
"Third Party Claim" has the meaning set forth in Section 13.3.
"Underwriter Representative" means the underwriter in the Initial Public
Offering who acts as the lead managing underwriter of the Initial Public
Offering.
ARTICLE II
THE ACQUISITION
SECTION 2.1. THE ACQUISITION. Subject to the terms and conditions of this
Agreement, on the Closing Date, the Company shall transfer, assign, convey and
deliver the Assets to AMP or AMP Subsidiary, a Georgia corporation ("AMP
Subsidiary"), free and clear of all security interests, liens, claims and
encumbrances (other than statutory liens arising in the ordinary course of
business or other liens that do not materially detract from the value or
interference with the use of such properties or Assets) and AMP or AMP
Subsidiary shall accept and acquire from the Company the Assets (the
"Acquisition").
SECTION 2.2. THE CLOSING. The Closing of the Acquisition will take place
at 10:00 a.m., local time, at the offices of Baker & Hostetler, Suite 2000, 1000
Louisiana, Houston, Texas two weeks from the day on which the transactions
contemplated by the Initial Public Offering are consummated. The date on which
the Closing occurs is the "Closing Date."
SECTION 2.3 ALLOCATION OF PURCHASE PRICE. The total consideration for the
Assets will be the cash and shares of AMP Common Stock in the amount set forth
on Annex I hereto (the "Acquisition Consideration"). The Acquisition
Consideration shall be allocated among the Assets as set forth in Schedule 2.3
to be delivered by the Company prior to Closing, which schedule will be subject
to the approval of AMP. AMP, the Company and the Owners will not take any
position on their respective income tax return that is inconsistent with such
allocation. The Acquisition Consideration less the Escrow Amount in Section 2.4
below, will be delivered to the Company at Closing.
SECTION 2.4. ESCROW AMOUNT. AMP shall withhold $1,500,000.00 cash of the
Acquisition Consideration and $500,000.00 in AMP Common Stock of the Acquisition
Consideration (the "Escrow Amount") for three fiscal years after the Closing.
Notwithstanding the foregoing, the Company and/or the Owners may substitute AMP
stock which they hold for some or all of the Cash
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portion of the Escrow, provided such AMP stock has equivalent value on the date
of Closing equal to the amount of cash for which it is being substituted, and
further provided that all documents, instruments and agreements necessary to
properly secure AMP's interest therein are in form reasonably acceptable to
AMP's attorneys. The Escrow Amount will be released to the Company as AMP is
able to reach certain operating income performance targets with the AMP
Subsidiary. These performance targets (individually the "Performance Target",
collectively the "Performance Targets"), for each of the three years will be as
follows: (i) year 1 - AMP Subsidiary operating income after salaries and
amortization of $1.5 million; (ii) year 2 - operating income after salaries and
amortization of $1.7 million; and (iii) year 3 - operating income after salaries
and amortization of $1.95 million. The performance of the AMP Subsidiary will be
evaluated at the end of each of the first three fiscal years of AMP following
the Closing, and at such time a portion of the Escrow Amount will be released
either to the Owners or to AMP, as determined below. The portion of the Escrow
Amount to be released annually is one-third of the Escrow Amount at the end of
the first fiscal year of AMP following the Closing, one-half of the Escrow
Amount at the end of the second fiscal year of AMP following the Closing, and
all of the Escrow Amount at the end of the third fiscal year of AMP following
the Closing (each, the "Release Amount"). The Owners shall be entitled to
receive that portion of the Release Amount that is the product of the Release
Amount for a given fiscal year and a fraction, the numerator of which is the
actual operating income of the AMP Subsidiary for that fiscal year (after
salaries and amortization) less sixty-four percent of the Performance Target and
the denominator of which is thirty-six percent of the Performance Target for
that fiscal year, and the balance of the Release Amount (if any) shall be
distributed to AMP. If for any reason the Closing should not occur on or before
December, 31, 1997, then the parties will use their respective best efforts to
renegotiate the period for the annual determination of the portion of the Escrow
Amount to be released to occur failing which agreement the determination shall
occur at the end of the fiscal year of AMP first following the Closing and the
Performance Target shall be adjusted ratably to reflect such short performance
evaluation year. Any interest earned on the Escrow Amount during the three-year
period will be paid to Owners after the end of each of AMP's fiscal years.
Subject to any restrictions under this Agreement or any securities laws, the
Company may convert any of the AMP Common Stock held in escrow to cash. At the
end of the third fiscal year, any portion of the Escrow Amount still retained by
AMP will be forfeited by the Company and the Owners, and AMP will be the sole
Owner thereof.
SECTION 2.5. FRACTIONAL SHARES. Notwithstanding any other provision
herein, no fractional shares of AMP Common Stock shall be issued, and the person
entitled hereunder to receive a fractional share of AMP Common Stock but for
this Section 2.5 will be entitled to receive a cash payment in lieu thereof
reflecting such person's proportionate interest in a share of AMP Common Stock
multiplied by the Initial Public Offering Price.
SECTION 2.6. SUBSEQUENT ACTIONS. If, at any time after the Closing, AMP
shall 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 AMP Subsidiary its right, title or interest in, to or
under any of the rights, properties or Assets of the Company acquired or to be
acquired by AMP Subsidiary as a result of, or in connection with, the
Acquisition or otherwise to carry out this Agreement, and to transfer the Assets
of the Company in return for the consideration set forth in this Agreement, the
officers and directors of AMP Subsidiary shall be authorized to execute and
deliver, in
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the name and on behalf of the Company, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on behalf of the
Company, 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
such rights, properties or Assets in AMP Subsidiary or otherwise to carry out
this Agreement.
SECTION 2.7 ASSUMED LIABILITIENotwithstanding anything to the contrary
contained in this Agreement, AMP shall assume or cause to be assumed any and all
Executive obligations that arise on or after (but not before) the Closing Date
under the contracts and agreements described on the attached Schedule 2.7, the
parties hereto acknowledging that such obligations relate to the ordinary course
of business conducted by Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE OWNERS
The Company and the Owners, jointly and severally, represent and warrant
to AMP and AMP Subsidiary that the following are true and correct as of the date
hereof and the Closing:
SECTION 3.1.ORGANIZATION AND GOOD STANDING; QUALIFICATION. The Company is
a corporation duly organized, and existing under the laws of its state of
organization with all requisite power and authority to carry on the business in
which it is engaged, to own the properties it owns, to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The Company is
not qualified or licensed to do business in any other jurisdiction. The Company
has no assets, employees or offices in a state other than the state of its
organization. Except as set forth in Schedule 3.1, neither the Company nor any
Owner controls, directly or indirectly, the capital stock of any other
corporation or any entity or a profit sharing, participation or other interest
in any corporation, partnership, joint venture or other entity that is engaged
in a business that is in or related to the healthcare industry.
SECTION 3.2. CAPITAL STRUCTURE. The authorized capital stock of the
Company consists of __________ shares of common stock, of which ___________
shares are issued and outstanding. The Owners own all of the Company's issued
and outstanding common stock in the respective amounts set forth in Schedule
3.2, free and clear of all security interests, liens, adverse claims,
encumbrances, equities, proxies and shareholders' agreements, except to the
extent specifically disclosed in detail on Schedule 3.2. Each outstanding share
of common stock of the Company has been legally and validly issued and is fully
paid and nonassessable. No share of capital stock is owned by the Company in
treasury. No shares of capital stock of the Company has been issued or disposed
of in violation of the preemptive rights, rights of first refusal or similar
rights of any of the Company's stockholders. The Company has no bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or are convertible into or exercisable for securities having the right to
vote) with the stockholders of the Company on any matter.
SECTION 3.3. TRANSACTIONS IN CAPITAL. The Company has acquired none of its
capital stock
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since ____________, ____. Except as set forth in Schedule 3.3, there exist no
options, warrants, subscriptions or other rights to purchase, or securities
convertible into or exchangeable for, any of the authorized or outstanding
securities of the Company, and no option, warrant, call, conversion right or
commitment of any kind exists that obligates the Company to issue any of its
authorized but unissued capital stock. Except as set forth in Schedule 3.3, the
Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof. Except as set
forth in Schedule 3.3, neither the equity structure of the Company nor the
relative ownership of shares among any of its stockholders has been altered or
changed in contemplation of the transactions contemplated hereby.
SECTION 3.4. CONTINUITY OF BUSINESS ENTERPRISE. Except as set forth in
Schedule 3.4 and except as contemplated this Agreement, there has not been any
sale, distribution or spin-off of Assets of the Company, other than in the
ordinary course of business within the five years preceding the date of this
Agreement.
SECTION 3.5. INTENTIONALLY OMITTED
SECTION 3.6. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Company of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by the Company. This Agreement has
been duly executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except for the lack of effectiveness or
enforceability because of the Bankruptcy Code, or any other provision of law
relating to fraudulent conveyances, transfers or obligations or the pursuit of
equitable remedies generally. The Company has obtained, in accordance with
applicable law and its Bylaws and its Articles of Incorporation, the approval of
its stockholders necessary to consummate the transactions contemplated hereby.
SECTION 3.7. NO VIOLATION. Except as set forth specifically in detail in
Schedule 3.7 or Schedule 3.8, neither the execution, delivery or performance of
this Agreement or the other agreements contemplated hereby nor the consummation
of the transactions contemplated hereby or thereby will (a) conflict with,
result in a violation or breach of the terms, conditions or provisions of or
constitute a default under the Bylaws or the Articles of Incorporation of the
Company, (b) except as would not, individually or in the aggregate, result in a
Material Adverse Effect, conflict with, result in a violation or breach of the
terms, conditions or provisions of or constitute a default under any agreement,
indenture or other instrument by which the Company is bound or to which any of
the Assets of the Company is subject, or result in the creation or imposition of
any security interest, lien, charge or encumbrance upon any Assets of the
Company or (c) except as would not, individually or in the aggregate, result in
a Material Adverse Effect, violate or conflict with any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body.
SECTION 3.8. CONSENTS. Except as set forth in Schedule 3.8, no consent,
authorization, approval, permit or license of, or filing with, any governmental
or public body or authority, any lender, any lessor or any other person or
entity is required to authorize, or is required in connection with, the
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execution, delivery or performance of this Agreement or the agreements
contemplated hereby.
SECTION 3.9.FINANCIAL STATEMENTS. The Company has furnished AMP its
balance sheet and related statements of income, retained earnings and cash flows
for its prior three full fiscal years and its balance sheet dated as of
____________, 199_ (the "Balance Sheet," and the date thereof the "Balance Sheet
Date") and related statements of income, retained earnings and cash flows for
the __________ months then ended (all such financial information, with the
related notes thereto, the "Financial Statements"), each audited as agreed to by
the parties. The Financial Statements fairly present the financial condition and
results of operations of the Company as of the dates and for the periods
indicated and have been prepared in conformity with generally accepted
accounting principles (subject to normal year-end adjustments and the absence of
notes for any unaudited interim financial statement for any interim periods
presented) applied on a consistent basis with prior periods, except as otherwise
specifically indicated in the Financial Statements.
SECTION 3.10. LIABILITIES AND OBLIGATIONS. Except as set forth in Schedule
3.10, the Financial Statements reflect all liabilities of the Company, accrued,
contingent or otherwise, required to be reflected on a balance sheet, or in the
notes thereto, prepared in accordance with generally accepted accounting
principles, except for liabilities or obligations incurred in the ordinary
course of business consistent with reasonable past practice since the Balance
Sheet Date. Except as specifically set forth in the Financial Statements or
Schedule 3.10, to the actual knowledge of the Company and Owners, the Company is
not liable upon or with respect to, or obligated in any other way to provide
funds in respect of or to guarantee or assume in any manner, any debt,
obligation or dividend of any person, corporation, association, partnership,
joint venture, trust or other entity, and the Company does not actually know of
any valid basis for the assertion of any claims or liabilities of any nature or
in any amount
SECTION 3.11. EMPLOYEE MATTERS.
(a) CASH COMPENSATION. Schedule 3.11(a) contains a complete and accurate
list of the names, titles and annual cash compensation as of _______________,
199_, including, without limitation, wages, salaries, bonuses (discretionary and
formula) and other cash compensation (the "Cash Compensation"), of all full and
part-time employees of the Company. In addition, Schedule 3.11(a) contains a
complete and accurate description of (i) all increases in Cash Compensation of
employees of the Company during the current fiscal year and the immediately
preceding fiscal year and (ii) any promised increases in Cash Compensation of
employees of the Company that have not yet been effected.
(b) COMPENSATION PLANS. Schedule 3.11(b) contains a complete and accurate
list of all compensation plans, arrangements or practices (the "Compensation
Plans") sponsored by the Company or to which the Company contributes on behalf
of its employees, other than Employment Agreements listed in Schedule 3.11(c)
and Employee Benefit Plans listed in Schedule 3.13(a). The Compensation Plans
include, without limitation, plans, arrangements or practices that provide for
severance pay, deferred compensation, incentive, bonus or performance awards and
stock ownership or stock options.
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The Company has provided to AMP a copy of each written Compensation Plan and a
written description of each unwritten Compensation Plan. Except as set forth on
Schedule 3.11(b), each of the Compensation Plans can be terminated or amended at
will by the Company.
(c) EMPLOYMENT AGREEMENTS. Except as set forth in Schedule 3.11(c), the
Company is not a party to any written employment agreement (the "Employment
Agreements") with respect to any of its employees. Employment Agreements
include, without limitation, employee leasing agreements, employee services
agreements and noncompetition agreements.
(d) EMPLOYEE POLICIES AND PROCEDURES. Schedule 3.11(d) contains a complete
and accurate list of all employee manuals and all policies, procedures and
work-related rules (the "Employee Policies and Procedures") that apply to
employees of the Company. The Company has provided or made available to AMP a
copy of all written Employee Policies and Procedures. To the Company and Owner's
actual knowledge, there are no unwritten Employee Policies or Procedures.
(e) UNWRITTEN AMENDMENTS. Except as described in Schedule 3.11(b),
3.11(c), or 3.11(d), no unwritten material amendments have been made, whether by
oral communication, pattern of conduct or otherwise, with respect to any
Compensation Plans, Employment Agreements or Employee Policies and Procedures.
(f) LABOR COMPLIANCE. To the Company and Owner's acutal knowledge, the
Company has been and is in compliance with all applicable laws, rules,
regulations and ordinances respecting employment and employment practices, terms
and conditions of employment and wages and hours, except for any such failures
to be in compliance that, individually or in the aggregate, would not result in
a Material Adverse Effect, and the Company is not liable for any arrears of
wages or penalties for failure to comply with any of the foregoing. To the
Company and Owners' actual knowledge, the Company has not engaged in any unfair
labor practice or discriminated on the basis of race, color, religion, sex,
national origin, age, disability or handicap in its employment conditions or
practices. Except as set forth in Schedule 3.11(f), to the Company and Owners'
actual knowledge, there are no (i) unfair labor practice charges or complaints
or racial, color, religious, sex, national origin, age, disability or handicap
discrimination charges or complaints pending or, to the knowledge of the
Company, threatened against the Company before any federal, state or local
court, board, department, commission or agency (nor, to the actual knowledge of
the Company, does any valid basis therefor exist) or (ii) existing or, to the
knowledge of the Company, threatened labor strikes, disputes, grievances,
controversies or other labor troubles affecting the Company (nor, to the actual
knowledge of the Company, does any valid basis therefor exist).
(g) UNIONS. The Company has never been a party to any agreement with any
union, labor organization or collective bargaining unit. No employees of the
Company are represented by any union, labor organization or collective
bargaining unit. Except as set forth in Schedule 3.11(g), to the actual
knowledge of the Company, none of the employees of the Company has threatened to
organize or join a union, labor organization or collective bargaining unit.
SECTION 3.12. ALIENS. All employees of the Company are citizens of, or are
authorized in
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accordance with federal immigration laws to be employed in, the United States.
SECTION 3.13. EMPLOYEE BENEFIT PLANS.
(a) IDENTIFICATION. Schedule 3.13 contains a complete and accurate list of
all employee benefit plans (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) sponsored by the
Company or to which the Company contributes on behalf of its employees and all
employee benefit plans previously sponsored or contributed to on behalf of its
employees within the five years preceding the date hereof (the "Employee Benefit
Plans"). The Company has provided to AMP copies of all plan documents,
determination letters, pending determination letter applications, trust
instruments, insurance contracts, 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, the Company has provided AMP a written description of all existing
practices engaged in by the Company that constitute Employee Benefit Plans.
Except as set forth in Schedule 3.13, no unwritten amendment exists with respect
to any Employee Benefit Plan.
(b) ADMINISTRATION. To the Company and the Owner's actual knowledge, 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 3.13, the Company 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.
(d) PROHIBITED TRANSACTIONS. To the Company and the Owner's actual
knowledge, no prohibited transactions (within the meaning of Section 4975 of the
Code) have occurred with respect to any Employee Benefit Plan.
(e) CLAIMS AND LITIGATION. Except as set forth in Schedule 3.13, no
pending or, to the actual knowledge of the Company, threatened, claims, suits or
other proceedings exist with respect to an Employee Benefit Plan, other than
normal benefit claims filed by participants or beneficiaries.
(f) QUALIFICATIONS. The Company has received a favorable determination
letter or ruling from the IRS for each of the Employee Benefit Plans intended to
be qualified within the meaning of Section 401(a) of the Code and/or tax-exempt
within the meaning of Section 501(a) of the Code. No proceedings exist or, to
the actual knowledge of the Company, have been threatened that could result in
the revocation of any such favorable determination letter or ruling.
(g) FUNDING STATUS. To the actual knowledge of the Company, except as set
forth in Schedule 3.13, 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
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by any member of a controlled group (within the meaning of Section 412(n)(6)(B)
of the Code) in which the Company is a member (a "Controlled Group"). To the
actual knowledge of the Company, except as set forth in Schedul 3.13, 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 funded as described in Section 501(c)(9) of the Code,
to the actual knowledge of the Company, 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 90 days prior to the
date hereof. Schedule 3.13 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 the Company nor any member of a Controlled Group
has any liability to pay excise taxes with respect to any Employee Benefit Plan
under applicable provisions of the Code or ERISA.
(i) MULTIEMPLOYER PLANS. Neither the Company 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.
(j) PBGC. No facts or circumstances exist that would result in the
imposition of liability against AMP or AMP Subsidiary by the Pension Benefit
Guaranty Corporation as a result of any act or omission by the Company 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. The Company has no obligation or commitment to provide
medical, dental or life insurance benefits to or on behalf of any of its
employees who may retire or any of its former employees who have retired, except
as may be required pursuant to the continuation of coverage provisions of
Section 4980B of the Code and the applicable provisions of ERISA.
(l) OTHER COMPENSATION ARRANGEMENTS. Except as set forth in Schedules
3.11(a), 3.11(b), 3.11(c), 3.11(d), 3.13(a) and 3.13(l), neither the Company nor
any Owner is a party to any compensation or other arrangement with any person
relating to the provision of healthcare related services, other than
arrangements with the Company.
SECTION 3.14. ABSENCE OF CERTAIN CHANGES. Except as set forth on Schedule
3.14 and as contemplated by this Agreement, since the Balance Sheet Date, the
Company has not
(a) suffered a Material Adverse Effect, whether or not caused by any
deliberate act or omission of the Company or any Owner;
(b) contracted for the purchase of any capital asset having a cost in
excess of $5,000 or made any single capital expenditure in excess of $5,000;
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(c) incurred any indebtedness for borrowed money (other than short-term
borrowings in the ordinary course of business consistent with reasonable past
practice) or issued or sold any debt securities;
(d) incurred or discharged any material liabilities or obligations, except
in the ordinary course of business consistent with reasonable past practice;
(e) paid any amount on any indebtedness prior to the due date, forgiven or
cancelled any claims or any debt in excess of $5,000 or released or waived any
rights or claims, except in the ordinary course of business consistent with
reasonable past practice;
(f) mortgaged, pledged or subjected to any security interest, lien, lease
or other charge or encumbrance any of its properties or Assets (other than
statutory liens arising in the ordinary course of business consistent with
reasonable past practice or other liens that do not materially detract from the
value or interfere with the use of such properties or Assets);
(g) suffered any damages or destruction to or loss of any Assets (whether
or not covered by insurance) that has resulted, or might reasonably be expected
to result, individually or in the aggregate, in a Material Adverse Effect;
(h) acquired or disposed of any Assets having an aggregate value in excess
of $5,000, except in the ordinary course of business consistent with reasonable
past practice;
(i) written up or written down the carrying value of any of its Assets,
other than accounts receivable in the ordinary course of business consistent
with reasonable past practice;
(j) changed the costing system or depreciation methods of accounting for
its Assets;
(k) lost or terminated any employee, customer or supplier that has
resulted, or might reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect;
(l) increased the compensation of any Owner, director, officer, key
employee or consultant;
(m) increased the compensation of any employee (except for increases in
the ordinary course of business consistent with reasonable past practice) or
hired any new employee who, in either case, is expected to receive annualized
compensation of $15,000 or more;
(n) made any payments of cash or Assets to or loaned any money or Assets
to any person or entity referred to in Section 3.26;
(o) formed, or acquired or disposed of any interest in, any corporation,
partnership, joint venture, limited liability company or other entity;
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(p) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of its capital stock,
securities or other ownership interests or any rights to acquire such capital
stock, securities or other ownership interests, or agreed to change the terms
and conditions of any such capital stock, securities or other ownership
interests or rights;
(q) entered into any agreement providing for total payments in excess of
$5,000 in any 12 month period with any person or group, or modified or amended
in any material respect the terms of any such existing agreement, except in the
ordinary course of business consistent with reasonable past practice; or except
with AMP's consent, which consent will not be unreasonably withheld;
(r) entered into, adopted or amended any Employee Benefit Plan, except as
contemplated hereby; or
(s) entered into any commitment or transaction, or experienced any event,
that would materially interfere with its performance under this Agreement or any
other agreements or document executed or to be executed pursuant to this
Agreement or otherwise has resulted, or might reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Effect.
SECTION 3.15. TITLE; LEASED ASSETS.
(a) REAL PROPERTY. The Company does not own any interest in any real
property, other than leasehold interests referred to in Schedule 3.15. The
leased real property referred to in Schedule 3.15 constitutes the only real
property necessary for the conduct of the Company's business.
(b) PERSONAL PROPERTY. Except as set forth in Schedule 3.15, the Company
has good, and valid title to all the personal property owned by it and the
Company has good, and valid title to the Assets (the Assets and the personal
property owned by the Company are collectively referred to herein as the
"Personal Property"). The Personal Property and the leased personal property
referred to in Section 3.15(c) constitute the only personal property necessary
for the conduct of the Company's business. Upon consummation of the transactions
contemplated hereby, AMP Subsidiary will have good and, valid title to the
Personal Property, free and clear of all security interests, liens, claims and
encumbrances, other than statutory liens arising in the ordinary course of
business or other liens that do not materially detract from the value or
interfere with the use of such properties or Assets.
(c) LEASES. A list and brief description of (i) all leases of real
property and (ii) leases of personal property involving rental payments within
any 12-month period in excess of $5,000, in either case to which the Company is
a party, either as lessor or lessee, are set forth in Schedule 3.15. All such
leases are valid and, to the knowledge of the Company, enforceable in accordance
with their respective terms.
SECTION 3.16. COMMITMENTS. Except as set forth in Schedule 3.16 or in
other schedules prepared pursuant to this Agreement, the Company is not a party
to nor is it bound by, nor are any of its shares of its capital stock subject
to, nor are the Assets or the business of the Company bound by,
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whether or not in writing, any of the following (collectively, the
"Commitments"):
(i) partnership or joint venture agreement;
(ii) guaranty or suretyship, indemnification or contribution
agreement or performance bond;
(iii) debt instrument, loan agreement or other obligation relating
to indebtedness for borrowed money or money lent or to be lent to another;
(iv) contract to purchase real property;
(v) agreement with dealers or sales or commission agents, public
relations or advertising agencies, accountants or attorneys (other than in
connection with this Agreement and the transactions contemplated hereby)
involving total payments within any 12-month period in excess of $5,000 and that
is not terminable on 30 days' notice with or without penalty;
(vi) agreement relating to any matter or transaction involving more
than $5,000 in the aggregate;
(vii) powers of attorney;
(viii) contracts containing noncompetition covenants;
(ix) agreement providing for the purchase from a supplier of all or
substantially all of the requirements of the Company of a particular product or
service; or
(x) any other agreement or commitment not made in the ordinary
course of business or that is material to the Company's business, operations,
condition (financial or otherwise), results of operations or prospects.
True, correct and complete copies of the written Commitments, and true, correct
and complete written descriptions of the oral Commitments, have been delivered
to AMP. Except as set forth in Schedule 3.16, to the Company's and the Owner's
actual knowledge there are no existing or asserted defaults, events of default
or events, occurrences, acts or omissions that, with the giving of notice or
lapse of time or both, would constitute defaults by the Company or, to the
actual knowledge of the Company, any other party to a material Commitment, and
no penalties have been incurred nor are amendments pending with respect to any
material Commitment, except as described in Schedule 3.16. The Commitments are
in full force and effect and are valid and enforceable obligations of the
Company except for the lack of effectiveness or enforceability because of the
Bankruptcy Code, or any other provision of law relating to fraudulent
conveyances, transfers or obligations, and to the actual knowledge of the
Company, the other parties thereto in accordance with their respective terms,
and no defenses, off-sets or counterclaims have been asserted or, to the actual
knowledge of the Company,
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may be made by any party thereto (other than by the Company) nor has the Company
waived any rights thereunder, except as described in Schedule 3.16. Except as
disclosed specifically in Schedule 3.16, (i) none of the Company or any Owner
has received notice of any plan or intention of any other party to any
Commitment to exercise any right to cancel or terminate any Commitment, and
neither the Company nor any Owner knows of any fact that would justify the
exercise of such a right and (ii) none of the Company or any Owner currently
contemplates, or has a reason to believe any other person currently
contemplates, any amendment or change to any Commitment except that the Company
contemplates amending all if its current billing agreements.
SECTION 3.17. INSURANCE. The Company and each Owner carry property,
liability, malpractice, workers' compensation and such other types of insurance
pursuant to the insurance policies listed and described in Schedule 3.17 (the
"Insurance Policies"). The Insurance Policies are all of the insurance policies
of the Company and the Owners relating to the Company, and to the actual
knowledge of the Company, are valid and enforceable policies. All Insurance
Policies will be maintained in force without interruption up to and including
the Closing Date. True, complete and correct copies of all Insurance Policies
have been provided to AMP. Except as set forth in Schedule 3.17, neither the
Company nor any Owner has received any notice or other communication from any
issuer of any Insurance 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 actual knowledge of the
Company, no such cancellation or increase of deductibles, retainages or premiums
is threatened. Except as set forth on Schedule 3.17, neither the Company nor any
Owner has any outstanding claims, settlements or premiums owed against any
Insurance Policy, and the Company and each Owner have given all notices or has
presented all potential or actual claims under any Insurance Policy in a due and
timely fashion. Schedule 3.17 also sets forth a list of all claims under any
Insurance Policy in excess of $5,000 per occurrence filed by the Company or any
Owner during the immediately preceding five years.
SECTION 3.18. PROPRIETARY RIGHTS AND INFORMATION. Set forth in Schedule
3.18 is a true and correct description of the following (the "Proprietary
Rights"):
(a) all trademarks, trade-names, service marks and other trade
designations, including common law rights, registrations and applications
therefor, and all patents and applications therefor currently owned, in whole or
in part, by the Company, and all licenses, royalties, assignments and other
similar agreements relating to the foregoing to which the Company is a party
(including expiration date, if applicable); and
(b) all agreements relating to technology, know-how or processes that the
Company is licensed or authorized to use by others (other than technology,
know-how or processes generally available to other health care providers) or
which it licenses or authorizes others to use. The Company owns or has the legal
right to use the Proprietary Rights, without conflicting, infringing or
violating the rights of any other person. Except as disclosed in Schedule 3.18,
no consent of any person will be required for the use of the Proprietary Rights
by AMP Subsidiary 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 or for infringement by the Company of the
proprietary
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right of any other person, and the Company does not know of any valid basis for
any such claim. The Company has the right to use, free and clear of any adverse
claims or rights of others, all trade secrets, customer lists and proprietary
information required for the marketing of all merchandise and services formerly
or presently sold or marketed by it.
SECTION 3.19. TAXES.
(a) FILING OF TAX RETURNS. The Company has duly and timely filed (in
accordance with any extensions duly granted by the appropriate governmental
agency, if applicable) with the appropriate governmental agencies all Tax
Returns and reports required to be filed in the United States, any state or any
political subdivision thereof or any foreign jurisdiction. All such Tax Returns
or reports are, to the Company and Owner's actual knowledge, complete and
accurate in all material respects and properly reflect the Taxes of the Company
for the periods covered thereby.
(b) PAYMENT OF TAXES. Except for such items as the Company may be
disputing in good faith by proceedings in compliance with applicable law, which
are described in Schedule 3.19(b) and are adequately accrued for, (i) the
Company has paid all Taxes that have become due from the Company with respect to
any Tax Return that it has filed (including those related to employment) and has
properly accrued on its books and records for all of the same that have not yet
become due and (ii) the Company 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 3.19(c), the Company has not received any notice that
any Tax deficiency or delinquency has been asserted against the Company. To the
actual knowledge of the Company or Owner's, there is no unpaid assessment,
proposal for additional Taxes, deficiency or delinquency in the payment of any
of the Taxes of the Company that could be asserted by any taxing authority.
There is no taxing authority audit o the Company pending, or, to the actual
knowledge of the Company, threatened, and the results of any completed audits
are properly reflected in the Financial Statements. The Company has not violated
in any material respect any federal, state, local or foreign Tax law.
(d) NO EXTENSION OF LIMITATION PERIOD. The Company has not granted an
extension to any taxing authority of the limitation period during which any Tax
liability may be assessed or collected.
(e) ALL WITHHOLDING REQUIREMENTS SATISFIED. All monies required to be
withheld by the Company and paid to governmental agencies for all income, social
security, unemployment insurance, sales, excise, use and other Taxes have been
collected or withheld and paid to the respective governmental agencies.
(f) FOREIGN PERSON. Neither the Company nor any Owner is a foreign person,
as such term is referred to in Section 1445(f)(3) of the Code.
(g) INTENTIONALLY OMITTED.
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(h) TAX EXEMPT ENTITY. None of the Assets of the Company are subject to a
lease to a "tax exempt entity" as such term is defined in Section 168(h)(2) of
the Code.
(i) COLLAPSIBLE CORPORATION. The Company has not at any time consented,
and the Owners will not permit the Company to elect, to have the provisions of
Section 341(f)(2) of the Code apply to it.
(j) BOYCOTTS. The Company has not at any time participated in or
cooperated with any international boycott as defined in Section 999 of the Code.
(k) INTENTIONALLY OMITTED.
(l) S CORPORATION. The Company has made an election to be taxed as an "S"
corporation under Section 1362(a) of the Code.
(m) INTENTIONALLY OMITTED.
(n) INTENTIONALLY OMITTED.
SECTION 3.20. COMPLIANCE WITH LAWS. To their acutal knowledge the Company
and each Owner have to their actual knowledge, complied with, and are in
compliance with, all applicable laws, regulations and licensing requirements and
to their actual knowledge, have filed with the proper authorities all necessary
statements and reports, except where the failure to so comply or file would not,
and is not reasonably expected to, individually or in the aggregate, result in a
Material Adverse Effect except as otherwise set forth on Schedules attached
hereto. To the actual knowledge of the Company and the Owners, there are no
existing violations by the Company nor any Owner of any federal, state or local
law or regulation that could, individually or in the aggregate, result in a
Material Adverse Effect. To their actual knowledge the Company and each Owner
possess all necessary licenses, franchises, permits and governmental
authorizations for the conduct of its, his or her business as now conducted, all
of whic are listed (with expiration dates, if applicable) in Schedule 3.20.
Except as set forth in Schedule 3.20 the transactions contemplated by this
Agreement will not result in a default under or a breach or violation on of, or
adversely affect the rights and benefits afforded by, any such licenses,
franchises, permits or government authorizations, except for any such default,
breach or violation that would not, and is not reasonably expected to,
individually or in the aggregate, have a Material Adverse Effect. Except as set
forth in Schedule 3.20, or as referenced at Section 3.30, neither the Company
nor any Owner has received any notice from any federal, state or other
governmental authority or agency having jurisdiction over its, his or her
properties or activities, or any insurance or inspection body, that its, his or
her operations or any of its, his or her properties, facilities, equipment or
business practices fail to comply with any applicable law, ordinance,
regulation, building or zoning law o requirement of any public or quasi-public
authority or body, except where failure to so comply would not, and is not
reasonably expected to, individually or in the aggregate, have a Material
Adverse Effect.
SECTION 3.21. FINDER'S FEE. Except as set forth in Schedule 3.21, none of
the Company, any
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Owner or any of their Affiliates has incurred any obligation for any finder's,
broker's, agent's or similar fee in connection with the transactions
contemplated hereby.
SECTION 3.22. LITIGATION. Except as described in Schedule 3.22 or as
referenced at Section 3.30, there are no legal actions, administrative
proceedings or investigations instituted, or, to the actual knowledge of the
Company, threatened, affecting or that could affect the Company, any Owner, the
outstanding ownership interests in the Company, any of the Assets of the Company
or the operations, business, condition (financial or otherwise), results of
operations or prospects of the Company which (i) if successful, could, or might
reasonably be expected to, individually or in the aggregate, have a Material
Adverse Effect or (ii) could adversely affect the ability of the Company or any
Owner to effect the transactions contemplated hereby. Neither the Company nor
any Owner is (a) subject to any court or administrative order, judgment, writ,
injunction or decree or (b) in default with respect to any such order, judgment,
writ, injunction or decree. The Company and the Owners have no knowledge of any
valid basis for any such action, proceeding or investigation. Except as set
forth in Schedule 3.22, all medical malpractice claims asserted against the
Company or any of its Affiliates, general liability incidents and incident
reports have been submitted on a timely basis and in the proper manner to the
Company's insurer therefor. All claims made or threatened against the Company in
excess of its deductible are covered under its Insurance Policies.
SECTION 3.23. CONDITION OF FIXED ASSETS. All of the plants, structures and
equipment (the "Fixed Assets") used by the Company in its business are in good
condition and repair, subject to normal wear and tear, and conform in all
material respects with all applicable ordinances, regulations and other laws,
and the Company and the Owners have no actual knowledge of any latent defects
therein.
SECTION 3.24. DISTRIBUTIONS AND REPURCHASES. Except as described in
Schedule 3.24, no distribution, payment or dividend of any kind has been
declared or paid by the Company on any of its ownership interests since the
Balance Sheet Date. No repurchase of any of the Company's ownership interests
has been approved or effected or is pending or contemplated by the Board of
Directors of the Company.
SECTION 3.25. BANKING RELATIONS. Set forth in Schedule 3.25 is a complete
and accurate list of all borrowing and investing arrangements that the Company
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 3.26. INTERESTED PERSONS; AFFILIATIONS. Except as set forth in
Schedule 3.26, no Owner, officer, employee or director of the Company, or any of
their respective spouses, children or Affiliates, owns, directly or indirectly,
on an individual or joint basis, any interest in, has a compensation or other
financial arrangement with or serves as an officer or director of any customer
or supplier of the Company or any organization that has a contract or
arrangement with the Company.
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SECTION 3.27. ENVIRONMENTAL MATTERS.
(a) ENVIRONMENTAL LAWS. Neither the Company nor any of its Assets is
currently in violation of, or subject to any existing, pending or, to the actual
knowledge of the Company, threatened investigation or inquiry by any
governmental authority or to any remedial obligations under, any Environmental
Law.
(b) PERMITS. The Company is not required to obtain, nor has knowledge of
any reason AMP Subsidiary will be required to obtain, by reason of any
Environmental Law, any permits, licenses or similar authorizations to occupy,
operate or use any buildings, improvements, fixtures or equipment owned or
leased by the Company.
(c) SUPERFUND LIST. None of the Assets owned or leased by the Company are
on any federal or state "Superfund" list or subject to any environmentally
related liens.
SECTION 3.28. CERTAIN PAYMENTS. None of the Company, any Owner, any
director, officer or employee of the Company or any of their respective
Affiliates has paid, caused to be paid or received, directly or indirectly, in
connection with the business of the Company:
(a) to or from any government or agency thereof or any agent of any
supplier or customer, any bribe, kick-back or other similar payment; or
(b) any contribution to any political party or candidate, other than from
personal funds not reimbursed by their respective employers or as otherwise
permitted by applicable law.
SECTION 3.29. INTENTIONALLY OMITTED
SECTION 3.30. MEDICARE AND MEDICAID PROGRAMS. The Company is engaged in
the business of filing claims on behalf of providers of professional services
participating in the Medicare and Medicaid programs. On or about September 19,
1997 the Company received a "Dear Provider" letter from the Health Care
Financing Administration (HCFA) indicating that there may be irregularities in
the manner in which the Company has been filing and collecting claims on behalf
of the providers with whom it contracts to provide billing services. A copy of
the letter is attached at Schedule 3.30. The HCFA letter indicates that any
billing irregularities require corrective action but does not expressly state
that any of the penalty provisions in the Medicare Act are implicated by any of
the irregularities described. The Company has engaged legal counsel to review
its billing format and assist in the development of corrective actions if
necessary. Based on preliminary review, the Company is not currently aware of
any instances in which it has overbilled the Medicare or Medicaid programs on
behalf of the providers to whom it provides billing services.
SECTION 3.31. FRAUD AND ABUSE. The Company is engaged in the business of
filing claims on behalf of providers of professional services participating in
the Medicare and Medicaid programs. The Company also provides management
services to these providers. The Company does not provide any services which are
directly reimbursed by Medicare or Medicaid, nor does the Company refer patients
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for designated health services as defined in 42 U.S.C. Sec. 1395nn. Subject to
the disclosure set forth in Section 3.30, to the best of its knowledge the
Company and Owners have not:
(a) knowingly and willingly made or caused to be made any false
statement or representation of a material fct with respect to any
claim for payment; or
(b) knowingly and willingly offered or received any remuneration in
return for referring a patient for a service for which payment may
be made by Medicare or Medicaid or for purchasing or arranging the
purchase of any service or good for which payment may be made by
Medicare or Medicaid.
SECTION 3.32. INTENTIONALLY OMITTED.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE OWNERS
Each of the Owners, jointly and severally, represents and warrants to AMP
and AMP Subsidiary that the following are true and correct as of the date hereof
and the Closing:
SECTION 4.1. VALIDITY; OWNERS' CAPACITY. This Agreement and each other
agreement contemplated hereby has been or will be, as the case may be, as of the
Closing Date duly executed and delivered by the Owners and constitute or will
constitute, as the case may be, legal, valid and binding obligations of the
Owners, enforceable against the Owners in accordance with their respective
terms. Each Owner has legal capacity to enter into and perform this Agreement
and the other such agreements to which the Owners are a party.
SECTION 4.2. NO VIOLATION. Neither the execution, delivery or performance
of this Agreement or the other agreements of the Owners contemplated hereby nor
the consummation of the transactions contemplated hereby or thereby will (a)
conflict with, result in a violation or breach of the terms, conditions or
provisions of or constitute a default under any agreement, indenture or other
instrument by which any Owner is bound or to which any of the ownership
interests in the Company are subject, or result in the creation or imposition of
any security interest, lien, charge or encumbrance upon any of the ownership
interests in the Company or (b) to the knowledge of the Owners, violate or
conflict with any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body.
SECTION 4.3. PERSONAL HOLDING COMPANIES; CONTROL OF RELATED BUSINESSES. No
Owner owns ownership interests in the Company, directly or indirectly,
beneficially or of record, through a personal holding company. Except as set
forth in Schedule 4.3, no Owner controls another business that is in the same or
similar line of business as the Company or that has or is engaged in a
transaction with the Company.
SECTION 4.4. TRANSFERS OF OWNERSHIP INTERESTS. Set forth in Schedule 4.4
is a list of all
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transfers or other transactions involving ownership interests in the Company.
All such transfers were made for valid business reasons and not in anticipation
or contemplation of the consummation of the transactions contemplated by this
Agreement.
SECTION 4.5. ACCREDITED INVESTOR STATUS. Except as set forth in Schedule
4.5, each Owner is an "accredited investor" as defined in Rule 501(a) under the
Securities Act.
SECTION 4.6. CONSENTS. Except as specifically disclosed pursuant to
Article III, no consent, authorization or approval of any person is required to
authorize, or is required in connection with, the execution, delivery and
performance of this Agreement or the agreements contemplated hereby.
SECTION 4.7. INTENTIONALLY OMITTED.
SECTION 4.8. INTENTIONALLY OMITTED.
SECTION 4.9. INTERESTED PERSONS; AFFILIATIONS. Except as set forth in
Schedule 3.13(L), no Owner and no Owner's spouse, children or Affiliates owns,
directly or indirectly, on an individual or joint basis, any interest in, has a
compensation or other financial arrangement with or serves as an officer or
director of, any customer or supplier of the Company or any organization that
has a contract or arrangement with the Company. No Owner or any of such Owner's
Affiliates is, or within the last five years was, a party to any contract,
lease, agreement or arrangement, including, but not limited to, any joint
venture or consulting agreement, with any physician, hospital, pharmacy, home
health agency or other person that is in a position to make or influence
referrals to, or otherwise generate business for, the Company.
SECTION 4.10. INVESTMENTS IN COMPETITORS. Except as disclosed in Schedule
4.10, no Owner owns, directly or indirectly, any interests or has any investment
in any person that is a competitor of the Company.
SECTION 4.11. DISPOSITION OF AMP SHARES. No Owner presently intends to
dispose of any shares of AMP Common Stock received pursuant hereto or is a party
to any plan, arrangement or agreement for the disposition of such shares, other
than this Agreement and the Registration Rights Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF AMP
AMP represents and warrants to the Company and the Owners that the
following are true and correct as of the date hereof and the Closing:
SECTION 5.1. ORGANIZATION AND GOOD STANDING. AMP Subsidiary will be a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with all
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requisite corporate power and authority to carry on the business in which it is
engaged, to own the properties it owns, to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. Prior to the Closing,
AMP Subsidiary will not have had any operations, other than in connection with
it formation and capitalization and the transactions contemplated by this
Agreement and the Other Agreements.
SECTION 5.2. CAPITALIZATION. The authorized capital stock of AMP
Subsidiary will consist of one-thousand shares of AMP Subsidiary Common Stock,
of which 1000 shares will be issued and outstanding and will be held by AMP, AMP
Subsidiary will not have any bonds, debentures, notes or other obligations the
holders of which will have the right to vote (or will be convertible into or
exercisable for securities having the right to vote) with the stockholders of
AMP Subsidiary on any matter. There will exist no options, warrants,
subscriptions or other rights to purchase, or securities convertible into or
exchangeable for, any of the authorized or outstanding securities of AMP
Subsidiary, and no option, warrant, call, conversion right or commitment of any
kind will exist that obligates AMP Subsidiary to issue any of its authorized but
unissued capital stock. AMP Subsidiary will have no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay a dividend or make any distribution in
respect thereof. No stockholder of AMP Subsidiary will have granted options or
other rights to purchase any shares of AMP Subsidiary Common Stock from such
stockholder.
SECTION 5.3. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by AMP of this Agreement and the other agreements expressly
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by AMP. This Agreement and each
other agreement expressly contemplated hereby to be executed by AMP have been or
will be, as the case may be, as of the Closing Date duly executed and delivered
by AMP and constitute or will constitute, as the case may be, legal, valid and
binding obligations of AMP enforceable against AMP in accordance with its terms
except for the lack of effectiveness or enforceability because of the Bankruptcy
Code, or any other provision of law relating to fraudulent conveyances,
transfers or obligations or the pursuit of equitable remedies generally.
SECTION 5.4. NO VIOLATION. Neither the execution, delivery or performance
of this Agreement or the other agreements expressly contemplated hereby nor the
consummation of the transactions contemplated hereby or thereby will (a)
conflict with, result in a violation or breach of the terms, conditions and
provisions of or constitute a default under the Certificate of Incorporation or
Bylaws of AMP or AMP Subsidiary or any agreement, indenture or other instrument
by which AMP or AMP Subsidiary is or will be, as of the Closing, bound or (b)
except as would not, individually or in the aggregate, have a Material Adverse
Effect on the business, operations, condition (financial or otherwise) or
results of operations of AMP or AMP Subsidiary, violate or conflict with any
judgment, decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over AMP or AMP
Subsidiary or the properties or Assets of AMP or AMP Subsidiary.
SECTION 5.5. FINDER'S FEE. Except as disclosed in Schedule 5.5, AMP has
not incurred any obligation for any finder's, broker's, agent's or similar fee
in connection with the transactions
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contemplated hereby.
SECTION 5.6. CAPITAL STOCK. The issuance and delivery by AMP of shares of
AMP Common Stock in connection with the Acquisition will be duly and validly
authorized by all necessary corporate action on the part of AMP. The shares of
AMP Common Stock to be issued in connection with the Acquisition, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable and will not have been issued in violation of any preemptive
rights, rights of first refusal o similar rights of any AMP stockholders.
SECTION 5.7. CONSENTS. Except as have been obtained or as may be required
by the exchange or automated quotation system on which the AMP Common Stock may
be listed or under the Delaware Business Corporation Act, the Exchange Act, the
Securities Act or state securities laws, no consent, authorization, approval,
permit or license of, or filing with, any governmental or public body or
authority, any lender, any lessor or any other person is required to authorize,
or is required in connection with, the execution, delivery and performance of
this Agreement or the agreements contemplated hereby on the part of AMP or AMP
Subsidiary.
ARTICLE VI
COVENANTS OF THE COMPANY AND THE OWNERS
The Company and the Owners, jointly and severally, agree that between the
date hereof and the Closing:
SECTION 6.1. CONSUMMATION OF AGREEMENT. The Company and the Owners will
use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions.
SECTION 6.2. BUSINESS OPERATIONS. The Company will operate its business in
the ordinary course. The Company and the Owners will use their best efforts to
preserve the business of the Company intact. Neither the Company nor any Owners
will take any action that would, individually or in the aggregate, result in a
Material Adverse Effect. Except as set forth in Schedule 6.2, the Company will
use its best efforts to preserve intact its relationships with Payors, referral
sources, customers, suppliers patients, employees and others having significant
business relations with it, unless doing so would impair its goodwill or,
individually or in the aggregate, result in a Material Adverse Effect. The
Company will collect its receivables and pay its trade payables in the ordinary
course of business consistent with reasonable past practice.
SECTION 6.3. ACCESS. The Company and the Owners will, at reasonable times
during normal business hours and on reasonable notice, permit AMP and its
authorized representatives reasonable access to, and make available for
inspection, all of the Assets and business of the Company, including its
employees, customers and suppliers, and permit AMP and its authorized
representatives to inspect and make copies of all documents, records (other than
confidential portions of patient medical records)
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and information with respect to the affairs of the Company as AMP and its
representatives may reasonably request, all for the sole purpose of permitting
AMP to become familiar with the businesses and Assets and liabilities of the
Company.
SECTION 6.4 NOTIFICATION OF CERTAIN MATTERS. The Company and the Owners
will promptly inform AMP in writing of (a) any notice of, or other communication
relating to, a default or event that, with notice or lapse of time or both,
would become a default, received by the Company or any Owner subsequent to the
date of this Agreement and prior to Closing under any Commitment material to the
Company's condition (financial or otherwise), operations, Assets, liabilities,
business or prospects and to which it is subject, (b) any event that would cause
any of their respective representations and warranties under this Agreement to
be untrue or (c) any material adverse change in the Company's condition
(financial or otherwise), operations, Assets, liabilities, business or
prospects.
SECTION 6.5. TAX RETURNS. AMP will have the right to review the tax
returns of the Company at least thirty (30) days before March 15th, or other
relevant filing deadlines.
SECTION 6.6. APPROVALS OF THIRD PARTIES. The Company and the Owners will
use their best efforts to obtain all licenses, permits, approvals or other
authorizations required to be delivered by them and required under any law,
statute, rule, regulation or ordinance, or otherwise necessary or desirable, to
consummate the transactions, to provide the services and to conduct the intended
business of AMP and AMP Subsidiary.
SECTION 6.7. EMPLOYEE MATTERS. Except as set forth in Schedule 6.7 or as
otherwise specifically contemplated by this Agreement, the Company will not,
without the prior written approval of AMP, except as required by law or in the
ordinary course of business, consistant with past practices of the Company:
(a) increase the Cash Compensation of any Owner or other employee of the
Company;
(b) adopt, amend or terminate any Compensation Plan;
(c) adopt, amend or terminate any Employment Agreement;
(d) adopt, amend or terminate any Employee Policies and Procedures;
(e) adopt, amend or terminate any Employee Benefit Plan;
(f) take any action that could deplete the assets of any Employee Benefit
Plan, other than payment of benefits in the ordinary course to participants and
beneficiaries;
(g) fail to pay any premium or contribution due or with respect to any
Employee Benefit Plan;
(h) fail to file any return or report with respect to any Employee Benefit
Plan;
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(i) institute, settle or dismiss any employment litigation, except as
could not, individually or in the aggregate, result in a Material Adverse
Effect;
(j) enter into, modify, amend or terminate any agreement with any union,
labor organization or collective bargaining unit; or
(k) take or fail to take any action with respect to any past or present
employee of the Company that would, individually or in the aggregate, result in
a Material Adverse Effect.
SECTION 6.8. CONTRACTS. Except with AMP's prior written consent, the
Company will not assume or enter into any contract, lease, license, obligation,
indebtedness, commitment, purchase or sale that is material to the Company's
business nor will it waive any material right or cancel any material contract,
debt or claim, other than in the ordinary course of business of the Company.
SECTION 6.9. CAPITAL ASSETS; PAYMENTS OF LIABILITIES. The Company will
not, without the prior written approval of AMP (a) acquire or dispose of any
capital asset having a fair market value of $15,000.00 or more or acquire or
dispose of any capital asset outside of the ordinary course of business or (b)
discharge or satisfy any lien or encumbrance or pay or perform any obligation or
liability, other than (i) liabilities and obligations reflected in the Financial
Statements or (ii) current liabilities and obligations incurred in the usual and
ordinary course of business since the Balance Sheet Date and, in either case (i)
or (ii) above, only as required by the express terms of the agreement or other
instrument pursuant to which the liability or obligation was incurred.
SECTION 6.10. MORTGAGES, LIENS AND GUARANTIES. The Company will not,
without the prior written approval of AMP, enter into or assume any mortgage,
pledge, conditional sale or other title retention agreement, permit any security
interest, lien, encumbrance or claim of any kind to attach to any of its Assets
(other than statutory liens arising in the ordinary course of business and other
liens that do not materially detract from the value or interfere with the use of
such Assets), whether now owned or hereafter acquired, or guarantee or otherwise
become contingently liable for any obligation of another, except obligations
arising by reason of enforcement for collection and other similar transactions
in the ordinary course of business, or make any capital contribution or
investment in any person.
SECTION 6.11. ACQUISITION PROPOSALS. From the date of this Agreement
through January 31, 1998 (a) no Owner nor the Company nor any of their
respective officers, directors or partners will, and the Owners and the Company
will direct and use their best efforts to cause the Company's employees, agents
and representatives not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
Assets, any equity securities or partnership interests of the Company (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal") or
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition
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Proposal; (b) each Owner and the Company will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing, and each will take
the necessary steps to inform the individuals or entities referred to in the
first sentence hereof of the obligations undertaken in this Section; and (c) the
Owners and the Company will notify AMP immediately if any such inquiries or
proposals are received by any such information is requested from or any such
negotiations or discussions are sought to be initiated or continued with the
Company or any Owner.
SECTION 6.12. DISTRIBUTIONS AND REPURCHASES. No distribution, payment or
dividend of any kind will be declared or paid by the Company in respect of its
capital stock, nor will any repurchase of any capital stock of the Company be
approved or effected; provided, however, that nothing contained herein shall be
construed to prohibit the distribution to Owners of all cash of the Company
available for such distribution to the extent consistent with past practice.
SECTION 6.13. REQUIREMENTS TO EFFECT ACQUISITION. The Company and the
Owners will use their best efforts to take, or cause to be taken, all actions
necessary to effect the Acquisition under applicable law, including, without
limitation, the filing with the appropriate government officials of all
necessary documents in form approved by counsel for the parties to this
Agreement.
SECTION 6.14. ACCESS. The Company and the Owners will, at reasonable times
during normal business hours and on reasonable notice, permit AMP and its
authorized representatives reasonable access to, and make available for
inspection, all of the Assets and records of the Company, including tax returns
and related information, and permit AMP and its authorized representatives to
inspect and make copies of all such documents, records (other than confidential
portions of patient medical records) and information with respect to the affairs
of the Company as AMP and its representatives may request.
SECTION 6.15. EMPLOYEE. AMP will offer all existing employees of Company
employment with AMP or AMP Subsidiary at their existing salary levels, subject
to the standard 90 days probationary period.
SECTION 6.16. NEW EMPLOYMENT AGREEMENTS. The Company and the Owners will
use their best efforts to cause, at or immediately prior to Closing, employees
of the Company (i) to terminate his or her employment agreement, if any, with
the Company by mutual consent without any liability therefor on the part of the
Company and (ii) to enter into new employment with AMP (and, in the case of
certain employees indentified on Schedule 6.16, to enter into a written
employment agreement with AMP or AMP Subsidiar ("New Employment Agreement").
SECTION 6.17. DELIVERY OF SCHEDULES. The Company and the Owners will
deliver to AMP all schedules required to be delivered by them prior to the
Closing.
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ARTICLE VII
COVENANTS OF AMP
AMP agrees that between the date hereof and the Closing:
SECTION 7.1. CONSUMMATION OF AGREEMENT. AMP will use its best efforts to
cause the consummation of the transactions contemplated hereby in accordance
with their terms and conditions and take all corporate and other action
necessary to approve the Acquisition.
SECTION 7.2. REQUIREMENTS TO EFFECT ACQUISITION. AMP will use its best
efforts to take, or cause to be taken, all actions necessary to effect the
Acquisition under applicable law, including, without limitation, the filing with
the appropriate government officials of all necessary documents in form approved
by counsel for the parties to this Agreement.
SECTION 7.3. NOTIFICATION OF CERTAIN MATTERS. AMP will promptly inform the
Company and the Owners in writing of any material adverse change in AMP's
condition (financial or otherwise), operations, assets, liabilities or business.
SECTION 7.4. APPROVALS OF THIRD PARTIES. AMP will use its best efforts to
secure, as soon as practicable after the date hereof, all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby.
SECTION 7.5. LICENSES AND PERMITS. AMP will use its best efforts to obtain
all licenses, permits, approvals or other authorizations required under any law,
statute, rule, regulation or ordinance, or otherwise necessary or desirable, to
consummate the transactions, provide the services and to conduct the intended
businesses of AMP and AMP Subsidiary.
ARTICLE VIII
COVENANTS OF AMP, THE COMPANY AND THE OWNERS
AMP, the Company and the Owners agree as follows:
SECTION 8.1. FILINGS; OTHER ACTION.
(a) AMP, the Company and the Owners will cooperate to promptly prepare and
file with the SEC the Registration Statement on Form S-1 (or other appropriate
Form) to be filed by AMP in connection with its Initial Public Offering
(including the prospectus constituting a part thereof, the "Registration
Statement"). AMP will obtain all necessary state securities law or "Blue Sky"
permits and approvals required to carry out the transactions contemplated by
this Agreement. The Company and the Owners wil cooperate as may be reasonably
requested in connection with any such action.
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(b) Each of the Company, each Owner and AMP represents and warrants that
none of the information or documents supplied or to be supplied by it for
inclusion in the Registration Statement, by exhibit or otherwise, will, at the
time the Registration Statement and each amendment and supplement thereto, if
any, becomes effective under the Securities Act, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of circumstances under
which they were made, not misleading.
(c) Each Owner and the Company will, upon request, furnish AMP with all
information concerning itself, its subsidiaries, directors, officers, partners
and stockholders and such other matters as may be reasonably requested by AMP in
connection with the preparation of the Registration Statement and each amendment
or supplement thereto, or any other statement, filing, notice or application
made by or on behalf of each such party or any of its subsidiaries to any
governmental entity in connection with the Acquisition and the other
transactions contemplated by this Agreement.
SECTION 8.2. AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party will have the continuing obligation until the Closing to
supplement or amend promptly the Schedules with respect to any matter that would
have been or would be required to be set forth or described in the Schedules in
order to not materially breach any representation, warranty or covenant of such
party contained herein; provided, that no amendment or supplement to a Schedule
that constitutes or reflects a material adverse change to the Company may be
made unless AMP consents to such amendment or supplement, and no amendment or
supplement to a Schedule that constitutes or reflects a material adverse change
to AMP may be made unless the Company and the Owners consent to such amendment
or supplement. For all purposes of this Agreement, including, without
limitation, for purposes of determining whether the conditions set forth herein
have been fulfilled, the Schedules hereto will be deemed to be the Schedules as
amended or supplemented pursuant to this Section.
SECTION 8.3. PRORATION OF COSTS AND RENTS. All rents, personal property
taxes and other sums actually paid under the lease agreements listed on Schedule
2.7 pertaining to the Assets and all expenses and costs related to the Assets
for the month of Closing will be prorated as of the Closing Date.
ARTICLE IX
CONDITIONS PRECEDENT OF AMP
Except as may be waived in writing by AMP, the obligations of AMP
hereunder are subject to the fulfillment at or prior to the Closing Date of each
of the following conditions:
SECTION 9.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company and each Owner contained herein will have been true
and correct when initially made and will be true and correct as of the Closing
Date.
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SECTION 9.2. COVENANTS. The Company and each Owner will have performed and
complied with all covenants required by this Agreement to be performed and
complied with by the Company or such Owner prior to the Closing Date.
SECTION 9.3. LEGAL OPINION. Counsel to the Company and the Owners will
have delivered to AMP their opinion, dated as of the Closing Date, in form and
substance reasonably satisfactory to AMP.
SECTION 9.4. PROCEEDINGS. No action, proceeding or order by any court or
governmental body or agency will have been threatened, orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
SECTION 9.5. NO MATERIAL ADVERSE EFFECT. No Material Adverse Effect will
have occurred, whether or not such effect shall have been caused by the
deliberate act or omission of the Company or any Owner.
SECTION 9.6. GOVERNMENT APPROVALS AND REQUIRED CONSENTS. The Company, the
Owners, and AMP will have obtained all necessary government and other
third-party approvals and consents.
SECTION 9.7. SECURITIES APPROVALS. The Registration Statement will have
become effective under the Securities Act, and no stop order suspending the
effectiveness of the Registration Statement will have been issued and no
proceedings for that purpose will have been initiated or threatened by the SEC.
At or prior to the Effective Date, AMP will have received all state securities
and "Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The AMP Common Stock will have been approved for listing on The Nasdaq
Stock Market, subject only to official notification of issuance.
SECTION 9.8. CLOSING DELIVERIES. AMP will have received all documents and
agreements, duly executed and delivered in form satisfactory to AMP, referred to
in Section 11.1.
ARTICLE X
CONDITIONS PRECEDENT OF THE COMPANY AND THE OWNERS
Except as may be waived in writing by the Company and the Owners, the
obligations of the Company and the Owners hereunder are subject to fulfillment
at or prior to the Closing Date of each of the following conditions:
SECTION 10.1 REPRESENTATIONS AND WARRANTIES. The representation and
warranties of AMP contained herein will be true and correct when initially made
and will be true and correct as of the Closing Date.
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SECTION 10.2 COVENANTS. AMP will have performed and complied in all
material respects with all covenants and conditions required by this Agreement
to be performed and complied with by it prior to the Closing Date.
SECTION 10.3 LEGAL OPINION. Counsel to AMP will have delivered to the
Company and the Owners their opinion, dated as of the Closing Date, in form and
substance reasonably satisfactory to the Company and the Owners.
SECTION 10.4 PROCEEDINGS. No action, proceeding or order by any court or
governmental body or agency will have been threatened, orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
SECTION 10.5 GOVERNMENT APPROVALS AND REQUIRED CONSENTS. The Company, the
Owners, and AMP will have obtained all necessary government and other
third-party approvals and consents.
SECTION 10.6 SECURITIES APPROVALS. The Registration Statement will have
become effective under the Securities Act, and no stop order suspending the
effectiveness of the Registration Statement will have been issued and no
proceedings for that purpose will have been initiated or threatened by the SEC.
At or prior to the Effective Date, AMP will have received all state securities
and "Blue Sky" permits necessary to consummate the transactions contemplated
hereby. At or prior to the Effective Date, th AMP Common Stock will have been
approved for listing on The Nasdaq Stock Market, subject only to official
notification of issuance.
SECTION 10.7 CLOSING DELIVERIES. The Company will have received all
documents and agreements, duly executed and delivered in form satisfactory to
the Company, referred to in Section 11.2.
ARTICLE XI
CLOSING DELIVERIES
SECTION 11.1 DELIVERIES OF THE COMPANY AND THE OWNERS. At or prior to the
Closing Date, the Company and the Owners will deliver to AMP c/o Baker &
Hostetler, counsel to AMP, the following, all of which will be in a form
satisfactory to AMP and will be held by Baker & Hostetler in escrow pending
Closing, pursuant to an escrow agreement in form and substance mutually
acceptable to the parties hereto:
(a) a copy of resolutions of the Board of Directors of the Company
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements and consummation of the Acquisition, certified
by the Secretary of the Company as being true and correct copies of the
originals thereof subject to no modification or amendment;
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(b) a certificate of the President of the Company and each Owner, dated
the Closing Date, as to the truth and correctness of the representations and
warranties of the Company and the Owners contained herein on and as of the
Closing Date;
(c) a certificate of the President of the Company and each Owner, dated
the Closing Date, (i) as to the performance of and compliance in all material
respects by the Company and the Owners with all covenants contained herein on
and as of the Closing Date and (ii) certifying that all conditions precedent of
the Company and the Owners to the Closing Date have been satisfied;
(d) a certificate of the Secretary of the Company certifying as to the
incumbency of the directors and officers of the Company and as to the signatures
of such directors and officers who have executed documents delivered at Closing
on behalf of the Company;
(e) a certificate, dated within five days prior to the Closing Date, of
the Secretary of State of the respective states of organization of the Company
establishing that such corporation is in existence, has paid all franchise or
similar taxes, if any, and, if applicable, otherwise is in good standing to
transact business in its state of organization;
(f) certificates, dated within five days prior to the Closing Date, of the
Secretaries of State of the states in which the Company is qualified to do
business, to the effect that such corporation is qualified to do business and,
if applicable, is in good standing as foreign corporation or partnership, as the
case may be, in each of such states;
(g) an opinion of Glass, McCullough, Sherrill & Harrold, LLP, counsel to
the Company and the Owners, dated as of the Closing Date, pursuant to Section
9.3;
(h) all authorizations, consents, approvals, permits and licenses
referenced in Section 3.8; (i) Intentionally Omitted
(j) an executed New Employment Agreement between AMP and each employee of
the Company listed in Schedule 6.16. in form satisfactory to AMP;
(k) an executed Registration Rights Agreement among AMP, the Owners and
the Company in substantially the form attached hereto as Exhibit 11.1(k) (the
"Registration Rights Agreement");
(l) a nonforeign affidavit, as such affidavit is referred to in Section
1445(b)(2) of the Code, of each Owner, signed under a penalty of perjury and
dated as of the Closing Date, to the effect that such Owner is a United States
citizen or a resident alien (and thus not a foreign person) and providing such
Owner's United States taxpayer identification number;
(m) an executed Bill of Sale conveying the Assets to AMP Subsidiary in
substantially the form attached hereto as Exhibit 11.1(m);
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(n) an assignment to AMP or AMP Subsidiary of each lease for real
property, in form and substance satisfactory to AMP (the "Lease Assignments");
and
(o) such other instrument or instruments as may be necessary or
appropriate, as AMP or its counsel will reasonably request, to carry out and
effect the purpose and intent of this Agreement.
SECTION 11.2 DELIVERIES OF AMP. At or prior to the Closing Date, AMP will
deliver to the Company and the Owners c/o Baker & Hostetler, counsel to AMP, the
following, all of which will be in a form satisfactory to the Company and the
Owners and will be held by Baker & Hostetler in escrow pending Closing, pursuant
to an escrow agreement in form and substance mutually acceptable to the parties
hereto:
(a) a copy of the resolution of the Board of Directors of AMP authorizing
the execution, delivery and performance of this Agreement, and all related
documents and agreements, certified by AMP's Secretary as being true and correct
copies of the originals thereof subject to no modifications or amendments;
(b) a certificate of an officer of AMP dated the Closing Date as to the
truth and correctness of the representations and warranties of AMP contained
herein on and as of the Closing Date;
(c) a certificate of an officer of AMP dated the Closing Date (i) as to
the performance and compliance by AMP with all covenants contained herein on and
as of the Closing Date and (ii) certifying that all conditions precedent of AMP
to the Closing have been satisfied;
(d) a certificate of the Secretary of AMP certifying as to the incumbency
of the officers of AMP who have executed documents delivered at the Closing on
behalf of AMP;
(e) a certificate, dated within five days prior to the Closing Date, of
the Secretary of State of the respective states of incorporation of AMP and AMP
Subsidiary establishing that such corporation is in existence, has paid all
franchise or similar taxes, if any, and, if applicable, otherwise is in good
standing to transact business in its state of incorporation;
(f) certificates, dated within five days prior to the Closing Date, of the
Secretaries of State of the states in which AMP is qualified to do business, to
the effect that AMP is qualified to do business and, if applicable, is in good
standing as a foreign corporation in such state;
(g) an opinion of Baker & Hostetler, counsel to AMP, dated as of the
Closing Date, pursuant to Section 10.3;
(h) the executed Registration Rights Agreement;
(i) the Acquisition Consideration in accordance with Article II and Annex
I hereof;
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(j) the executed Lease Assignments; and
(k) such other instrument or instruments as may be necessary or
appropriate, as the Company, the Owners or their counsel may reasonably request,
to carry out and effect the purpose and intent of this Agreement.
(l) an executed new Employment Agreement between AMP and each employee of
the Company listed in Schedule 6.16 in form satisfactory to the Company.
ARTICLE XII
POST CLOSING MATTERS
SECTION 12.1 FURTHER INSTRUMENTS OF TRANSFER. Following the Closing, at
the request of AMP, the Owners and the Company will deliver any further
instruments of transfer and take all reasonable action as may be necessary or
appropriate to carry out the purpose and intent of this Agreement.
ARTICLE XIII
REMEDIES
SECTION 13.1 INDEMNIFICATION BY THE OWNERS AND THE COMPANY. Subject to the
terms and conditions of this Article XIII, the Owners and the Company, jointly
and severally, agree to indemnify, defend and hold AMP, AMP Subsidiary 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"), as incurred, asserted
against or incurred by such indemnities arising out of or resulting from:
(a) a breach of any representation, warranty or covenant of the Company or
any Owner contained herein or in any schedule or certificate delivered
hereunder;
(b) any violation (or alleged violation) by the Owners, the Company and/or
any of their past or present directors, officers, members, partners, managers,
shareholders, employees, agents, consultants and Affiliates of state or federal
laws governing healthcare 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 resultin from claims submitted to any third party
payor (including the Medicare and Medicaid programs) on or before the Closing
Date; or
(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 any Owner or the
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Company (including its subsidiaries) and provided to AMP or its counsel by the
Company or the Owners specifically for inclusion in any preliminary prospectus,
the Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to any
Owner or the Company (including its subsidiaries) required to be stated therein
or necessary to make the statements therein not misleading and not provided to
AMP or its counsel by the Company or any Owner.
(d) any liability, obligation or Claims arising from events occurring
prior to the Closing and relating to the Assets.
SECTION 13.2 INDEMNIFICATION BY AMP. Subject to the terms and conditions
of this Article XIII, AMP hereby agrees to indemnify, defend and hold the Owners
and the Company and their respective agents, attorneys and Affiliates harmless
from and against all Damages, as incurred, asserted against or incurred by such
indemnities arising out of or resulting from:
(a) a breach by AMP of any representation, warranty or covenant of AMP
contained herein or in any schedule or certificate delivered hereunder; or
(b) 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, or arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to AMP or its subsidiaries
contained in any preliminary prospectus, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to AMP (including its subsidiaries)
required to be stated therein or necessary to make the statements therein not
misleading.
SECTION 13.3 INDEMNIFICATION PROCEDURES. All claims for indemnification
under this Agreement will be asserted and resolved as follows:
(a) A party claiming indemnification under this Agreement (an "Indemnified
Party") shall promptly (and, in any event, at least 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. 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.
Within 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
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to the Indemnified Party under this Article XIII with respect to such Third
Party Claim or (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, with the consent of the
Indemnified Party. The Indemnifying 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 Indemnifying Party shall deem
necessary or appropriate to protect its interests or those of the Indemnified
Party and not prejudicial to the Indemnified Party. If requested by the
Indemnifying Party, the Indemnified Party agrees, at the sole cost and expense
of the Indemnifying Party, to cooperate with the Indemnifying Party and its
counsel in contesting any Third Party Claim that the Indemnifying Party elects
to contest, including, without limitation, the making of any related
counterclaim against the person asserting the Third Party Claim or any
cross-complaint against any person. The Indemnified Party may participate in,
but not control, any defense or settlement of any Third Party Claim controlled
by the Indemnifying Party pursuant to this Section 15.3(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 Indemnifying 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 13.3(b), or if the Indemnifying Party elects to defend
the Indemnified Party pursuant to Section 13.3(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.
The Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this Section 13.3(c),
and the Indemnifying Party shall
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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 Indemnified 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) If 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 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.
(e) Payments of all amounts owing by an Indemnifying Party pursuant to
this Article XIII relating to a Third Party Claim shall be made within 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 13.3(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.
SECTION 13.4 REMEDIES NOT EXCLUSIVE. 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 13.5 COSTS, EXPENSES AND LEGAL FEES. Whether or not the
transactions contemplated hereby are consummated, each party hereto shall bear
its own costs and expenses (including attorneys' fees), except that each party
hereto agrees to pay the costs and expenses (including reasonable attorneys'
fees and expenses) incurred by the other parties in successfully (a) enforcing
any of the terms of this Agreement or (b) proving that another party breached
any of the terms of this Agreement.
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ARTICLE XIV
TERMINATION
SECTION 14.1 TERMINATION. This Agreement may be terminated:
(a) at any time prior to the Effective Date by mutual agreement of all
parties;
(b) at any time prior to the Effective Date by AMP, if any material
representation or warranty of the Company or any Owner contained in this
Agreement or in any certificate or other document executed and delivered by the
Company or any Owner pursuant to this Agreement is or becomes untrue or breached
in any material respect or if the Company or any Owner fails to comply in any
material respect with any covenant or agreement contained herein, and any such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within seven days after receipt of written notice thereof;
(c) at any time prior to the Effective Date by the Company, if any
representation or warranty of AMP contained in this Agreement or in any
certificate or other document executed and delivered by AMP pursuant to this
Agreement is or becomes untrue in any material respect or if AMP fails to comply
in any material respect with any covenant or agreement contained herein, and any
such misrepresentation, noncompliance or breach is not cured, waived or
eliminated within seven days after receipt of writte notice thereof;
(d) at any time prior to the Effective Date by AMP, if, as a result of its
due diligence, AMP deems termination to be advisable; or
(e) by AMP or the Company if the Acquisition has not been consummated by
January 31, 1998.
SECTION 14.2 EFFECT OF TERMINATION. In the event this Agreement is
terminated pursuant to Sections 14.1(b) or 14.1(c) above, AMP, the Company and
the Owners shall each be entitled to pursue, exercise and enforce any and all
remedies, rights, powers and privileges available at law or in equity. In the
event of a termination of this Agreement under the provisions of this Article, a
party not then in material breach of this Agreement shall stand fully released
and discharged of any and all obligations under this Agreement, except as noted
below. In the event this Agreement is terminated by AMP as a result of its due
diligence for reason not related to (a), (b) or (e), then AMP shall as
liquidated damages reimburse the Company and Owners for their costs incurred in
connection with legal and accounting fees for this transaction up to a maximum
of $50,000.00.
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ARTICLE XV
NONCOMPETITION
SECTION 15.1 PROHIBITED ACTIVITIES. In order to protect AMP against the
unauthorized use or the disclosure of any of its Confidential Information
presently known or hereinafter obtained by the Owners, and other good and
valuable consideration, each Owner hereby agrees that, subject to adjustment
pursuant to Section 15.5, and except for the activities discribed in Schedule
15.1, for a period of five years following the Closing Date, neither the Owner
nor any of his or her Affiliates, shall knowingly directly or indirectly, for
himself or herself or on behalf of any other corporation, person, firm,
partnership, association or any other entity (whether as an individual, agent,
servant, employee, employer, officer, director, shareholder, investor,
principal, consultant or in any other capacity):
(a) establish, operate or provide services at or for any medical office,
clinic or out-patient and/or ambulatory treatment or diagnostic facility
providing services similar to those provided by the Group Practice or engage or
participate in or finance any business which engages in competition with the
business being conducted by AMP (unless the Owner participated in such business
(other than the practice of medicine) within the geographical area designated
below prior to the Closing Date or the date the Owner became aware of planning
for such business operations by AMP), anywhere within twenty (20) miles of any
location of the Group Practice designated by AMP or at which Owner has worked in
the prior year; or
(b) induce or attempt to influence any employee of the Group Practice or
AMP to terminate his or her employment or hire any such employee, whether or not
so induced or influenced.
SECTION 15.2 DAMAGES. Because of the difficulty of measuring economic
losses to AMP as a result of the breach of the foregoing covenant and because of
the immediate and irreparable damage that would be caused to AMP for which it
would have no other adequate remedy, each Owner agrees that, in the event of a
breach by him or her of the foregoing covenant, the covenant may be enforced by
AMP by injunctions and restraining orders.
SECTION 15.3 REASONABLE RESTRAINT. It is agreed by the parties that the
foregoing covenants in this Article XV impose a reasonable restraint on the
Owners in light of the activities and businesses of the Company on the date of
the execution of this Agreement and the future plans of the Group Practice.
SECTION 15.4 SEVERABILITY; REFORMATION. The covenants in this Article XV
are severable and separate, and the unenforceability of any specific covenant
shall not affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
SECTION 15.5 TERM. It is specifically agreed that the period of five years
stated above shall
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be computed by excluding from such computation any time during which an Owner is
in violation of any provision of this Article XV. The covenants contained in
this Article XV shall have no effect if the transactions contemplated by this
Agreement are not consummated for any reason (including termination pursuant to
Section 14.1(b)), but otherwise shall not be affected by any breach of any other
provision hereof by any party hereto.
SECTION 15.6 OWNER ACTIVINotwithstanding the above if this Agreement is
terminated for any reason, the Employees listed on Schedule 6.16 shall not be
prohibited from being employed as or acting as a Certified Nurse Anesthetist,
but shall not otherwise participate during the term as managers of other
Certified Anesthetist.
ARTICLE XVI
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
SECTION 16.1 NONDISCLOSURE. The Owners and the Company recognize and
acknowledge that they had in the past, currently have and in the future may
possibly have access to certain Confidential Information of AMP that is
valuable, special and a unique asset of AMP. The Owners and the Company 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 AMP and (b) to counsel and other
advisers to AMP, respectively, provided that such advisers (other than counsel)
agree to the confidentiality provisions of this Section, unless (i) such
information becomes available to or known by the public generally through no
fault of any Owner or the Company, (ii) disclosure is required by law or the
order of any governmental authority, provided, that, prior to disclosing any
information pursuant to this clause, (iii), each Owner and the Company, as the
case may be, shall, if possible, give prior written notice thereof to AMP and
provide AMP with the opportunity to contest such disclosure, (iv) 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. In the event of a breach or threatened breach by any
Owner or the Company of the provisions of this Section, AMP shall be entitled to
an injunction restraining the Owner or the Company from disclosing, in whole or
in part, such Confidential Information. Nothing herein shall be construed as
prohibiting AMP 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 no other
adequate remedy would exist, the Owners and the Company 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 or restraining orders.
SECTION 16.3 SURVIVAL. The obligations of the Owners and the Company under
this Article XVI shall survive the termination of this Agreement.
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SECTION 16.4 AMP NONDISCLOSURE.Section 16.1 hereof shall apply with equal
force and effect to AMP, its agents, officers, directors, employees and
Affiliates with respect to the Confidential Information of Company and Owners.
ARTICLE XVII
TRANSFER RESTRICTIONS
SECTION 17.1 TRANSFER RESTRICTIONS. For a period of one year following the
Closing, unless the minimum holding period under Rule 144 promulgated under the
Securities Act is shortened, in which case, for such shortened period, except
pursuant to the Registration Rights Agreement, no Owner shall voluntarily (a)
sell, assign, exchange, transfer, encumber, pledge, distribute, appoint, or
otherwise dispose of (i) any shares of AMP Common Stock received by the Company
in the Acquisition, or (ii) any interest (including, without limitation, an
option to buy or sell) in any such shares of AMP Common Stock, in whole or in
part, and no such attempted transfer shall be treated as effective for any
purpose or (b) engage in any transaction, whether or not with respect to any
shares of AMP Common Stock or any interest therein, the intent or effect of
which is to reduce the risk of owning shares of AMP Common Stock. The
certificates evidencing the AMP Common Stock delivered to the Company pursuant
to this Agreement will bear a legend substantially in the form set forth below
and containing such other information as AMP may deem necessary or appropriate:
Except pursuant to the terms of the Registration Rights Agreement
and the Business Purchase Agreement among the issuer, the holder of
this certificate and the other parties thereto, the shares
represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be
required to give effect to any attempted voluntary sale, assignment,
exchange, transfer, encumbrance, pledge, distribution, appointment
or other disposition prior to _______________ [date that is one year
after the Closing]. Upon the written request of the holder of this
certificate, the issuer agrees to remove this restrictive legend
(and any stop order placed with the transfer agent) after the date
specified above.
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ARTICLE XVIII
FEDERAL SECURITIES LAW RESTRICTIONS ON AMP COMMON STOCK
SECTION 18.1 INVESTMENT REPRESENTATION. The Company acknowledges that the
shares of AMP Common Stock to be delivered to the Company pursuant to this
Agreement have not been and will not be registered under the Securities Act and
may not be resold without compliance with the Securities Act. The AMP Common
Stock to be acquired by the Company pursuant to this Agreement is being acquired
solely for its own account, for investment purposes only and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution; provided, however, that the Company intends and shall be
permitted to distribute the AMP Stock to the Owners.
SECTION 18.2 COMPLIANCE WITH LAW. The Company covenants, warrants and
represents that none of the shares of AMP Common Stock issued to the Company
will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Securities Act and the rules and regulations of the SEC and applicable
state securities laws and regulations. All certificates evidencing shares of AMP
Common Stock shall bear the following legend, in addition to the legends under
Article X7:
The shares represented hereby have not been registered under the
Securities Act of 1933 (the "Act") and may only be sold or otherwise
transferred if the holder hereof complies with the Act and
applicable state securities law.
In addition, certificates evidencing shares of AMP Common Stock shall bear any
legend required by the securities or blue sky laws of the state of the Company's
formation or incorporation.
SECTION 18.3 ECONOMIC RISK; SOPHISTICATION. The Company is able to bear
the economic risk of an investment in AMP Common Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the proposed investment and therefore has the
capacity to protect his, her or its own interests in connection with the
acquisition of the AMP Common Stock The Company or its purchaser representatives
have had an adequate opportunity to ask questions and receive answers from the
officers of AMP concerning any and all matters relating to the transactions
described in the Registration Statement, including, without limitation, the
background and experience of the officers and directors of AMP, the plans for
the operations of the business of AMP and any plans for additional acquisitions
and the like. The Company or its purchaser representatives have asked any and
all questions in the nature described in the preceding sentence and all
questions have been answered to his, her or their satisfaction.
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ARTICLE XIX
COVENANT OF CONTINUED USE
INTENTIONALLY OMITTED
ARTICLE XX
GENERAL
SECTION 20.1 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 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 20.2 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 AMP to a
wholly owned subsidiary of AMP; provided, that any such assignment shall not
relieve AMP of its obligations hereunder.
SECTION 20.3 PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES. Except as
otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and permitted assigns of the parties hereto. Neither
this Agreement nor any other agreement contemplated hereby shall be deemed to
confer upon any person not a party hereto or thereto, except AMP Subsidiary, any
rights or remedies hereunder or thereunder.
SECTION 20.4 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 20.5 SEVERABILITY. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws effecting
during the term hereof, such provisions 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 20.6 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
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representations, warranties and covenants contained herein shall survive the
Closing. All statements contained in any certificate, exhibit or other
instrument delivered by or on behalf of the Company, any Owner or AMP pursuant
to this Agreement shall be deemed to have been representations and warranties by
such Company, such Owner or AMP, as the case may be. All such representations,
warranties and covenants shall survive unti the expiration of any applicable
limitations period.
SECTION 20.7 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 TEXAS.
SECTION 20.8 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 20.9 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 20.10. 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 20.11. 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 AMP has determined in its good faith
judgment to be required by federal securitie 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 AMP in connection
with the conduct of its Initial Public Offering and conducting an examination of
the operations and Assets of the Company. 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 20.12. NOTICE. Whenever this Agreement requires 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
when actually received by the party to whom notice is sent, 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):
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If to AMP: ___________________________
___________________________
___________________________
with a copy to: Baker & Hostetler, LLP
1000 Louisiana, Suite 2000
Houston, TX 77002
Attn: Mr. Ivan Wood
If to the Company
or any Owner: ___________________________
___________________________
___________________________
with a copy to: ___________________________
___________________________
___________________________
SECTION 20.13. CHOICE OF FORUM. The parties hereto agree that should any
suit, action or proceeding arising out of this Agreement be instituted by any
party hereto (other than a suit, action or proceeding to enforce or realize upon
any final court judgment arising out of this Agreement), such suit, action or
proceeding shall be instituted only in a state or federal court in ________
County, Texas. Each of the parties hereto consents to the in personam
jurisdiction of any state or federal court in _______ County, Texas and waives
any objection to the venue of any such suit, action or proceeding. The parties
hereto recognize that courts outside ________ County, Texas may also have
jurisdiction over suits, actions or proceedings arising out of this Agreement,
and in the event that any party hereto shall institute a proceeding involving
this Agreement in a jurisdiction outside ________ County, Texas, the party
instituting such proceeding shall indemnify any other party hereto for any
losses and expenses that may result from the breach of the foregoing covenant to
institute such proceeding only in a state or federal court in ________ County,
Texas, including without limitation any additional expenses incurred as a result
of litigating in another jurisdiction, such as reasonable fees and expenses of
local counsel and travel and lodging expenses for parties, witnesses, experts
and support personnel.
SECTION 20.14. NO WAIVER; REMEDIES. No party hereto shall by any act
(except by written instrument pursuant to Section 20.1 hereof), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default in or breach of any of the terms
and conditions hereof. No failure to exercise, nor any delay in exercising, on
the part of any party hereto, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. No remedy set forth in this
Agreement or otherwise conferred upon or reserved to any party shall be
considered exclusive of any other remedy available to any party, but the same
shall be distinct, separate and cumulative and may be exercised from time to
time as often as occasion may arise or as may be deemed expedient.
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SECTION 20.15. 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 20.16. DEFINED TERMS. Terms used in Annex I and the Schedules
attached hereto with their initial letter capitalized and not otherwise defined
therein shall have the meanings assigned to such terms in this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first written above.
AMERICAN MEDICAL PROVIDERS, INC.:
By: ______________________________
Name: ____________________________
Title: ___________________________
THE COMPANY:
PYRAMID ANESTHESIOLOGY GROUP, INC.
By: ______________________________
Name: ____________________________
Title: ___________________________
THE OWNERS:
By: ______________________________
Roger Bigham
By: ______________________________
David LaGuardia
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ANNEX I
ACQUISITION CONSIDERATION
The aggregate Acquisition Consideration estimated to be received by the Company
is:
NUMBER OF VALUE OF
AMP TOTAL
CASH SHARES CONSIDERATION*(1)
---- ------ ---------------
$6,000,000.00 $500,000.00 $6,500,000.00
* The number of AMP shares delivered at Closing will be the Cash Value of
AMP shares divided by the Initial Public Offering Price.
(1) The formula used to determine the Acquisition consideration is as follows:
X-4 multiplied by 5, where X equals the agreed to operating income for the
most recent twelve months and Y equals X multiplied by 5, with the result
and reduced by the value of the Assets on the Company's books and records
and such amount is divided by 25.
A-1
EXHIBIT 10.11
FORM OF
REGISTRATION RIGHTS AGREEMENT
between
AMERICAN MEDICAL PROVIDERS, INC.
and
_________________________________
_______________________, 1997
<PAGE>
FORM OF
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is entered into
as of , 1997, between AMERICAN MEDICAL PROVIDERS, INC., a Delaware corporation
(the "Company"), and ______________________ ("Doctor").
This Agreement is made pursuant to that certain Business Purchase
Agreement of even date herewith (the "Purchase Agreement") by and between the
Company and Doctor pursuant to which the Company agreed to purchase the
podiatric practice of the Doctor for cash and shares of the Company's Common
Stock, par value $.01 per share (the "Common Shares"). In order to induce Doctor
to enter into the Purchase Agreement, the Company has agreed, INTER ALIA, to
provide the registration rights set forth in this Agreement[, and the execution
and delivery of this Agreement is a condition precedent to consummation of the
transactions contemplated by the Purchase Agreement.]
The parties hereby agree as follows:
1. DEFINITIONS.
Capitalized terms used herein without definition shall have the
meaning set forth in the Note.
"COMMISSION" means the United States Securities and Exchange
Commission.
"HOLDER" means Doctor, so long as Doctor holds any Registrable
Securities, and any other holder of Registrable Securities to whom the
registration rights set forth in Section 2 hereof have been transferred pursuant
to Section 9 (c) hereof.
"PERSON" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity or
organization.
"REGISTRABLE SECURITIES" means (i) the Common Shares issued to
Doctor pursuant to the Purchase Agreement and (ii) any other securities that may
be issued or distributed in respect of such Common Shares by way of dividend,
split, exchange or other distribution, recapitalization or reclassification. For
the purposes of this Agreement, Registrable Securities will cease to be
Registrable Securities when (a) a registration statement covering such
Registrable Securities has been declared effective and they have been disposed
of pursuant to such effective registration statement, (b) they are distributed
pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act or (c) they have been otherwise transferred and the Company has
delivered new certificates or other evidences of ownership for them not subject
to any stop transfer order or other restriction on transfer and not bearing a
legend restricting transfer.
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<PAGE>
"SECURITIES ACT" means the United States Securities Act of 1933,
as amended.
2. REGISTRATION.
(a) REGISTRATION OF SIMILAR SECURITIES. If, at any time prior to the
second anniversary of this Agreement, the Company proposes to file a
registration statement under the Securities Act with respect to an offering of
Similar Securities (as defined herein), then the Company shall give notice by
telephone (and confirmed by written notice) (together, the "Registration
Notice") of such proposed filing to the Holder of Registrable Securities as
early as practicable, but in no event later than ten days before the anticipated
filing date, provided, however, that the Company shall have no obligation to
give the Registration Notice to the Holder with respect to the filing of any
registration statement in connection with the Company's initial public offering
and the Company shall have no obligation to include Registrable Securities in
such registration. Any Registration Notice shall state the estimated proposed
offering price, the estimated number of securities proposed to be registered and
whether the registration will be in connection with an underwritten offering
(and, if not, shall identify the alternative plan of distribution) and offer the
Holder the opportunity to include in such registration statement such amount of
Registrable Securities as the Holder may request by written notice delivered to
the Company prior to the anticipated filing date (any such request being
referred to as a "Registration Request"). If such registration is in connection
with an underwritten offering or in connection with a transaction pursuant to
which securities are being sold to a purchaser or purchasers with a view to the
redistribution thereof, such Registrable Securities may only be sold as part of
such underwriting or transaction. If the anticipated filing date is deferred by
more than fifteen business days, the Company shall promptly give written notice
of such new filing date to the Holder of Registrable Securities, which notice
shall offer such Holder the opportunity to request to include such greater or
lesser amount of Registrable Securities as previously requested, provided such
Holder makes such new request not later than forty-eight hours prior to the new
filing date. For purposes of this Section 2(a), "Similar Securities" shall mean
the Company's Common Shares.
(b) UNDERWRITTEN OFFERINGS. The Company shall use its best efforts
to cause the managing underwriters of a proposed underwritten offering pursuant
to Section 2(a) to permit the Holder of Registrable Securities requested to be
included in the registration for such offering to include such Registrable
Securities in such offering on the same terms and conditions as any Similar
Securities of the Company included therein. Upon request by the Company or the
managing underwriters made to the Holders of Registrable Securities, such Holder
shall enter into underwriting agreements with such underwriters providing for
the inclusion of such Registrable Securities in such offering on such terms and
conditions or, if the Holder shall refuse to enter into any such agreements, the
Company shall have the right to exclude from such registration all (but not less
than all) Registrable Securities of the Holder. Notwithstanding the foregoing,
if the managing underwriters of such offering advise the Company in writing that
in their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner in such
offering within a price range acceptable to the Company, the Company will
include in such registration (i) first, the securities originally intended to be
sold on
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<PAGE>
behalf of the Company in the registration prior to the giving of the
Registration Notice, (ii) second, (i) the Registrable Securities and (ii) any
Common Shares held by any person (an "Owner") to whom such Common Shares were
issued in an acquisition of such Owner's podiatry practice pursuant to a
business purchase agreement between the Company and such Owner ("Owners' Common
Shares") to the extent such Registrable Securities or Owners' Common Shares have
been requested to be included in such registration, pro rata among the Holders
and Owners on the basis of the number of shares owned by each such Holder and
Owner and (iii) third, other securities requested to be included in such
registration.
(c) EFFECTIVENESS, ETC. The Company agrees to use its best efforts
to effect the registration and the sale of the Registrable Securities requested
to be registered pursuant to this Section 2 in accordance with the intended
method of disposition thereof as quickly as practical; except that the Company
may terminate such registration in its sole discretion and for any reason.
(d) AVAILABILITY OF RULE 144. Notwithstanding this Section 2, the
Company shall not be obligated to effect registration of any Registrable
Securities if such Registrable Securities to be included in such registration
can be sold pursuant to Rule 144 under the Securities Act.
3. HOLDBACK AGREEMENT.
To the extent not inconsistent with applicable law, Holder of
Registrable Securities agrees not to offer publicly or effect any public sale or
distribution of the issue being registered or of any similar security of the
Company, or any securities convertible into or exchangeable or exercisable for
such securities, including a sale pursuant to Rule 144 (or any similar provision
then in force) under the Securities Act, during the seven days prior to, and
during the ninety-day period beginning on, the effective date of all
registration statements relating to the Company's securities. if and to the
extent requested by the Company in the case of a non-underwritten public
offering in which Registrable Securities of the Holder are included or if and to
the extent requested by the managing underwriter(s) in the case of an
underwritten public offering during the first year of this Agreement. Anything
herein to the contrary notwithstanding, under no circumstances shall the Holder
of Registrable Securities be precluded by the provisions of this Section 3 from
offering publicly or effecting any public sale or distribution of Registrable
Securities for more than ninety days out of any consecutive period of 270 days.
4. REGISTRATION PROCEDURES.
Subject to the provisions of Section 2 hereof, in connection with
the registration of Registrable Securities hereunder, the Company will as
expeditiously as possible:
(a) furnish to each seller of Registrable Securities, prior to
filing a registration statement, copies of such registration statement as
proposed to be filed, and thereafter such number of copies of such registration
statement, each amendment and supplement thereto (in each case including all
exhibits thereto), the prospectus included in such registration statement
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<PAGE>
(including each preliminary prospectus) and such other documents in such
quantities as such seller may reasonably request from time to time in order to
facilitate the disposition of the Registrable Securities owned by such seller;
(b) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller of Registrable Securities reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller; except that the Company will not be
required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this paragraph (b), (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to general
service of process in any such jurisdiction;
(c) use its best efforts to cause the Registrable Securities covered
by such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operation of the Company to enable the seller or sellers thereof to
consummate the disposition of such Registrable Securities;
(d) notify each seller of such Registrable Securities, at any time
when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and the
Company will promptly (or, if such event is the conduct of negotiations
disclosure of which, in the Company's reasonable judgment, would be detrimental
to the Company and the Company shall have given a notice to each seller of
Registrable Securities to such effect (the "Negotiation Notice"), promptly after
any required disclosure would not be detrimental to the Company but in no event
more than ninety days after the giving of the Negotiation Notice) prepare a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading.
(e) use its best efforts to cause all such Registrable Securities to
be listed (i) on each securities exchange on which Similar Securities issued by
the Company are then listed, or (ii) if no such Similar Securities are then
listed, on the Nasdaq National Market;
(f) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such Registrable
Securities;
(g) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent retained by
any such seller or underwriter (collectively, the "Inspectors"), all financial
and other records, pertinent corporate documents and properties of the
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<PAGE>
Company and its subsidiaries (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the officers, directors and employees of the Company
to supply all information reasonably requested by any such Inspector in
connection with such registration statement. Records which the Company
determines, in good faith, to be confidential and which it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in the registration statement and either (A) such registration has
not been terminated or delayed pursuant to the provisions of Section 2 hereof,
as the case may be, or (B) sales have been consummated pursuant to such
registration statement by any seller of Registrable Securities or (ii) the
release of such Records is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction. Each seller of Registrable Securities shall use
reasonable efforts, prior to any such disclosure by such seller's Inspector, to
inform the Company that such disclosure is necessary to avoid or correct a
misstatement or omission in the registration statement. Each seller of
Registrable Securities further agrees that it will, upon learning that
disclosure of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company, at the expense of the Company, to
undertake appropriate action to prevent disclosure of the Records deemed
confidential;
(h) in the event such sale is pursuant to an underwritten public
offering, use its best efforts to obtain a letter of the kind contemplated by
the Statement of Auditing Standards No. 72, "Letters For Underwriters and
Certain Other Requesting Parties," promulgated by the American Institute of
Certified Public Accountants (an "AICPA Letter") from the independent public
accountants for the Company in customary form and covering such matters of the
type customarily covered by such letters as the Holder reasonably requests; and
(i) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and to make available to the Holder of
Registrable Securities, as soon as reasonably practicable, an earning statement
covering a period of twelve months, beginning within three months after the
effective date of the registration statement, which earning statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.
The Company may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding such seller or the distribution of such securities as the
Company may from time to time reasonably request in writing, in each case only
as required by the Securities Act.
The Holder of Registrable Securities agrees that, upon receipt of
any notice (including any Negotiation Notice) from the Company of the happening
of any event of the kind described in Section 4(d) hereof, the Holder shall
forthwith discontinue disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until the Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 4(d) hereof (the "Blackout Period"), and, if so directed by the Company,
the Holder will deliver to the Company (at the expense of the Company) all
copies, other than permanent file
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<PAGE>
copies then in the Holder's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice. The
Company will suspend any underwritten public offering that includes the
Registrable Securities during the Blackout Period.
5. REGISTRATION EXPENSES.
All expenses incident to the performance of or compliance with
Section 2 this Agreement by the Company, including, without limitation, all
registration and filing fees (including, without limitation, fees of the
Commission and the National Association of Securities Dealers, Inc.), fees and
expenses of compliance with securities or blue sky laws (including reasonable
fees and disbursements of counsel in connection with blue sky qualifications of
the Registrable Securities), rating agency fees, printing expenses, messenger
and delivery expenses, internal expenses the fees and expenses incurred in
connection with the listing of the securities to be registered on each
securities exchange on which Similar Securities issued by the Company are then
listed, fees and disbursements of counsel for the Company and its independent
certified public accountants (including the expenses of any special audit or
AICPA Letter required by or incident to such performance), securities acts
liability insurance (if the Company elects to obtain such insurance), the fees
and expenses of any special experts retained by the Company in connection with
such registration and the fees and expenses of other persons retained by the
Company (all such expenses being herein called "Registration Expenses"), will be
borne by the Company, except that the Holder will pay those expenses incurred
solely as a result of Holder's participation in the offering, including, but not
limited to, Holder's pro rata portion of the Commission, National Association of
Securities Dealers, Inc., listing, and blue sky filing fees.
6. INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify,
to the full extent permitted by law, the Holder of Registrable Securities
included in any registration statement pursuant to Section 2 hereof, its
officers and directors and each person who controls, is controlled by or under
common control with (within the meaning of the Securities Act) the Holder,
officer and director, against all losses, claims, damages, liabilities and
expenses (including attorneys' fees and other expenses incurred in connection
with investigating or defending any such claims) caused by any untrue or alleged
untrue statement of material fact contained in any registration statement, or
any prospectus or preliminary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except (i) insofar as the same are caused by (i) any
such untrue statement or omission or alleged untrue statement or omission based
upon information furnished in writing to the Company by or on behalf of a Holder
or underwriter expressly for use therein or (ii) the fact that the Holder or
underwriter sold Registerable Securities to a Person to whom there was not sent
or given a copy of the prospectus as amended or supplemented to the date of such
sale at or prior to the confirmation of such sale. In connection with an
underwritten offering, the Company will indemnify the underwriters thereof,
their officers and directors and each person who controls such
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<PAGE>
underwriters (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the Holder of Registrable
Securities.
(b) INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. In
connection with any registration statement in which the Holder of Registrable
Securities is participating, the Holder will furnish to the Company in writing
such information with respect to the Holder as the Company reasonably requests
for use in connection with any such registration statement, or any prospectus or
preliminary prospectus contained therein, or any amendment or supplement
thereto, and agrees to indemnify, to the extent permitted by law, the Company,
its directors and officers and each person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses caused by any untrue or alleged untrue statement of a material fact
contained in any such registration statement, or any prospectus or preliminary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, to
the extent, but only to the extent, that such untrue statement or omission is
contained in any information with respect to the Holder provided by the Holder
for use in the preparation of such registration statement. The Company will
furnish Holder with a copy of the information attributable to the Holder in the
registration statement at the time of the initial filing. Notwithstanding
anything to the contrary in this Agreement, in no event shall any
indemnification provided hereunder by the Holder of Registrable Securities in
connection with any registration thereof exceed the amount of proceeds received
by the Holder in connection with such registration.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person entitled to
indemnification hereunder agrees to give prompt written notice to the
indemnifying party after the receipt by such person of any written notice of the
commencement of any action, suit, proceeding or investigation or threat thereof
made in writing for which such person will claim indemnification or contribution
pursuant to this Agreement and, unless in the reasonable judgment of such
indemnified party a conflict of interest may exist between such indemnified
party and the indemnifying party with respect to such claim, permit the
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to such indemnified party. If the indemnifying party is not
entitled to, or elects not to, assume the defense of a claim, it will not be
obligated to pay the fees and expenses of more than one counsel with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels. The indemnifying party will not be subject to
any liability for any settlement made without its consent.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 6 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such
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<PAGE>
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include, subject to the limitations set forth in Section 6(c) hereof, any legal
or other fees or expenses reasonably incurred by such party in connection with
any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by PRO RATA
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 6, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Section 6(a) and (b) hereof without regard to the relative fault of
said indemnifying party or indemnified party or any other equitable
consideration provided for in this Section 6(d).
Notwithstanding anything to the contrary in this Agreement, in no
event shall the amount contributed hereunder by the Holder of Registrable
Securities in connection with any registration thereof exceed the amount of
proceeds received by such Holder in connection with such registration.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
No person may participate in any underwritten registration
thereunder unless such person (a) agrees to sell such person's securities on the
basis provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
8. TERMINATION OF THE COMPANY'S OBLIGATIONS.
The Company's obligations pursuant to Section 2 hereof shall
terminate on the date on which all Registrable Securities (other than
Registrable Securities acquired by the Company or any affiliate of the Company)
can be freely sold by the Holder thereof without registration under
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the Securities Act to a transferee, who (unless an affiliate of the Company)
would be able to sell freely such Common Shares without further registration
under the Securities Act.
9. GENERAL.
(a) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to or departures from the provisions hereof may not be given
unless the Company has obtained the written consent of the Holder.
(b) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made by hand delivery, telex, telecopy, overnight
courier or registered first-class mail:
(i) if to the Holder of Registrable Securities at the most
current address given by the Holder to the Company in writing;
(ii) if to the Company at its address set forth in the
Purchase Agreement.
All such notices and communications shall be deemed to have been
duly given: when delivered, if by hand, overnight courier or mail; when the
appropriate answerback is received, if by telex; when transmitted, if by
telecopy.
(c) SUCCESSORS AND ASSIGNS; NONTRANSFERABILITY OF REGISTRATION
RIGHTS. This Agreement shall inure to the benefit and be binding upon the
successors of each of the parties. The registration rights set forth in this
Agreement may not be transferred by Doctor to any other Person.
(d) DELAY OF REGISTRATION. No Holder shall have any right to take
any action to restrain, enjoin or otherwise delay any registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of the Agreement.
(e) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) HEADINGS. The headings to this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of Texas applicable to contracts and to be performed
wholly within Texas.
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(h) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of
Doctor shall be enforceable to the fullest extent permitted by law.
(i) ENTIRE AGREEMENT. This Agreement, together with the Purchase
Agreement is intended by the parties as a final expression of their agreement
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement and the Purchase Agreement supersede all prior agreements and
understandings between the parties with respect to such subject matter.
(j) ATTORNEYS' FEES. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof or of the
Purchase Agreement or the Registrable Securities is validly asserted as a
defense, the successful party shall be entitled to recover reasonable attorneys'
fees in addition to any other available remedy.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
AMERICAN MEDICAL PROVIDERS, INC.
By:
Name:
Title:
____________________________________
____________________________________
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EXHIBIT 10.12
FORM OF
STOCKHOLDER PROTECTION AGREEMENT
dated as of
February __, 1998
between
AMERICAN MEDICAL PROVIDERS, INC.
and
as Rights Agent
<PAGE>
FORM OF
STOCKHOLDER PROTECTION AGREEMENT
TABLE OF CONTENTS
PAGE
ARTICLE I - CERTAIN DEFINITIONS............................................ 1
1.1 Certain Definitions............................................ 1
ARTICLE II - THE RIGHTS.................................................... 6
2.1 Summary of Rights.............................................. 6
2.2 Legend on Stock Certificates................................... 6
2.3 Exercise Price; Exercise of Rights; Detachment of Rights....... 7
2.4 Adjustments to Exercise Price; Number of Rights; Securities
Purchasable.................................................... 9
2.5 Date On Which Exercise Is Effective............................ 12
2.6 Execution, Authentication, Delivery and Dating of Rights
Certificates................................................... 12
2.7 Registration, Registration of Transfer and Exchange............ 12
2.8 Mutilated, Destroyed, Lost and Stolen Rights Certificates...... 13
2.9 Persons Deemed Owners.......................................... 14
2.10 Delivery and Cancellation of Certificates...................... 14
2.11 Agreements of Rights Holders................................... 14
2.12 Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.................................................. 15
2.13 Certificate of Adjusted Exercise Price or Number of Shares..... 16
ARTICLE III - THE RIGHTS AGENT............................................. 17
3.1 General........................................................ 17
3.2 Merger or Consolidation or Change of Name of Rights Agent...... 17
3.3 Duties of Rights Agent......................................... 18
ARTICLE IV - MISCELLANEOUS................................................. 21
4.1 Redemption, Termination and Exchange........................... 21
4.2 Provision in Event of Insufficient Shares of Series A
Preferred Stock................................................ 22
4.3 Issuance of New Rights Certificates............................ 22
4.4 Supplements and Amendments..................................... 23
4.5 Fractional Shares.............................................. 23
4.6 Transactions After the Separation Time......................... 23
4.7 Rights of Action............................................... 23
4.8 Holder of Rights Not Deemed a Stockholder...................... 24
4.9 Notice of Proposed Actions..................................... 24
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4.10 Notices........................................................ 24
4.11 Costs of Enforcement........................................... 25
4.12 Successors..................................................... 25
4.13 Benefits of this Agreement..................................... 25
4.14 Descriptive Headings........................................... 25
4.15 Governing Law.................................................. 25
4.16 Counterparts................................................... 25
4.17 Severability................................................... 26
EXHIBITS
Exhibit A Form of Certificate of Designation, Preferences and Rights
of Series A Junior Participating Preferred Stock
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<PAGE>
FORM OF
STOCKHOLDER PROTECTION AGREEMENT
This Stockholder Protection Agreement (the "Agreement"), is entered into
as of February __, 1998, between AMERICAN MEDICAL PROVIDERS, INC., a Delaware
corporation (the "Company") , and ___________________________________, as Rights
Agent (the "Rights Agent", which term shall include any successor Rights Agent
hereunder).
WHEREAS, on February __, 1998, the Board of Directors of the Company
adopted a stockholder protection plan designed to provide protection to the
Company's stockholders in the event any person should attempt to acquire a 15%
or greater equity interest in the Company at a price, under circumstances or on
terms that are not in the best interests of the Company and its stockholders;
WHEREAS, the Board of Directors of the Company has (a) authorized and
declared a dividend of one contingent preferred stock purchase right ("Right")
in respect of each share of Common Stock (as hereinafter defined) held of record
as of the close of business on _________________________ (the "Record Time") and
(b) authorized the issuance of one Right in respect of each share of Common
Stock that shall become outstanding after the Record Time and prior to the
Separation Time (as hereinafter defined);
WHEREAS, each Right entitles the holder thereof, after the Separation
Time, to purchase that number of Units (as hereinafter defined) of a share of
the Company's Series A Preferred Stock (as hereinafter defined) which equals the
quotient obtained by dividing the Exercise Price (as hereinafter defined) by
fifty percent (50%) of the Market Price (as hereinafter defined) per share of
Common Stock, pursuant to the terms and subject to the conditions set forth
herein; and
WHEREAS, the Company desires to appoint the Rights Agent to act on behalf
of the Company, and the Rights Agent is willing to so act, in connection with
the issuance, transfer, exchange and replacement of Rights Certificates (as
hereinafter defined), the exercise of Rights and other matters referred to
herein.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
the parties hereto agree as follows:
ARTICLE I - CERTAIN DEFINITIONS
I.1 CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who has (i) acquired or
obtained the right to acquire Beneficial Ownership of 15% or more of the
outstanding shares of Common Stock or (ii) has commenced or announced an
intention to commence a tender or exchange offer which would result in that
Person obtaining Beneficial Ownership of 15% or more of the outstanding shares
of Common Stock; PROVIDED, HOWEVER, that the term "Acquiring Person" shall not
include the Company, any wholly-owned Subsidiary of the Company, any employee
stock
<PAGE>
ownership or other employee benefit plan of the Company or of a Subsidiary of
the Company (a "Plan"), any Person holding Common Stock for or pursuant to the
terms of any such Plan or any Exempted Person. Notwithstanding the foregoing,
any Person who acquires the Beneficial Ownership of 15% or more of the shares of
Common Stock of the Company either (i) by reason of share purchases by the
Company reducing the number of shares of Common Stock outstanding (provided such
Person does not acquire additional shares of Common Stock), or (ii)
inadvertently, if such Person notifies the Board of Directors of such
inadvertent purchase within five business days and within two business days
after such notice divests itself of enough shares of Common Stock so as to no
longer have the Beneficial Ownership of 15% of the outstanding Common Stock,
will not be an Acquiring Person.
(b) "Affiliate," when used to indicate a relationship with a
specified Person, shall mean a Person that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, such specified Person.
(c) "Associate" of a specified Person shall mean (i) any
corporation, partnership or other organization of which such specified Person is
an officer or partner or is, directly or indirectly, the Beneficial Owner of 10%
or more of any class of equity securities, (ii) any trust or other estate in
which such specified Person has a substantial beneficial interest or as to which
such specified Person serves as trustee or in a similar fiduciary capacity,
(iii) any relative or spouse of such specified Person, or any relative of such
spouse, who has the same home as such specified Person or who is a director or
officer of the Company or an Affiliate of the Company and (iv) any Person who is
a director, officer, partner or trustee of such specified Person or of any
corporation, partnership or other organization (other than the Company or any
wholly-owned Subsidiary of the Company) that is an Affiliate or Associate of
such specified Person.
(d) A Person shall be deemed the "Beneficial Owner", and to have
"Beneficial Ownership", of, and to "Beneficially Own", any securities as to
which such Person or any of such Person's Affiliates or Associates is or may be
deemed to be the Beneficial Owner pursuant to Rule 13d-3 or Rule 13d-5 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (or pursuant to
any comparable or successor laws or regulations or, if such Rules shall be
rescinded and there shall be no comparable or successor laws or regulations,
pursuant to Rule 13d-3 or Rule 13d-5 as in effect on the date of this
Agreement), as well as any securities as to which such Person or any of such
Person's Affiliates or Associates has the right to become a Beneficial Owner
(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding, or upon the
exercise of conversion rights, exchange rights, rights (other than the Rights),
warrants or options, or otherwise; provided, however, that a Person shall not be
deemed the "Beneficial Owner" or to have "Beneficial Ownership", of or to
"Beneficially Own" any security (i) solely because such Person or any of such
Person's Affiliates or Associates has or shares the power to vote or direct the
voting of such security pursuant to a revocable proxy given in response to a
public proxy or consent solicitation made pursuant to, and in accordance with,
the applicable rules and regulations under the Exchange Act, except if such
power (or the arrangements relating thereto) is then reportable under Item 6 of
Schedule 13D under the Exchange Act (or any similar provision of a comparable or
successor report) or (ii) held for or
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<PAGE>
pursuant to the terms of any Plan; and provided, however, that nothing in this
paragraph 1.1(d) shall cause a Person engaged in business as an underwriter of
securities to be the Beneficial Owner of, to have Beneficial Ownership of, or to
Beneficially Own, any securities acquired through such Person's participation in
good faith in a firm commitment underwriting until the expiration of 40 days
after the date of such acquisition. For purposes of this Agreement, in
determining the percentage of the outstanding shares of Common Stock with
respect to which a Person is the Beneficial Owner, all shares as to which such
Person is deemed the Beneficial Owner shall be deemed outstanding.
(e) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the City of New York are generally
authorized or obligated by law or executive order to close.
(f) "Close of Business" on any given day shall mean the time on such
date (or, if such date is not a Business Day, the time on the next succeeding
Business Day) at which the offices of the transfer agent for the Common Stock
(or, after the Separation Time, the offices of the Rights Agent) are closed to
the public.
(g) "Common Stock" shall mean the Class A Common Stock, par value
$0.001 per share, of the Company and the Class B Common Stock, par value $0.001
per share, of the Company.
(h) "Exempted Person" shall mean any Institutional Investor, any
Minority Investor and the Strategic Investor. Notwithstanding the foregoing, if
(i) any Institutional Investor or Minority Investor acquires Beneficial
Ownership of the outstanding Common Stock in excess of that percentage expressly
approved in writing by the Board of Directors of the Company or (ii) the
Strategic Investor acquires Beneficial Ownership of the outstanding Common Stock
in excess of the greater of 25% or the Minority Percentage, either (y) by reason
of share purchases by the Company reducing the number of shares of Common Stock
outstanding (provided such Exempted Person does not acquire additional shares of
Common Stock) or (z) inadvertently, if such Exempted Person notifies the Board
of Directors of such inadvertent purchase within five business days and within
two business days after such notice divests itself of enough shares of Common
Stock so as to no longer have the Beneficial Ownership of the outstanding Common
Stock in excess of the specified percentages, such Institutional Investor,
Minority Investor or Strategic Investor will not cease to be an Exempted Person.
(i) "Exercise Price" shall initially be $ , subject to adjustment
from time to time as provided in Section 2.4 hereof.
(j) "Expiration Time" shall be (i) the Close of Business on .
(k) "Institutional Investor" shall mean any Person (together with
such Institutional Investor's Affiliates and Associates) (i) who, with the
express written approval of the Board of Directors of the Company, acquires
aggregate Beneficial Ownership of 15% or more but
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<PAGE>
not more than 20% of the outstanding Common Stock of the Company, PROVIDED,
HOWEVER, that the Institutional Investor acquires such Beneficial Ownership in
the ordinary course of business and not with the purpose nor with the effect of
changing or influencing the control of the Company, nor in connection with or as
a participant in any transaction having such purpose or effect, including any
transaction subject to Rule 13d-3(b) of the Exchange Act, and (ii) who is: (A) a
broker or dealer registered under Section 15 of the Exchange Act; (B) a bank as
defined in Section 3(a)(6) of the Exchange Act; (C) an insurance company as
defined in Section 3(a)(19) of the Exchange Act; (D) an investment company
registered under Section 8 of the Investment Company Act of 1940; (E) an
investment adviser registered under Section 203 of the Investment Advisers Act
of 1940; (F) an employee benefit plan or pension fund which is subject to the
provisions of the Employee Retirement Income Security Act of 1974 or an
endowment fund; (G) a parent holding company, provided the aggregate amount held
directly by the parent, and directly and indirectly by its subsidiaries which
are not persons specified in Rule 13d-1(b)(ii)(A) through (F) of the Exchange
Act, does not exceed one percent of the securities of the subject class; or (H)
a group, provided that all the members are persons specified in Rule
13d-1(b)(ii)(A) through (G) of the Exchange Act.
(l) "Market Price" per share of Common Stock on any date of
determination shall mean the average of the daily closing prices per share of
Common Stock (determined as described below) on each of the 20 consecutive
Trading Days through and including the fifth Trading Day immediately preceding
such determination date; provided, however, that if the first public
announcement of an event described in Section 2.4 hereof occurs within such 20
Trading Day period, Market Price per share of Common Stock on such determination
date shall mean the average of the daily closing prices per share of Common
Stock on each Trading Day from and including the day after the date of such
announcement through and including the fifth Trading Day immediately preceding
such determination date. The closing price per share of Common Stock on any date
shall be the last sale price, regular way, or, in case no such sale takes place
on such date, the average of the closing bid and asked prices, regular way, for
each share of Common Stock, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Common Stock is
not then listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Common Stock is listed or admitted to trading or, if the Common Stock is not
then listed or admitted to trading on any national securities exchange, the
average of the high bid and low asked prices for each share of Common Stock in
the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or such other
system then in use, or, if on any such date the Common Stock is not then quoted
by any such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common Stock
selected by the Board of Directors of the Company; provided, however, that if on
any such date the Common Stock is not listed or admitted for trading on a
national securities exchange or traded in the over-the-counter market, the
closing price per share of Common Stock on such date shall mean the fair value
per share of Common Stock on such date as determined in good faith by the Board
of Directors of the Company, after consultation with a nationally recognized
investment banking firm with respect to the fair value per share of Common
Stock. Market Price per share of Series A Preferred Stock on any date of
determination shall be determined in the same manner set forth above for Common
Stock, other than as provided in the second proviso thereto. If the Market Price
per share of Series A
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<PAGE>
Preferred Stock cannot be determined in the manner provided above, or if the
Series A Preferred Stock is not publicly held or listed or traded in a manner
described above, the Market Price per share of Series A Preferred Stock shall be
conclusively deemed to be an amount equal to 100 (as such number may be
appropriately adjusted for such events as subdivisions or combinations of stock,
stock dividends and recapitalizations with respect to the Common Stock occurring
after the date of this Agreement) multiplied by the Market Price per share of
Common Stock. If neither the Common Stock nor the Series A Preferred Stock is
publicly held or listed or traded, Market Price per share shall mean the fair
value per share as determined in good faith by the Board of Directors of the
Company, after consultation with a nationally recognized investment banking firm
with respect to the fair value per share of Series A Preferred Stock. Market
Price of a Unit shall be equal to the Market Price of one share of Series A
Preferred Stock divided by 100.
(m) "Minority Investor" shall mean any Person (together with such
Minority Investor's Affiliates and Associates) who, with the express, written
approval of the Board of Directors of the Company, acquires aggregate Beneficial
Ownership of 15% or more but less than 50% of the outstanding Common Stock of
the Company.
(n) "Minority Percentage" shall mean the greatest percentage of the
outstanding Common Stock Beneficially Owned by any single Minority Investor or
the greatest percentage which the Board has authorized any Minority Investor to
Beneficially Own without becoming an Acquiring Person.
(o) "Person" shall mean any individual, firm, partnership,
association, group (as such term is used in Rule 13d-5 under the Exchange Act,
as in effect on the date of this Agreement), corporation or other entity.
(p) "Series A Preferred Stock" shall mean the Series A Junior
Participating Preferred Stock, par value $0.001 per share, of the Company having
the rights, powers, privileges and restrictions, qualifications and limitations
set forth in the Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock in the form attached as EXHIBIT A.
[(q) "Series B Preferred Stock" shall mean the Series B Convertible
Preferred Stock, par value $0.10 per share, of the Company.]
(r) "Separation Time" shall mean the Close of Business on the tenth
Business Day after (i) a public announcement establishing that an Acquiring
Person has become such or (ii) a resolution by the Board of Directors stating
that the majority of the Board of Directors is aware that a Person has become an
Acquiring Person, provided that if the foregoing results in the Separation Time
being prior to the Record Time, the Separation Time shall be extended to the
Record Time.
(s) "Subsidiary" of any specified Person shall mean any corporation
or other
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<PAGE>
entity of which a majority of the voting power of the equity securities or a
majority of the equity interest is Beneficially owned, directly or indirectly,
or otherwise controlled by such Person.
(t) "Trading Day" shall mean a day on which the principal national
securities exchange or over-the-counter market on which the Common Stock is
listed or admitted to trading is open for the transaction of business or, if the
Common Stock is not then listed or admitted to trading on any national
securities exchange or over-the-counter market, a Business Day.
(u) "Voting Stock" shall mean (i) a Unit of Series A Preferred
Stock, (ii) a share of Common Stock and (iii) any other share of capital stock
of the Company entitled to vote generally in the election of directors or
entitled to vote together with the Common Stock in respect of any merger,
consolidation, sale of all or substantially all of the Company's assets,
liquidation, dissolution or winding up.
(v) A "Unit" of Series A Preferred Stock shall mean one
one-hundredth of a share of Series A Preferred Stock.
ARTICLE II - THE RIGHTS
II.1 SUMMARY OF RIGHTS. As soon as practicable after the date hereof, the
Company will mail to each holder of record of Common Stock as of the Record
Time, at such holder's address as shown by the records of the Company, a copy of
a Summary of Stockholder Protection Agreement in substantially the form attached
as EXHIBIT D.
II.2 LEGEND ON STOCK CERTIFICATES. Certificates for the Common Stock
issued after the Record Time but prior to the close of business on the
Separation Time shall evidence one Right for each share of Common Stock
represented thereby and shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
Until the earlier of the Separation Time or the Expiration Time (as such
terms are defined in the Stockholder Protection Agreement referred to
below), this certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Stockholder Protection Agreement, dated
as of October __, 1997 as amended, supplemented or otherwise modified from
time to time, (the "Stockholder Protection Agreement"), between American
Medical Providers, Inc. (the "Company") and __________________________ ,
the terms of which are hereby incorporated herein by reference and a copy
of which is on file at the principal executive offices of the Company.
Under certain circumstances, as set forth in the Stockholder Protection
Agreement, such Rights may expire, may become void (if they are
"Beneficially Owned" by an "Acquiring Person" or an "Affiliate" or
"Associate" thereof, as such terms are defined in the Stockholder
Protection Agreement, or a transferee of any of the foregoing) or may be
evidenced by separate certificates and may no longer be evidenced by this
certificate. The Company will mail or arrange for the mailing of a copy of
the Stockholder Protection Agreement to the holder of this certificate
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<PAGE>
without charge within five days after the receipt of a written request
therefor.
Notwithstanding the absence of the foregoing legend, certificates representing
shares of Common Stock that are issued and outstanding at the Record Time shall
evidence one Right for each share of the Common Stock evidenced thereby.
II.3 EXERCISE PRICE; EXERCISE OF RIGHTS; DETACHMENT OF RIGHTS.
(a) Subject to the terms and conditions of this Agreement, after the
Separation Time, each Right will entitle the holder thereof to receive, upon the
exercise thereof and payment of the Exercise Price, that number of Units of
Series A Preferred Stock which equals the quotient obtained by dividing the
Exercise Price by fifty percent (50%) of the Market Price per share of Common
Stock at the Separation Time, which number and type of securities are subject to
adjustment as provided in Section 2.12 hereof and in Section 2.4 hereof. The
Company shall calculate the Exercise Price and provide the Rights Agent with
notice of such Exercise Price immediately after the Separation Time.
(b) Until the Separation Time, (i) no Right may be exercised and
(ii) each Right will be evidenced by the certificate for the associated share of
Common Stock (together, in the case of certificates issued prior to the Record
Time, with the letter or other communication mailed to each holder of record of
Common Stock pursuant to Section 2.1 hereof) and will be transferable and/or
convertible only together with, and will be transferred by a transfer or a
conversion of, such associated share (whether with or without such letter or
other communication)
(c) After the Separation Time and prior to the Expiration Time, and
subject to the provisions of clause (g) and the second paragraph of clause (h)
of this Section 2.3, the Rights (i) may be exercised and (ii) will be
transferable independently of the Common Stock. As soon as practicable following
the Separation Time, the Rights Agent will mail to each holder of record of
Common Stock as of the Separation Time (other than a holder known by the Rights
Agent to be an Acquiring Person or an Affiliate or Associate thereof), at such
holder's address as shown by the records of the Company (the Company hereby
agreeing to furnish copies of such records to the Rights Agent for this
purpose), (x) a certificate (a "Rights Certificate") in substantially the form
of EXHIBIT C hereto appropriately completed, representing the number of Rights
held by such holder at the Separation Time and having such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange or quotation system on which the Rights may
from time to time be listed or traded, or to conform to usage, and (y) a
disclosure statement describing the Rights.
(d) Subject to the provisions of clause (g) and the second paragraph
of clause (h) of this Section 2.3, Rights may be exercised on any Business Day
after the Separation Time and prior to the Expiration Time by submitting to the
Rights Agent the Rights Certificate evidencing such Rights with an Election to
Purchase (an "Election to Purchase") and certificate substantially in
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<PAGE>
the form attached to the Rights Certificate duly completed, accompanied by
payment of the Exercise Price multiplied by the number of Rights being exercised
and a sum sufficient to cover any transfer tax or charge that may be payable in
respect of any transfer involved in the transfer or delivery of Rights
Certificates or the issuance or delivery of certificates for Series A Preferred
Stock or depositary receipts (or both) in a name other than that of the holder
of the Rights being exercised. Payment of the Exercise Price for the Units
purchased upon the exercise of the Rights hereunder shall be made by delivery to
the Company of (i) money order or check to the order of the Company, (ii) Common
Stock, (iii) Rights to purchase Units of the Company's Series A Preferred Stock
or (iv) in such other form as the determined by the Board of Directors of the
Company, in each case in an amount equal to the aggregate Exercise Price of such
Rights. For the purposes of the preceding sentence, (x) Common Stock shall be
valued at its Market Price and (y) Rights to purchase Units of the Company's
Series A Preferred Stock shall be valued at an amount equal to the fair market
value of the Units subject to the Rights (as determined by the Company's Board
of Directors) less the Exercise Price.
(e) Upon receipt of a Rights Certificate, with an Election to
Purchase and certificate duly executed accompanied by payment as set forth in
Section 2.3(d) above, and subject to the provisions of clause (g) and the second
paragraph of clause (h) of this Section 2.3, the Rights Agent will thereupon
promptly (i)(A) requisition from the Company's transfer agents certificates for
the number of shares of stock to be purchased (the Company hereby irrevocably
authorizing its transfer agents to comply with all such requisitions) and (B) if
the Company elects pursuant to Section 4.5 hereof not to issue certificates
representing fractional shares of stock, requisition from the depositary
selected by the Company cash or depositary receipts, as the case may be,
representing the fractional shares of stock to be purchased and (ii) after
receipt of such certificates or depositary receipts, deliver such certificates
or depositary receipts to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder.
(f) If the holder of any Rights shall exercise fewer than all the
Rights evidenced by such holder's Rights Certificate, a new Rights Certificate
evidencing the Rights remaining unexercised will be issued by the Rights Agent
to such holder or to such holder's duly authorized assigns, subject to the
provisions of Section 4.5 hereof.
(g) Anything in this Agreement or in the Rights Certificates to the
contrary notwithstanding, Rights Beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof or any transferee of any of the foregoing cannot
validly be transferred or exercised and shall be for all purposes void.
(h) The Company covenants and agrees that it will (i) cause to be
reserved and kept available until the Expiration Time out of its authorized and
unissued shares of capital stock a number of shares of Series A Preferred Stock
and/or Common Stock or other preferred stock or equity securities of the Company
satisfactory for delivery pursuant to Section 4.2 hereof, sufficient to permit
the exercise in full of all outstanding Rights; (ii) take all such action as may
be necessary to ensure that all shares delivered upon exercise of Rights shall,
at the time of delivery of the
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<PAGE>
certificates for such shares (subject to payment of the Exercise Price) , be
duly and validly authorized, executed, issued and delivered and fully paid and
nonassessable; (iii) take all such action as may be necessary to comply with any
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act") , and the Exchange Act, and the rules and regulations
thereunder, and any other applicable law, rule or regulation, in connection with
the issuance of any shares upon exercise of Rights; (iv) use its best efforts to
cause all shares issued upon exercise of Rights to be listed on a national
securities exchange or traded in the over-the-counter market and quoted on
NASDAQ upon issuance; and (v) pay when due and payable any and all federal and
state transfer taxes and charges that may be payable in respect of the original
issuance or delivery of the Rights Certificates or of any shares issued upon the
exercise of Rights, provided that the Company shall not be required to pay any
transfer tax or charge that may be payable in respect of any transfer involved
in the transfer or delivery of Rights Certificates or the issuance or delivery
of certificates for shares in a name other than that of the holder of the Rights
being transferred or exercised.
The Company may temporarily suspend, at any time, the exercisability of
the Rights for such period of time as may be reasonably necessary to prepare and
file such documents and to perform such acts as are required to ensure
compliance with the Securities Act, the Exchange Act, the rules and regulations
thereunder, the "blue sky" laws of the various states and any other applicable
law, rule or regulation, as provided in clause (iii) above. The Company may also
suspend such exercisability for such period of time as may be reasonably
necessary to permit any registration statement or statements required by the
Securities Act or the Exchange Act or any registration or qualification required
by any other applicable law, rule or regulation, to be effective with respect to
any securities to be issued upon exercise of Rights. Upon any suspension of
exercisability, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be exercisable
in any jurisdiction if the requisite qualification in such jurisdiction shall
not have been obtained or the exercise thereof shall not be permitted under
applicable law.
II.4 ADJUSTMENTS TO EXERCISE PRICE; NUMBER OF RIGHTS; SECURITIES
PURCHASABLE.
(a) If the Company shall at any time after the Record Time and prior
to the Expiration Time (i) declare or pay a dividend on Common Stock payable in
Common Stock (or other capital stock), (ii) subdivide the outstanding Common
Stock or (iii) combine the outstanding Common Stock into a smaller number of
shares of Common Stock, the Exercise Price and number of Rights outstanding, or,
if the payment or effective date therefor shall occur after the Separation Time,
the securities purchasable upon exercise of Rights shall be adjusted in the
manner set forth below. If the Exercise Price and number of Rights are to be
adjusted, (x) the Exercise Price in effect after such adjustment will be equal
to the Exercise Price in effect immediately prior to such adjustment divided by
the number of shares of Common Stock (or other capital stock) (the "Expansion
Factor") that a holder of one share of Common Stock immediately prior to such
dividend, subdivision or combination would hold thereafter as a result thereof
and (y) each Right held prior to such adjustment will become that number of
Rights equal to the Expansion Factor, and the adjusted number of Rights will be
deemed to be distributed among the shares of Common Stock
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with respect to which the original Rights were associated (if they remain
outstanding) and the shares issued in respect of such dividend, subdivision or
combination, so that each such share of Common Stock will have exactly one Right
associated with it. If the securities purchasable upon exercise of Rights are to
be adjusted, the securities purchasable upon exercise of each Right after such
adjustment will be the securities that a holder of the securities purchasable
upon exercise of one Right immediately prior to such dividend, subdivision or
combination would hold immediately thereafter. If after the Record Time and
prior to the Expiration Time the Company shall issue any shares of capital stock
other than Common Stock in a transaction of a type described in the first
sentence of this Section 2.4 (a) or shall issue any Voting Stock in a
reclassification of the Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), shares of such capital stock shall be treated herein
as nearly equivalent to shares of Common Stock as may be practicable and
appropriate under the circumstances and the Company and the Rights Agent agree
to amend this Agreement to effect such treatment.
If the Company shall at any time after the Record Time and prior to the
Separation Time issue any shares of Common Stock otherwise than in a transaction
referred to in the preceding paragraph or in Section 2.4 (b) hereof, each such
share of Common Stock so issued shall automatically have one new Right
associated with it, which Right shall be evidenced by the certificate
representing such share.
(b)(i) If the Company shall at any time after the Record Time and
prior to the Expiration Time (A) declare or pay any dividend on the Series A
Preferred Stock payable in Voting Stock, (B) subdivide the outstanding Series A
Preferred Stock, (C) combine the outstanding Series A Preferred Stock into a
smaller number of shares of Series A Preferred Stock or (D) issue Voting Stock
in a reclassification of the Series A Preferred Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), then, and in each such
event, the number and kind of Units of Series A Preferred Stock or other
securities issuable upon the exercise of a Right on such date shall be
proportionately adjusted so that the holder of any Right exercised on or after
such date shall be entitled to receive, upon the exercise thereof and payment of
the Exercise Price, the aggregate number and kind of Units of Series A Preferred
Stock or other securities or other property, as the case may be, that, if such
Right had been exercised immediately prior to such date and at a time when such
Right was exercisable and the transfer books of the Company were open, such
holder would have owned upon such exercise and would have been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs on or prior to the Separation Time that
would require an adjustment under this Section 2.4(b)(i), the adjustment
provided for in this Section 2.4(b)(i) shall be made prior to giving effect to
Section 2.3(a) or Section 2.12 hereof.
(ii) If the Company shall at any time after the Record Time and
prior to the Expiration Time fix a record date for the making of a distribution
to all holders of Series A Preferred Stock (including any such distribution made
in connection with a consolidation or merger in which the Company is the
surviving corporation) of securities or assets (other than a distribution solely
of Voting Stock for which an adjustment is required under Section 2.4 (b)(i)
hereof or a
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regular quarterly cash dividend), the Exercise Price to be in effect after such
record date shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be equal to the difference of the Market Price per share of Series A
Preferred Stock on such record date minus the fair market value of the portion
of the securities or assets to be so distributed applicable to one share of
Series A Preferred Stock, and the denominator of which shall be equal to such
Market Price per share of Series A Preferred Stock. Such adjustments shall be
made successively whenever such a record date is fixed, and if such a
distribution is not so made, the Exercise Price shall be adjusted to be the
Exercise Price that would then be in effect if such record date had not been
fixed. If the Company fixes a record date for the making of a distribution of
both Voting Stock and other securities or assets (other than a regular quarterly
cash dividend), such that the provisions of Section 2.4(b)(i) and Section
2.4(b)(ii) hereof would otherwise be applicable, then the provisions of each
such section shall be applicable to each such distribution, respectively,
according to the terms of each such section. If an event occurs on or prior to
the Separation Time that would require an adjustment under this Section
2.4(b)(ii), the adjustment provided for in this Section 2.4(b)(ii) shall be made
prior to giving effect to Section 2.3(a) or Section 2.12 hereof.
(c) Each adjustment made pursuant to this Section 2.4 shall be made
as of (i) the record date for the applicable issuance and distribution, in the
case of an adjustment made pursuant to Section 2.4(b) above, and (ii) the
payment or effective date for the applicable dividend, subdivision or
combination, in the case of an adjustment made pursuant to Section 2.4(a) above.
(d) Each adjustment to the Exercise Price made pursuant to this
Section 2.4 shall be calculated to the nearest cent. Whenever an adjustment to
the Exercise Price is made pursuant to this Section 2.4, the Company shall (i)
promptly prepare a certificate setting forth such adjustment and a brief
statement of the facts accounting for such adjustment, (ii) promptly file with
the Rights Agent and with the transfer agent for the Series A Preferred Stock,
if any, and the transfer agent for the Common Stock, a copy of such certificate
and (iii) mail a brief summary thereof to each holder of Rights.
(e) Irrespective of any adjustment or change in the securities
purchasable upon exercise of the Rights, the Rights Certificates theretofore and
thereafter issued may continue to express the securities so purchasable that
were expressed in the initial Rights Certificates issued hereunder.
II.5 DATE ON WHICH EXERCISE IS EFFECTIVE. Each person in whose name any
certificates for shares are issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of the shares represented
thereby on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Exercise Price for such Rights (and any applicable taxes and other governmental
charges payable by the exercising holder hereunder) was made; provided, however,
that if the date of such surrender and payment is a date upon which the stock
transfer books of the Company are closed, such person shall be deemed to have
become the record holder of such shares on, and such certificate shall be dated,
the next succeeding Business Day on which the stock transfer books of
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the Company are open.
II.6 EXECUTION, AUTHENTICATION, DELIVERY AND DATING OF RIGHTS
CERTIFICATES.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or one of its Vice Presidents,
under its corporate seal reproduced thereon attested by its Secretary or one of
its Assistant Secretaries. The signature of any of these officers on the Rights
certificates may be manual or facsimile.
Rights Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the countersignature and delivery of such Rights
Certificates.
Promptly after the Company learns of the Separation Time, the Company will
notify the Rights Agent of such Separation Time and will deliver Rights
Certificates executed by the Company to the Rights Agent for countersignature,
and the Rights Agent shall manually countersign and deliver such Rights
Certificates to the holders of the Rights pursuant to Section 2.3(c) hereof. No
Rights Certificate shall be valid for any purpose until manually countersigned
by the Rights Agent.
(b) Each Rights Certificate shall be dated the date of
countersignature thereof.
II.7 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
(a) The Company will cause to be kept a register (the "Rights
Register") in which, subject to such reasonable regulations as it may prescribe,
the Company will provide for the registration and transfer of Rights. The Rights
Agent is hereby appointed "Rights Registrar" for the purpose of maintaining the
Rights Register for the Company and registering Rights and transfers of Rights
as herein provided. If the Rights Agent shall cease to be the Rights Registrar,
the Rights Agent will have the right to examine the Rights Register at all
reasonable times.
After the Separation Time and prior to the Expiration Time, upon surrender
for registration of transfer or exchange of any Rights Certificate, and subject
to the provisions of Sections 2.3(g) and 2.7(c) hereof, the Company will
execute, and the Rights Agent will countersign and deliver, in the name of the
holder or the designated transferee or transferees, as required pursuant to the
holder's instructions, one or more new Rights Certificates evidencing the same
aggregate number of Rights as did the Rights Certificate so surrendered.
(b) Subject to the provisions of Section 2.3(g) hereof, all Rights
issued upon any registration of transfer or exchange of Rights Certificates
shall be the valid obligations of the Company, and such Rights shall be entitled
to the same benefits under this Agreement as the Rights surrendered upon such
registration of transfer or exchange.
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(c) Every Rights Certificate surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company or the Rights Agent,
as the case may be, duly executed by the holder thereof or such holder's
attorney-in-fact duly authorized in writing. As a condition to the issuance of
any new Rights Certificate under this Section 2.7, the Company may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto.
II.8 MUTILATED, DESTROYED, LOST AND STOLEN RIGHTS CERTIFICATES.
(a) If any mutilated Rights Certificate is surrendered to the Rights
Agent prior to the Expiration Time, the Company shall execute and the Rights
Agent shall countersign and deliver in exchange therefor a new Rights
Certificate evidencing the same number of Rights as did the Rights Certificate
so surrendered.
(b) If there shall be delivered to the Company and the Rights Agent
prior to the Expiration Time (i) evidence to their satisfaction of the
destruction, loss or theft of any Rights Certificate and (ii) such security or
indemnity as may be required by them to save each of them and any of their
agents harmless, then, in the absence of notice to the Company or the Rights
Agent that such Rights Certificate has been acquired by a bona fide purchaser,
the Company shall execute and upon its request the Rights Agent shall
countersign and deliver, in lieu of any such destroyed, lost or stolen Rights
Certificate, a new Rights Certificate evidencing the same number of Rights as
did the Rights Certificate so destroyed, lost or stolen.
(c) As a condition to the issuance of any new Rights Certificate
under this Section 2.8, the Company may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Rights
Agent) connected therewith.
(d) Subject to the provisions of section 2.3(g) hereof, every new
Rights Certificate issued pursuant to this Section 2.8 in lieu of any destroyed,
lost or stolen Rights Certificate shall evidence an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Rights Certificate shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Agreement equally and proportionately
with any and all other Rights duly issued hereunder.
II.9 PERSONS DEEMED OWNERS. Prior to due presentment of a Rights
Certificate (or, prior to the Separation Time, the associated Common Stock
certificate) for registration of transfer, the Company, the Rights Agent and any
agent of the Company or the Rights Agent may deem and treat the person in whose
name such Rights Certificate (or, prior to the Separation Time, such Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby for all purposes whatsoever. As used in this Agreement, unless
the context otherwise requires, the term "holder" of any Right shall mean the
registered holder of such Rights (or, prior to the Separation Time, the
associated shares of Common Stock).
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II.10 DELIVERY AND CANCELLATION OF CERTIFICATES. All Rights Certificates
surrendered upon exercise or for redemption, registration or transfer or
exchange shall, if surrendered to any person other than the Rights Agent, be
delivered to the Rights Agent and, in any case, shall be promptly cancelled by
the Rights Agent. The Company may at any time deliver to the Rights Agent for
cancellation any Rights Certificates previously countersigned and delivered
hereunder that the Company may have acquired in any manner whatsoever, and all
Rights Certificates so delivered shall be promptly cancelled by the Rights
Agent. No Rights Certificates shall be countersigned in lieu of or in exchange
for any Rights Certificates cancelled as provided in this Section 2. 10, except
as expressly permitted by this Agreement. The Rights Agent shall destroy all
cancelled Rights Certificates and deliver a certificate of destruction to the
Company.
II.11 AGREEMENTS OF RIGHTS HOLDERS. Every holder of Rights by accepting
such Rights consents and agrees with the Company and the Rights Agent and with
every other holder of Rights that:
(a) prior to the Separation Time, each Right will be transferable
only together with, and will be transferred by a transfer, conversion or
exchange of, the associated share of Common Stock;
(b) after the Separation Time, the Rights Certificates will be
transferable only on the Rights Register as provided herein;
(c) each Right Beneficially Owned by an Acquiring Person or an
Affiliate or Associate thereof or any transferee of any of the foregoing cannot
validly be transferred or exercised and shall for all purposes be void; to
effectuate the foregoing, each Rights Certificate shall be transferable or
exercisable only if the holder so transferring or exercising shall certify, for
the benefit of all holders of Rights, that such holder is not an Acquiring
Person or an Affiliate or Associate of an Acquiring Person and that, to the best
of such holder's knowledge, no Rights evidenced by such Rights Certificates have
ever been Beneficially Owned by an Acquiring Person or an Affiliate or Associate
of an Acquiring Person;
(d) prior to due presentment of a Rights Certificate (or, prior to
the Separation Time, the associated Common Stock certificate) for registration
of transfer, the Company, the Rights Agent and any agent of the Company or the
Rights Agent may deem and treat the person in whose name the Rights Certificate
(or, prior to the Separation Time, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on such Rights
Certificate or the associated Common Stock certificate made by anyone other than
the Company or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent shall be affected by any notice to the contrary;
and
(e) any shares of Series B Common Stock presented for conversion
into Class A Common Stock (in accordance with the terms and specifications
governing such a conversion) (i) after the Record Time and prior to the earlier
of the Separation Time or the Expiration Time, shall
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automatically be deemed to include the Rights associated with such shares of
Series B Common Stock or (ii) after the earlier of the Separation Time or the
Expiration Time, shall not include the Rights that were, prior to the Separation
Time, associated with such shares of Series B Common Stock; and
(f) any shares of Class A Common Stock issued upon the conversion of
Series B Common Stock (in accordance with the terms and specifications governing
such a conversion) (i) after the Record Time and prior to the earlier of the
Separation Time or the Expiration Time, shall be issued with one associated
Right for each share of Class A Common Stock so issued or (ii) after the earlier
of the Separation Time or the Expiration Time, shall be issued without any
Rights associated with the shares of Class A Common Stock so issued; and
(g) after the Record Time and prior to the earlier of the Separation
Time and the Expiration Time, the Rights associated with any share of Series B
Common Stock surrendered for the purposes of conversion into Class A Common
Stock (in accordance with the terms and specifications governing such a
conversion) shall automatically terminate, on the date of such a conversion; and
(h) this Agreement may be supplemented or amended from time to time
pursuant to Section 4.4 or the last sentence of the first paragraph of Section
2.4(a) hereof.
II.12 CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER. Subject to the terms and conditions of this Agreement, if after the
Separation Time, directly or indirectly, (a) the Company shall consolidate with,
or merge with and into, any other Person, (b) any Person shall consolidate with
the Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the Common Stock shall be changed into or exchanged for
stock or other securities of any Person (including the Company) or cash or any
other property, or (c) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating fifty percent (50%) or more of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any Person other than the Company or one or more of its wholly-owned
Subsidiaries, then, and in each such case, proper provision shall be made so
that (i) each holder of a Right (except as otherwise provided herein) shall
thereafter have the right to receive, upon the exercise thereof at any time
prior to the Expiration Time and payment of the then current Exercise Price, in
accordance with the terms of this Agreement, such number of validly authorized
and issued, fully paid and nonassessable shares of common stock of such Person
or of that Affiliate or Associate of such Person which has the greatest
aggregate market value, determined in the same manner as the Market Price per
share of Common Stock is determined pursuant to Section 1.1(1) hereof, of
outstanding shares of publicly traded common stock (other than common stock held
by its Affiliates, officers, directors or employee benefit plans, or Associates
of the foregoing) as shall be equal to the result obtained by dividing the then
current Exercise Price by fifty percent (50%) of the Market Price per share of
Common Stock on the date of consummation of such consolidation, merger, sale or
transfer of a share of the common stock that the holder of a Right shall have
the right to receive; (ii) the issuer of
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such common stock shall thereafter be liable for, and shall assume, by virtue of
such consolidation, merger, sale or transfer, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such issuer; and (iv) such issuer shall take
such steps (including, but not limited to, the reservation of a sufficient
number of shares of its common stock) in connection with such consummation as
may be necessary to ensure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to the shares of common
stock thereafter deliverable upon the exercise of the Rights. The Company shall
not enter into any transaction of the kind referred to in this Section 2.12 if
at the time of such transaction there are any rights, warrants, instruments or
securities outstanding or any agreements or arrangements that, as a result of
the consummation of such transaction, would eliminate or substantially diminish
the benefits intended to be afforded by the Rights. The Company shall not
consummate any such consolidation, merger, sale or transfer unless such issuer
shall have a sufficient number of authorized shares of its common stock that
have not been issued or reserved for issuance to permit the exercise in full of
the Rights in accordance with this Section 2.12 and unless prior thereto the
Company and such issuer shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth in this Section 2.12
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in this Section 2.12, such
issuer will (i) prepare and file a registration statement under the Securities
Act with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the Expiration Time; and (ii) will
deliver to holders of the Rights historical financial statements for such issuer
and each of its Affiliates that comply in all respects with the requirements for
registration on Form 10 under the Exchange Act. The provisions of this Section
2.12 shall similarly apply to successive mergers or consolidations or sales or
other transfers.
II.13 CERTIFICATE OF ADJUSTED EXERCISE PRICE OR NUMBER OF SHARES. Whenever
an adjustment is made as provided in Sections 2.4 and 2.12 hereof, the Company
shall promptly (a) prepare a certificate setting forth such adjustment, and a
brief statement of the facts accounting for such adjustment, (b) file with the
Rights Agent and with the transfer agent for the Series A Preferred Stock, if
any, and the transfer agent for the Common Stock a copy of such certificate and
(c) mail a brief summary thereof to each holder of a Rights Certificate (or, if
prior to the Separation Time, to each holder of a certificate representing
shares of Common Stock) in accordance with Section 4.10 hereof. Notwithstanding
the foregoing sentence, the failure of the Company to make such certification or
to give such notice shall not affect the validity or the force and effect of
such adjustment. Any adjustment to be made pursuant to Sections 2.4 and 2.12
hereof shall be effective as of the date of the event giving rise to such
adjustment. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained and shall not be deemed to
have knowledge of any adjustment unless and until it shall have received such
certificate.
ARTICLE III - THE RIGHTS AGENT
III.1 GENERAL.
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(a) The Company hereby appoints the Rights Agent to act as agent for
the Company in accordance with the terms and conditions hereof, and the Rights
Agent hereby accepts such appointment. The Company agrees to pay to the Rights
Agent reasonable compensation for all services rendered by it hereunder and,
from time to time, on demand of the Rights Agent, its reasonable expenses and
counsel fees and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any certificate for
Series A Preferred Stock, Rights Certificate, certificate for or other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons, or otherwise upon the advice of counsel as set
forth in Section 3.3 hereof.
III.2 MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent is a party, or any corporation succeeding to the
stockholder services business of the Rights Agent or any successor Rights Agent,
will be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that such corporation would be eligible for appointment
as a successor Rights Agent under the provisions of Section 3.4 hereof. In case
at the time such successor Rights Agent succeeds to the agency created by this
Agreement any of the Rights Certificates have been countersigned but not
delivered, any such successor Rights Agent may adopt the countersignature of the
predecessor Rights Agent and deliver such Rights Certificates so countersigned;
and in case at that time any of the Rights Certificates have not been
countersigned, any successor Rights Agent may countersign such Rights
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Rights Certificates
will have the full force provided in the Rights Certificates and in this
Agreement.
(b) In case at any time the name of the Rights Agent is changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been
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countersigned, the Rights Agent may countersign such Rights Certificates either
in its prior name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
III.3 DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Rights Certificates, by their
acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel will be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent deems it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by a person believed by the Rights Agent to
be the Chairman of the Board, the President or any Vice President and by the
Chief Financial Officer or the Secretary or any Assistant Secretary of the
Company and delivered to the Rights Agent; and such certificate will be full
authorization to the Rights Agent for any action taken or omitted by it in good
faith under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent will be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent will not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the
certificates for Series A Preferred Stock or the Rights Certificates (except its
countersignature thereof) and will not be required to verify any of the
foregoing, and all such statements and recitals are and will be deemed to have
been made by the Company only.
(e) The Rights Agent will not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due authorization, execution and delivery hereof by the Rights Agent) or in
respect of the validity or execution of any certificate for Series A Preferred
Stock or Rights Certificate (except its countersignature thereof); nor will it
be responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Rights Certificate; nor will it be
responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 2.3(g) hereof) or any adjustment
required under the provisions of Section 2.4 hereof or responsible for the
manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights after receipt of the certificate contemplated by
Section 2.4 describing any such adjustment); nor will it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation
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of any shares of Series A Preferred Stock to be issued pursuant to this
Agreement or any Rights or as to whether any shares of Series A Preferred Stock
will, when issued, be duly and validly authorized, executed, issued and
delivered and fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged and delivered all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person believed by the Rights Agent to be the Chairman of the Board, the
President or any Vice President or the Chief Financial Officer or the Secretary,
any Assistant Secretary of the Company or any other person designated in writing
by such persons, and to apply to such persons for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
omitted by it in good faith in accordance with instructions of any such person.
Any application by the Rights Agent for written instructions from the Company
may, at the option of the Rights Agent, set forth in writing any action proposed
to be taken or omitted by the Rights Agent with respect to its duties or
obligations under this Agreement and the date on and/or after which such action
shall be taken or omitted and the Rights Agent shall not be liable for any
action taken or omitted in accordance with a proposal included in any such
application on or after the date specified therein (which date shall not be less
than ten business days after the date any such officer actually receives such
application, unless any such officer shall have consented in writing to any
earlier date) unless, prior to taking or omitting any such action, the Rights
Agent has received written instructions in response to such application
specifying the action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in Series A Preferred Stock,
Rights or other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act fully and freely as though it were not
Rights Agent under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent will not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) CHANGE OF RIGHTS AGENT. The Rights Agent may resign and be
discharged from its duties under this Agreement upon 90 days,' prior notice (or
such lesser notice as is acceptable to the Company) in writing mailed to the
Company and to each transfer agent of the Series A Preferred Stock and the
Common Stock, if any, by registered or certified mail, and at the
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expense of the Company to the holders of the Rights in accordance with Section
4.10. The Company may remove the Rights Agent upon 30 days' prior notice in
writing, mailed to the Rights Agent and to each transfer agent of the Series A
Preferred Stock and the Common Stock, if any, by registered or certified mail,
and to the holders of the Rights in accordance with Section 4.10. If the Rights
Agent should resign or be removed or otherwise become incapable of acting, the
Company will appoint a successor to the Rights Agent. If the Company fails to
make such appointment within a period of 30 days after such removal or after it
has been notified in writing of such resignation or incapacity by the resigning
or incapacitated Rights Agent or by the holder of any Rights (which holder
shall, with such notice, submit such holder's Rights Certificate for inspection
by the Company), then the holder of any Rights may apply to any court of
competent jurisdiction for the appointment of a now Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
the State of California, New Jersey or New York, in good standing, having its
principal office in the State of California, New Jersey or New York, that is
authorized under such laws to exercise the powers of the Rights Agent
contemplated by this Agreement and is subject to supervision or examination by
federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50,000,000. After
appointment, the successor Rights Agent will be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any further assurance, conveyance, act
or deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company will file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Series A Preferred Stock
and the Common Stock, if any, and mail a notice thereof in writing to the
holders of the Rights in accordance with Section 4.10. Failure to give any
notice provided for in this Section 3.4, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
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ARTICLE IV - MISCELLANEOUS
IV.1 REDEMPTION, TERMINATION AND EXCHANGE.
(a) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of the Separation Time or the Expiration Time redeem
all but not less than all of the then outstanding Rights at a redemption price
of $.01 per Right, as such amount may be appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof (the "Redemption Price"). The Company may, at its option, pay the
Redemption Price in cash, shares of Common Stock (based on the Market Price at
the time of redemption) or any other form of consideration deemed appropriate by
the Board of Directors.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent, and without any further action and without any
notice, the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price for each Right so held.
Promptly after the action of the Board of Directors ordering the redemption of
the Rights, the Company shall give notice of such redemption to the Rights Agent
and the holders of the then outstanding Rights. Any notice that is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
such notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made.
(c)(i) The Board of Directors of the Company may, at its option, at
any time after any Person becomes an Acquiring Person, exchange all or part of
the then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 2.3(g) and the second
paragraph of Section 2.3(h) hereof) for shares of Common Stock at an exchange
ratio of which equals the quotient obtained by dividing the Exercise Price by
the Market Price per share of Common Stock per Right, appropriately adjusted
pursuant to Section 2.4 hereof (such exchange ratio being hereinafter referred
to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of
Directors shall not be empowered to effect such exchange at any time after any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any such Subsidiary, or any entity holding Common
Stock for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or
more of the Common Stock then outstanding.
(ii) Immediately upon the action of the Board of Directors of
the Company ordering the exchange of any Rights pursuant to paragraph (c)(i) of
this Section 4.1 and without any further action and without any notice, the
right to exercise such Rights shall terminate and the only right thereafter of a
holder of such Rights shall be to receive that number of shares of Common Stock
equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio. The Company shall promptly give public notice of any such
exchange; PROVIDED, HOWEVER, that (i) the failure to give, or any defect in,
such notice shall not affect the validity of such exchange. The Company promptly
shall mail a notice of any such exchange to all of the holders of
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such Rights at their last addresses as they appear upon the registry books of
the Rights Agent. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of Common Stock for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 2.3(g) and the second paragraph of Section 2.3(h)
hereof) hold by each holder of Rights.
(iii) In the event that there shall not be sufficient Common
Stock issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 4.1(c), the
Company shall take all such action as may be necessary to authorize additional
shares of Common Stock for issuance upon exchange of the Rights. In the event
the Company shall, after good faith effort, be unable to take all such action as
may be necessary to authorize such additional Common Stock, the Company shall
substitute, for each share of Common Stock that would otherwise be issuable upon
exchange of a Right, a number of shares of Series A Preferred Stock or fraction
thereof having a current market price per share equal to the Market Price per
share of one share of Common Stock as of the date of issuance of such shares of
Preferred Stock or fraction thereof.
(iv) The Company shall not be required to issue fractions of a
share of Common Stock or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of such fractional shares, there shall be paid
to the registered holders of the Rights with regard to which such fractional
shares of Common Stock would otherwise be issuable, either (i) evidence of such
fractional shares by depository receipts, in accordance with the terms of
Section 4.5 hereof or (ii) an amount in cash equal to the same fraction of the
Market Price of a whole share of Common Stock based upon the date of exchange
pursuant to this Section 4.1(c), subject to the terms of Section 4.6 hereof.
IV.2 PROVISION IN EVENT OF INSUFFICIENT SHARES OF SERIES A PREFERRED
STOCK. If there shall not be sufficient authorized but unissued shares or
reserved shares of Series A Preferred Stock of the Company to permit the
exercise in full of the Rights in accordance with the terms hereof, the Company,
with respect to each Right being exercised and to the extent necessary, may make
adequate provision to substitute for the delivery of Units or shares or
fractions of shares of Series A Preferred Stock (i) cash, (ii) Common Stock, or
other preferred stock or equity securities of the Company, (iii) debt securities
of the Company, (iv) other assets or (v) any combination of the foregoing,
having an aggregate value equal to the Market Price of the Units of Series A
Preferred Stock that would have been purchasable upon exercise of such Right in
the absence of this Section 4.2, or may reduce the Exercise Price.
IV.3 ISSUANCE OF NEW RIGHTS CERTIFICATES. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by its Board of Directors to reflect any adjustment or change in
the number or kind or class of shares of stock purchasable upon
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exercise of Rights made in accordance with the provisions of this Agreement.
IV.4 SUPPLEMENTS AND AMENDMENTS. Prior to the Separation Time, the Company
and the Rights Agent, upon receipt of the certificate described hereinbelow,
shall, if the Company so directs, supplement or amend any provision of this
Agreement in any respect without the approval of any holders of Rights. From and
after the Separation Time, the Company and Rights Agent, upon receipt of the
certificate described hereinbelow, shall, if the Company so directs, supplement
or amend this Agreement without the approval of any holders of Rights (i) to
cure any ambiguity, (ii) to correct or supplement any provision contained herein
that may be defective or inconsistent with any other provisions herein, (iii) to
shorten or lengthen any time period hereunder, other than the time period during
which the Rights may be exercised, or (iv) to change or supplement the
provisions hereunder in any manner that the Company may deem necessary or
desirable and which shall not materially and adversely affect the interests of
the holders of Rights (other than an Acquiring Person or an Affiliate or
Associate of an Acquiring Person). Upon delivery of a certificate from an
appropriate officer of the Company stating that the proposed supplement or
amendment is in compliance with the terms of this Section 4.4, the Rights Agent
shall execute such supplement or amendment. Prior to the Separation Time, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock.
IV.5 FRACTIONAL SHARES. If the Company elects not to issue certificates
representing fractional shares of Series A Preferred Stock or other securities
(pursuant to Section 4.2 hereof) upon exercise of Rights, the Company may, in
lieu thereof, either (i) evidence such fractional shares by depositary receipts
issued pursuant to an appropriate agreement between the Company and a depositary
selected by it, provided that such agreement shall provide that the holders of
the depositary receipts shall have all of the rights, privileges and preferences
to which they are entitled as Beneficial Owners of such stock, or (ii) subject
to Section 4.6 hereof, pay an amount in cash equal to the same fraction of the
Market Price of a Unit of Series A Preferred Stock.
IV.6 TRANSACTIONS AFTER THE SEPARATION TIME. After the Separation Time and
prior to the Expiration Time, the Company shall not engage in any transaction
not in the ordinary course of business that would eliminate or otherwise
diminish in any material respect the benefits intended to be afforded by this
Agreement to the holders of Rights (other than Acquiring Persons or Affiliates
or Associates thereof, or Persons who may become any of the foregoing). Without
limiting the foregoing, after the Separation Time and prior to the Expiration
Time, the Company shall not (i) sell or issue to an Acquiring Person or any
Affiliate or Associate thereof, any rights, options, warrants or convertible
securities on terms similar to, or that materially adversely affect the value
of, the Rights, or (ii) sell or issue to an Acquiring Person or any Affiliate or
Associate thereof, Series A Preferred Stock, Common Stock or shares of any other
class of capital stock if such sale or issue is intended to or would materially
adversely affect the value of the Rights.
IV.7 RIGHTS OF ACTION. Subject to the terms of this Agreement, rights of
action in respect of this Agreement, other than rights of action vested solely
in the Rights Agent, are vested in the respective holders of the Rights (other
than Acquiring Persons or Affiliates or Associates thereof); and any holder of
any Rights (other than Acquiring Persons or Affiliates or Associates thereof),
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<PAGE>
without the consent of the Rights Agent or of the holder of any other Rights,
may, on such holder's own behalf and for such holder's own benefit and the
benefit of other holders of Rights, enforce, and may institute and maintain any
suit, action or proceeding against the Company to enforce, or otherwise act in
respect of, such holder's right to exercise such holder's Rights in the manner
provided in such holder's Rights Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.
IV.8 HOLDER OF RIGHTS NOT DEEMED A STOCKHOLDER. No holder, as such, of any
Right shall be entitled to vote, receive dividends or be deemed for any purpose
the holder of Series A Preferred Stock or any other securities that may at any
time be issuable on the exercise of such Rights, nor shall anything contained
herein or in any Rights Certificate be construed to confer upon the holder of
any Rights, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 4.9 hereof), or to receive dividends
or subscription rights, or otherwise, until such Rights shall have been
exercised in accordance with the provisions hereof.
IV.9 NOTICE OF PROPOSED ACTIONS. If the Company shall propose after the
Separation Time and prior to the Expiration Time to effect a liquidation, a
consolidation or merger with or a sale of all or substantially all of its assets
to any other Person or a reclassification of the Series A Preferred Stock, then,
in each such case, the Company shall give to each holder of a Right, in
accordance with Section 4.10 hereof, a notice of such proposed action, which
shall specify the date on which such action is to take place, and such notice
shall be so given at least 20 Business Days prior to the date of the taking of
such proposed action.
IV.10 NOTICES. Notices or demands authorized or required by this Agreement
to be given or made by the Rights Agent or by the holder of any Rights to or on
the Company shall be sufficiently given or made if delivered or sent by first
class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) an follows:
American Medical Providers, Inc.
3555 Timmons Lane, Suite 1550
Houston, TX 77027
Attention: Chief Financial Officer
Any notice or demand authorized or required by this Agreement to be given or
made by the Company or by the holder of any Rights to or on the Rights Agent
shall be sufficiently given or made if delivered or sent by first class mail,
postage prepaid, addressed (until another address is filed in writing with the
Company) as follows:
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Attention:
Notices or demands authorized or required by this Agreement to be given or made
by the Company or the Rights Agent to or on the holder of any Rights shall be
sufficiently given or made if delivered or sent by first class mail, postage
prepaid, addressed to such holder at the address of such holder as it appears
upon the Rights Register or, prior to the Separation Time, on the registry books
of the transfer agent for the Common Stock. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice.
IV.11 COSTS OF ENFORCEMENT. The Company agrees that if the Company or any
other Person the securities of which are purchasable upon exercise of Rights
fails to fulfill any of its obligations pursuant to this Agreement, then the
Company or such Person will reimburse the holder of any Rights for the costs and
expenses (including legal fees) incurred by such holder in actions to enforce
such holder's rights pursuant to any Rights or this Agreement.
IV.12 SUCCESSORS. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
IV.13 BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
holders of the Rights any legal or equitable right, remedy or claim under this
Agreement, and this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the holders of the Rights.
IV.14 DESCRIPTIVE HEADINGS. Descriptive headings appear herein for
convenience of reference only and shall not control or affect the meaning or
construction of any of the provisions hereof.
IV.15 GOVERNING LAW. This Agreement and each Right issued hereunder shall
be deemed to be a contract made under the laws of the State of Texas and for all
purposes shall be governed by, and construed in accordance with, the laws of
such state without regard to the laws of such state as to choice or conflict of
laws.
IV.16 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
IV.17 SEVERABILITY. If any term or provision hereof or the application
thereof to any circumstance shall, in any jurisdiction and to any extent, be
invalid or unenforceable, such term or
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provision shall be ineffective as to such jurisdiction to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining terms and provisions hereof or the application of such terms or
provision to circumstances other than those as to which it is held invalid or
unenforceable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested as of the date first above set forth.
AMERICAN MEDICAL PROVIDERS, INC.
___________________________________________
By: Jack McCrary
Title: Chairman, President and Chief
Executive Officer
Attest:
______________________________________
By: Wayne A. Bertsch
Title:Senior Vice President and Chief
Financial Officer
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_________________________________________
By:
Title:
Witness:
___________________________________
By:________________________________
________________________________
Signature page of the Stockholder
Protection Agreement, dated as of October
___ , 1997, between American Medical
Providers, Inc. and ______________________
as Rights Agent
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<PAGE>
Exhibit A
FORM OF
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
of
AMERICAN MEDICAL PROVIDERS, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
We, Jack N. McCrary, Chairman, President and Chief Executive Officer,
and Wayne A. Bertsch, Senior Vice President and Chief Financial Officer, of
American Medical Providers, Inc. a corporation organized and existing under
the General Corporation Law of the State of Delaware, in accordance with
provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the said Corporation, the said Board of
Directors on October , 1997, adopted the following resolution creating a series
of shares of Preferred Stock designated as Series A Junior Participating
Preferred Stock:
NOW THEREFORE BE IT RESOLVED, that a series of the Company's Preferred
Stock consisting of shares of Preferred Stock be, and hereby is,
designated as Series A Junior Participating Preferred Stock, par value
$0.001 per share (the "Series A Preferred"), and that the Series A
Preferred shall have the designations, powers, preferences, rights and
qualifications, limitations and restrictions substantially as set forth in
the Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock (the "Series A Certificate") attached hereto
as EXHIBIT .
That said Certificate states that the Board of Directors does hereby fix
and herein state and express such designations, powers, preferences and relative
and other special rights and qualifications, limitations and restrictions
thereof as follows (all terms used herein which are defined in the Certificate
of Incorporation shall be deemed to have the meanings provided therein).
Section (a) DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series A Junior Participating Preferred Stock" (the "Series A
Preferred Stock") and the number of shares constituting such series shall be
_________________. Such number of shares of Series A Preferred Stock may be
increased or decreased by resolution of the Board of Directors; provided, that
no decrease shall reduce the number of shares of Series A Preferred Stock to a
number less than the number of shares of Series A Preferred Stock then
outstanding plus the number of shares of Series A Preferred Stock reserved for
issuance upon the exercise of outstanding options, rights or warrants
<PAGE>
or upon the conversion of any outstanding securities issued by the Corporation
convertible or exercisable into Series A Preferred Stock.
Section (b) DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of any shares
of any series of preferred stock ranking prior and superior to the shares of
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
dividends payable in cash in an amount per share (rounded to the nearest cent),
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash dividends or other
distributions (other than a dividend payable in shares of the Class A Common
Stock, par value $0.001 per share, of the Corporation (the "Class A Common
Stock") or the Class B Common Stock, par value $0.001 per share of the
Corporation (the "Class B Common Stock") or a subdivision of the outstanding
shares of Class A Common Stock or Class B Common Stock (collectively, the
"Common Stock") (by reclassification or otherwise)), declared on the Common
Stock since the first issuance of any share or fraction of a share of Series A
Preferred Stock. In the event the Corporation shall at any time after (the
"Rights Declaration Date") (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the amount to which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event under the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the date of issue of such shares of
Series A Preferred Stock. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Preferred Stock in an amount less than
the total amount of such dividends shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
Section (c) VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A
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Preferred Stock shall entitle the holder thereof to 100 votes on all matters
submitted to a vote of the stockholders of the Corporation. In the event the
Corporation shall at any time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each case the number of votes per share to
which holders of shares of Series A Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares
of Series A Preferred Stock and the holders of shares of Common Stock shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
(C) Except as otherwise provided herein or provided by law, the holders of
shares of Series A Preferred Stock shall have no special voting rights and their
consent shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any corporate
action.
Section (d) CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other distribution on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid or distributions made ratably on the Series A
Preferred Stock and all such stock ranking on a parity with respect to the
particular dividend or distribution in proportion to the total amounts to
which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such parity stock in exchange for shares
of any stock of the Corporation ranking junior (both as to dividends and
upon dissolution, liquidation or winding up) to the Series A Preferred
Stock;
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<PAGE>
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up)
with the Series A Preferred Stock, except in accordance with a purchase or
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
Section (e) REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section (f) LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock unless, prior thereto, the holders
of shares of Series A Preferred Stock shall have received $100 per share, plus
an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall be made to the holders
of shares of Series A Preferred Stock unless, prior thereto, the holders of
shares of Common Stock shall have received an amount per share (the "Common
Stock Liquidation Amount') equal to the quotient obtained by dividing (i) the
Series A Liquidation Preference by (ii) 100 (as appropriately adjusted an set
forth in subparagraph C below to reflect such events as stock splits, stock
dividends and recapitalization with respect to the Common Stock) (such number in
clause (ii), the "Adjustment Number"). Following the payment of the full amount
of the Series A Liquidation Preference and the Common Stock Liquidation Amount
in respect of all outstanding shares of Series A Preferred Stock and Common
Stock, respectively, holders of Series A Preferred Stock and holders of shares
of Common Stock shall receive their ratable and proportionate share of remaining
assets to be distributed in the ratio of the Adjustment Number to 1 with respect
to such Preferred Stock and Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other
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series of preferred stock, if any, which rank on a parity with the Series A
Preferred Stock, then such remaining assets shall be distributed ratably to the
holders of the Series A Preferred Stock and the holders of such parity shares in
proportion to their respective liquidation preferences.
(C) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, (iii) combine the
outstanding Common Stock into a smaller number of shares, (iv) reclassify the
Common Stock or (v) effect a recapitalization of the Common Stock, then in each
such case the Adjustment Number in effect immediately prior to such event shall
be adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section (g) CONSOLIDATION, MERGER, ETC. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
Section (h) NO REDEMPTION. The shares of Series A Preferred Stock
shall not be redeemable.
Section (i) RANKING. The Series A Preferred Stock shall rank junior to all
other series of the Corporation's preferred stock, if any, as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise. Nothing in this Certificate shall limit the power of
the Board of Directors to create a new series of preferred stock ranking senior
to the Series A Preferred Stock in any respect.
Section (j) AMENDMENT. The Amended and Restated Certificate of
Incorporation of the Corporation shall not be further amended in any manner
which would materially alter or change the powers, preferences or special rights
of the Series A Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of two-thirds or more of the outstanding shares
of Series A Preferred Stock, voting separately as a class.
-32-
<PAGE>
Section (k) FRACTIONAL SHARES. Series A Preferred Stock may be issued in
fractions of a share, which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and
do affirm the foregoing as true under the penalties of perjury this day of
October, 1997.
__________________________________________
Jack N. McCrary
Chairman, President and Chief Executive
Officer
Attest:
________________________________________
Wayne A. Bertsch, Senior Vice President
and Chief Financial Officer
-33-
EXHIBIT 10.13
REIMBURSEMENT AND ASSUMPTION AGREEMENT
THIS REIMBURSEMENT AND ASSUMPTION AGREEMENT (the "Agreement"), is made,
executed and delivered by and between American Medical Providers, Inc., a
Delaware corporation ("AMP"), and Ankle & Foot Centers of America, LLC, a
Delaware limited liability partnership ("AFC"), with respect to the
reimbursement assumption by AMP of certain of AFC's obligations. By this
instrument, AMP and AFC, for good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), agree as follows:
1. ASSIGNMENT AND ASSUMPTION. AMP shall reimburse certain expenses,
assume certain debt and perform and carry out all of the contracts, obligations
and agreements of AFC all as set forth on Schedule A attached hereto at such
time as AMP has consummated its initial public offering of securities.
2. GENERAL
2.1 FURTHER ASSURANCES. AFC and AMP agree, each at its own expense, to
perform all such further acts and execute and deliver all such further
agreements, instruments and other documents as the other shall reasonably
request to evidence more effectively the reimbursement and assumptions made by
AMP under this Agreement.
2.2 DISCLAIMER. All rights and interests created by this Agreement are
exclusive to the parties to this Agreement, their successors and assigns. No
right, title, interest or cause of action is created for or inures to the
benefit of any other person or entity under this Agreement.
2.3 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given on the date of delivery, if delivered
personally or faxed during normal business hours of the recipient, or three days
after deposit in the U.S. Mail, postage prepaid, if mailed by registered or
certified mail (return receipt requested) as follows:
(a) If to AMP, to:
American Medical Providers, Inc.
3555 Timmons Lane, Suite 1550
Houston, TX 77027
Telephone: (713) 621-5500
Facsimile: (713) 621-4148
(b) If to AFC, to:
Ankle & Foot Centers of America, LLC
3555 Timmons Lane, Suite 1550
Houston, TX 77027
Telephone: (713) 621-5500
Facsimile: (713) 621-4148
2.4 SUCCESSORS IN INTEREST. This Agreement and all the provisions hereof
shall be binding upon, and inure to the benefit of, the successors and assigns
of the parties.
2.5 GOVERNING LAW. This instrument shall be interpreted, construed and
governed according to the laws of the State of Texas.
2.6 COUNTERPARTS. This instrument may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be but one and the same instrument.
2.7 FINAL AGREEMENT THIS INSTRUMENT EMBODIES THE FINAL, ENTIRE AGREEMENT
OF AMP AND AFC WITH RESPECT TO AMP'S REIMBURSEMENT AND ASSUMPTION OF THE ITEMS
LISTED IN SCHEDULE A ATTACHED HERETO AND SUPERSEDES ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR
ORAL, RELATING TO THE SUBJECT MATTER HEREOF. THIS AGREEMENT IS
1
<PAGE>
INTENDED BY AMP AND AFC AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THIS
AGREEMENT, AND NO COURSE OF DEALING BETWEEN AMP AND AFC, NO COURSE OF
PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY
NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS
INSTRUMENT. THERE ARE NO ORAL AGREEMENTS BETWEEN AMP AND AFC.
2.8 OBLIGATIONS ABSOLUTE. AMP hereby agrees that its obligations under
this Agreement shall not be released, discharged, diminished, impaired, reduced,
or affected for any reason or by the occurrence of any event, including, without
limitation, one or more of the following events, whether or not with notice to
or the consent of AMP: (a) the taking or accepting of collateral as security for
any or all of the obligations listed in Schedule A or the release, surrender,
exchange, or subordination of any collateral now or hereafter securing any or
all of the obligations listed in Schedule A; (b) any partial release of the
liability of AMP hereunder, or the full or partial release of any other obligor
or guarantor from liability for any or all of the obligations listed in Schedule
A; (c) any disability of AFC, or the dissolution, insolvency, or bankruptcy of
AFC, AMP, or any other party at any time liable for the payment of any or all of
the obligations listed in Schedule A; (d) any renewal, extension, modification,
waiver, amendment, or rearrangement of any or all of the obligations listed in
Schedule A or any instrument, document, or agreement evidencing, securing, or
otherwise relating to any or all of the obligations listed in Schedule A; (e)
any adjustment, indulgence, forbearance, waiver, or compromise that may be
granted or given by AFC to AMP, or any other party ever liable for any or all of
the obligations listed in Schedule A; (f) any neglect, delay, omission, failure,
or refusal of any party to take or prosecute any action for the collection of
any of the obligations listed in Schedule A or the foreclose or take or
prosecute any action in connection with any instrument, document, or agreement
evidencing, securing, or otherwise relating to any or all of the obligations
listed in Schedule A; (g) the unenforceability or invalidity of any or all of
the obligations listed in Schedule A or of any instrument, document, or
agreement evidencing, securing, or otherwise relating to any or all of the
obligations listed in Schedule A; (h) any payment of AFC or any other party to
any party is held to constitute a preference under applicable bankruptcy or
insolvency law or if for any other reason any party is required to refund any
payment or pay the amount thereof to someone else; (i) the settlement or
compromise of any of the obligations listed in Schedule A; (j) the
non-perfection of any security interest or lien securing any or all of the
obligations listed in Schedule A; (k) any impairment of any collateral security
any or all of the obligations listed in Schedule A; (l) the failure of any party
to sell any collateral securing any or all of the obligations listed in Schedule
A in a commercially reasonable manner or as otherwise required by law; (m) any
change in the corporate existence, structure, or ownership of AFC; or (n) any
other circumstance which might otherwise constitute a defense available to, or
discharge of AFC or AMP.
2.9 REPRESENTATIONS AND WARRANTIES. AMP represents and warrants as
follows:
(a) AMP is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation, is qualified to do
business in all jurisdictions in which the nature of the business conducted by
it makes such qualification necessary and where failure to so qualify would have
a material adverse effect on its business, financial condition or operations.
(b) AMP has the corporate power and authority an legal right to execute,
deliver, and perform its obligations under this Agreement and this Agreement
constitutes the legal, valid, and binding obligation of AMP, enforceable against
AMP in accordance with its respective terms, except as limited by bankruptcy,
insolvency, or other laws of general application relating to the enforcement of
creditor's rights.
(c) The execution, delivery, and performance by AMP of this Agreement has
been duly authorized by all requisite action on the part of AMP and do not and
will not violate or conflict with the articles of incorporation or bylaws of AMP
or any law, rule, or regulation or any order, writ, injunction or decree of any
court, governmental authority or agency, or arbitrator and do not and will not
conflict with, result in a breach of, or constitute a default under, or result
in the imposition of any lien upon any assets of AMP
2
<PAGE>
pursuant to the provisions of any indenture, mortgage, deed of trust, security
agreement, franchise, permit, license, or other instrument or agreement to which
AMP or its properties is bound.
(d) No authorization, approval, or consent of, and no filing or
registration with, any court, governmental authority, or third party is
necessary for the execution, delivery or performance by AMP of this Agreement or
the validity or enforceability thereof.
(e) The value of the consideration received and to be received by AFC as a
result of AMP incurring the obligations listed in Schedule A and AMP executing
and delivering this Agreement is reasonably worth at least as much as the
liability and obligation of AMP hereunder, and such liability and obligation
have benefited and may reasonably be expected to benefit AMP directly or
indirectly.
(f) AMP has, independently and without reliance upon any other party and
based upon such documents and information as AMP has deemed appropriate, made
its own analysis and decision to enter into this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of January
20, 1998.
AMERICAN MEDICAL PROVIDERS, INC.
a Delaware corporation
By:/s/ JACK N. MCCRARY
JACK N. MCCRARY, CHAIRMAN, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
ANKLE AND FOOT CENTERS OF
AMERICA LLP, a Delaware corporation
By:/s/ JACK N. MCCRARY
JACK N. MCCRARY, MANAGING DIRECTOR
3
<PAGE>
SCHEDULE A
REIMBURSEMENT AND ASSUMPTION AGREEMENT
BETWEEN
AMERICAN MEDICAL PROVIDERS, INC. ("AMP")
AND
ANKLE AND FOOT CENTERS OF AMERICA, LLC. ("AFC")
1. REIMBURSEMENT FOR EXPENSES.
All organizational, developmental, and related expenses expended or
incurred, paid or accrued by AFC in connection with the formation, organization,
acquisition activities, and initial public offering of AMP, including but not
limited to the purchase of furnishings, fixtures, or equipment, salaries, wages,
benefits of AFC employees, consulting expenses, lease and rental expenses,
supply expenses, travel and entertainment expenses, interest on borrowed funds,
accounting, legal, and professional fees, information and technology expenses
(software and hardware), printing, design and production fees.
2. ASSUMPTION OF CERTAIN DEBTS
All debts, financing, borrowings, loans, and obligations (together with any
interest thereon) relating to, or incurred by AFC in connection with, the
formation, organization, acquisition activities and initial public offering of
AMP, including, but not limited to such amounts as are owed to the Founder,
Organizers, the Seed Capital Investors, interim lenders, the bridge loan
investors, suppliers, vendors, providers of legal, accounting and professional
services information and technology consultants and other contractors related to
any of the foregoing. Notwithstanding the above, the PRINCIPAL amount of the
borrowing from the Seed Capital Investors, the interim lender, and the bridge
loans have been expended by AFC and will be reimbursed under Section 1 above
(collectively such principal amounts of the Seed Capital borrowing, the
borrowing from the interim lender and the bridge loan borrowing are referred to
as the "Principal Borrowings") and it is not the intention of this agreement
to have these Principal Borrowings reimbursed twice to AFC. However, the
interest and other agreements relating to the Principal Borrowings and the
interest (or investment returns) arising from the Principal Borrowings which
have not yet been paid or accrued under Section 1 will be assumed or otherwise
paid by AMP under this Section 2.
3. CONTRACTS, OBLIGATIONS AND AGREEMENTS.
All contracts, obligations and agreements of AFC relating to or in
connection with the formation, organization, acquisition activities and initial
public offering, including employment agreements with AFC's officers, directors,
consultants, suppliers, lease, and rental agreements acquisition agreements,
seed capital investment agreements, interim lender agreements, bridge loan
investor agreements, professional, legal and accounting agreements, and printing
and design agreements, communication, information and technology agreements or
any other such agreement related to any of the foregoing.
4
EXHIBIT 10.14
December 30, 1997
American Medical Providers, Inc.
3555 Timmons Lane
Suite 1550
Houston, Texas 77027-6435
Attention: Jack N. McCrary
Gentlemen:
We are pleased to inform you that we are prepared to make a $30,000,000
Revolving Line of Credit available to you substantially according to the
following terms and conditions:
Borrower: American Medical Providers, Inc.
("AMP")
Agent: Cooperative Centrale
Raiffcisen-Boerenleenbank B.A.,
"Rabobank Nederland", New York
Branch ("Rabobank").
Amount/Type of Facility: $30,000,000/3-year Revolving
Line-of-Credit.
Guarantors: All direct and indirect subsidiaries
of AMP whether existing on or after
the Closing Date.
Purpose: General corporate purposes to include
acquisitions of DPM practices,
working capital, equipment purchases
and the development of surgery
centers.
Interest Rates: At the option of AMP, the RLOC will
bear interest at a rate equal to
LIBOR plus the Applicable Margin or
at the Rabobank Base Rate plus the
Applicable Margin.
<TABLE>
<CAPTION>
APPLICABLE LIBOR APPLICABLE BASE
SR. DEBT/EBITDA MARGIN RATE MARGIN
------------------------------------------------ ------------- ----------
<S> <C> <C> <C>
(greater than or equal to) 2.5x (less than) 3.0x 250 bps 0 bps
(greater than or equal to) 2.0x (less than) 2.5x 200 bps 0 bps
(greater than or equal to) 1.0x (less than) 2.0x 150 bps 0 bps
(greater than or equal to) 0x (less than) 1.0 100 bps 0 bps
</TABLE>
Senior Debt is defined as all Bank
Debt plus any other indebtedness not
subordinate to the Bank's claim.
EBITDA is defined as Earnings Before
the deduction of Interest, Taxes,
Depreciation, and Amortization.
Interest Periods: For LIBOR advances and at the
Borrower's option, periods of one,
two, three, or six months. Interest
on each advance shall be payable on
the last day of each interest period,
but no less than ninety days from the
date of such advance; provided,
however, that interest on each
advance bearing interest at a rate
based upon the Base Rate shall be
payable on the last business day of
the calendar month in which such
advance is made and of each month
thereafter. All interest rates shall
be reserve-adjusted. The default
interest rate shall be Rabobank's
Base Rate plus 2.00%.
The Base Rate shall mean the higher
of (i) the rate of interest announced
by Rabobank in New York City from
time to time as its base rate, each
change in such fluctuating interest
rate to take effect simultaneously
with the corresponding change in such
base rate, but in no event in excess
of the maximum interest rate
permitted by applicable law and (ii)
1/2 of 1% per annum above Rabobank's
Federal Funds Rate (as defined
below).
Rabobank's Federal Funds Rate shall
mean the rate at which Rabobank, as a
federally licensed branch of a
foreign bank, in its sole discretion,
can acquire federal funds in the New
York City
1
<PAGE>
interbank term federal funds market
or other funding sources available to
Rabobank, through brokers of
recognized standing, for a period and
in an amount comparable to the period
and amount requested by the Borrower.
Unused Fee: A commitment fee of 0.50% per annum,
commencing on the closing date, based
on the average unused balance of the
commitment amount, payable in arrears
on the last day of each calendar
quarter and on the final maturity
date.
Arrangement Fee: An arrangement of $220,000 shall be
due and payable on the closing date.
Of this amount, $20,000 is due and
payable upon your acceptance of this
commitment, this amount being
non-refundable whether or not the
transaction closes.
Computations: All interest rate and fee
computations shall be based upon a
360 day year and the actual number of
days elapsed, except that interest
rate computations for extensions of
credit based upon the Base Rate shall
be based upon a 365 day year.
Availability: Fully revolving until Termination
Date. Subject to Borrowing Base
limitations.
Expiry/Termination: Three years from the date of closing,
but not later than December 31, 2000.
Repayment of Principal/Interest: Principal is due and payable in full
at maturity. Interest is due at the
end of each interest period, but no
less often than quarterly.
Prepayments: Prepayments at the end of an interest
period are allowed without penalty.
Prepayments prior to the end of an
interest period are allowed but may
result in a penalty sufficient to
reimburse the Bank for all costs
incurred as a result of prepayment.
All prepayments shall be made on not
less than one business day's notice
and in increments of at least
$25,000.
Collateral: As security for the Borrower's
obligations under the credit
facilities, the Bank shall be granted
a first priority lien on all accounts
receivable, equipment, contract
rights, management service con-
tracts, capital stock of affiliated
subsidiaries, notes from affiliated
physicians, securities and other
instruments (including those related
to any acquisition or merger, and
general intangibles,
Borrowing Base: The aggregate amount of all
extensions of credit under the
revolving credit facility to the
Borrower shall not exceed the sum of
the following:
1) 80% of all eligible domestic
accounts receivable, less than 90
days beyond the date of invoice;
plus
2) 50% of the market value of
equipment that is not otherwise
encumbered;
3) Less: Accounts Payable
Eligibility requirements of items
included in the Borrowing Base
shall be determined by the Bank
in its sole discretion and shall
include but not be limited to
the Bank having a first priority
security interest and accounts
receivable. Intercompany
accounts receivable/advances are
to be excluded from the
calculations of the borrowing
base. In the event outstandings
under the revolving line of
credit exceed the Borrowing
Base, the Borrower shall (i)
make a prepayment in the amount
by which the advances and
interest exceed the Borrowing
Base or (ii) pledge and assign
to the bank additional
collateral acceptable to
Rabobank in its sole discretion.
Any prepayment penalties
associated with bringing the
Borrowing Base back into
compliance are for the account
of the Borrower.
2
<PAGE>
Covenants/Other Terms: REPORTING REQUIREMENTS
1) Audited and unqualified annual
financial statements of the
Borrower, including balance
sheets, statements of income,
statements of cash flows within
120 days after fiscal year-end
prepared by independent nationally
recognized certified public
accountants acceptable to the Bank
and the Borrower.
2) Company prepared 3-year
projections of fiscal year-end
balance sheets, income statements,
and statements of cash flow
(excluding from those the effects
of intercompany transactions)
prior to closing. Rolling 12
month projections to be updated
semiannually on December 31 and
June 30 of each year thereafter.
3) Unaudited company prepared
monthly financial statements of
Borrower within 30 days after
month-end. Compliance certifi-
cate signed by the chief
financial officer of the Borrower
and showing calculation of
financial covenants and
compliance with those covenants
to be provided at the end of each
fiscal quarter.
4) Monthly accounts receivable
agings of the Borrower, submitted
within 30 days after month-end.
5) Borrowing Base Certificate,
submitted within 30 business days
of the last day of each month,
unless requested more often.
FINANCIAL REQUIREMENTS
So long as any extensions of credit
are outstanding, the Borrower shall
maintain the following financial
ratios as defined in accordance with
Generally Accepted Accounting
Principals;
1) CURRENT RATIO. Maintain at all
times a ratio of current assets to
current liabilities of not less
than 2.00:1.00
2) TOTAL SENIOR BANK DEBT/TANGIBLE
NET WORTH: Maintain Total Bank
Debt/Tangible Net Worth which
does not exceed 1.00:1.00.
3) SENIOR DEBT/EBITDA: Maintain
maximum Senior Debt / EBITDA of
3:00:1.00.
4) MINIMUM TANGIBLE NET
WORTH: Maintain at all times a
minimum tangible net worth of:
Borrower's tangible net worth at
closing, plus 100% of any new
equity raised, plus 75% of net
income after tax, measured
quarterly.
5) EBITDA/(Non-Discretionary Capex +
Interest Expense): Maintain
minimum of 1.25:1.00
6) CAPITAL EXPENDITURES: Limit to
be determined by the Bank.
7) ACQUISITIONS: Permitted without
Bank approval provided that no
individual acquisition accounts
for more than 10% of Borrower's
tangible net worth. Acquisitions
must be limited to the practice
of podiatry. Any practice with
negative EBITDA will require Bank
approval. Upon completion of the
acquisition, the Borrower must be
in compliance with all covenants
retrospectively and
prospectively.
8) ADDITIONAL DEBT: No additional
debt is permitted except for
scheduled debt. Any debt
exclusive of purchase money debt
will be subordinated to the Bank.
REPRESENTATIONS, WARRANTIES,
COVENANTS, EVENTS OF DEFAULT AND
OTHER TERMS
The documentation shall contain
representations, warranties, cove-
nants, events of default and other
terms which are customary for a
transaction of this type, including
but not limited to the following:
3
<PAGE>
1) CROSS-DEFAULT. It shall
constitute a default under this
facility if there is a default
under any other credit facility to
which the Borrower and/or the
Guarantors are a party, whether or
not Rabobank is a party thereto.
CONDITIONS OF LENDING
The documentation shall contain
conditions of lending which are
customary for a transaction of this
type, including but not limited to:
1) INSURANCE. Borrower shall
maintain, and Rabobank shall be
named as loss payee and additional
insured under, casualty and
liability insurance policies,
which shall be in form and sub-
stance satisfactory to Rabobank.
2) COLLATERAL INSPECTION. Rabobank
shall be entitled to perform,
prior to its initial extension of
credit, and during each annual
period thereafter and upon any
default, a satisfactory field
inspection of all collateral
securing the credit facility. The
Borrower shall reimburse Rabobank
for the cost of each such
inspection.
MISCELLANEOUS
All accounting terms shall be defined
in accordance with generally accepted
accounting principles consistent with
those applied in the preparation of
the financial statements referred to
above.
All legal fees of counsel to Rabobank
(which may be in-house counsel) and
costs associated therewith shall be
for the account of the Borrower. All
credit facility documentation shall
be governed by the laws of the State
of New York and the Borrower shall
submit to the exclusive jurisdiction
of courts located in New York City.
The terms and conditions of this
commitment are not limited to the
above terms and conditions. Those
matters which are not covered by or
made clear in the above outline are
subject to mutual agreement of the
parties.
This commitment is conditional upon
(i) the preparation, execution and
delivery of legal documentation in
form and substance satisfactory to
Rabobank and our counsel
incorporating substantially the terms
and conditions outlined or referred
to above and (ii) the absence of a
material adverse change in the
financial condition or operations of
the Borrower and/or the Guarantors
since the date of the Borrower's
and/or the Guarantor's financial
statements dated as of December 31,
1997.
4
<PAGE>
Please evidence your acceptance of the foregoing by signing and returning
to us the enclosed copy of this letter on or before January 9, 1998, the date
this commitment (if not accepted prior thereto) shall expire.
Very truly yours,
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
By:/s/Ian Reece
IAN REECE
Title: SENIOR CREDIT OFFICER
By:/s/Gordon E. Arnold
GORDON E. ARNOLD
Title: VICE PRESIDENT
Accepted on , 199 :
AMERICAN MEDICAL PROVIDERS, INC.
By:_______________________________
Title:____________________________
5
STOCK PURCHASE AGREEMENT
AMONG
AMERICAN MEDICAL PROVIDERS, INC.,
JERALD N. KRAMER, D.P.M., P.C.,
AND
THE OWNERS NAMED HEREIN
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I Definitions..................................................... 1
Section 1.1. Definitions............................................... 1
ARTICLE II The Acquisition................................................ 7
Section 2.1. The Acquisition.......................................... 7
Section 2.2. The Closing.............................................. 7
Section 2.3. Acquisition Consideration................................ 7
Section 2.6 Subsequent Actions....................................... 8
ARTICLE III Representations and Warranties of the Company and the Owner... 8
Section 3.1. Organization and Good Standing; Qualification............ 8
Section 3.2. Capital Structure........................................ 9
Section 3.3. Transactions in Capital.................................. 9
Section 3.4. Continuity of Business Enterprise........................ 9
Section 3.5. Records.................................................. 9
Section 3.6. Authorization and Validity............................... 10
Section 3.7. No Violation............................................. 10
Section 3.8. Consents................................................. 10
Section 3.9. Financial Statements..................................... 10
Section 3.10. Liabilities and Obligations.............................. 11
Section 3.11. Employee Matters......................................... 11
Section 3.12. Aliens................................................... 12
Section 3.13. Employee Benefit and Other Compensation Plans............ 12
Section 3.14. Absence of Certain Changes............................... 13
Section 3.15. Title; Leased Assets..................................... 15
Section 3.16. Commitments.............................................. 15
Section 3.17. Insurance................................................ 16
Section 3.18. Proprietary Rights and Information....................... 17
Section 3.19. Taxes.................................................... 17
Section 3.20. Compliance with Laws..................................... 18
Section 3.21. Finder's Fee............................................. 18
Section 3.22. Litigation............................................... 19
Section 3.23. Condition of Fixed Assets................................ 19
Section 3.24. Distributions and Repurchases............................ 19
Section 3.25. Banking Relations........................................ 19
Section 3.26. Interested Persons; Affiliations......................... 20
Section 3.27. Environmental Matters.................................... 20
Section 3.28. Certain Payments......................................... 20
1
<PAGE>
Section 3.29. Medical Waste............................................ 20
Section 3.30. Medicare and Medicaid Programs........................... 21
Section 3.31. Fraud and Abuse.......................................... 21
Section 3.32. Payors................................................... 22
Section 3.33. Representations and Warranties not a Guarantee of Future
Performance............................................................ 22
ARTICLE IV Representations and Warranties of the Owners................... 22
Section 4.1. Validity; Owner's Capacity............................... 22
Section 4.2. No Violation............................................. 23
Section 4.3. Personal Holding Companies; Control of
Related Businesses....................................... 23
Section 4.4. Transfers of Ownership Interests......................... 23
Section 4.5. Consents................................................. 23
Section 4.6. Certain Payments......................................... 23
Section 4.7. Finder's Fee............................................. 23
Section 4.8. Interested Persons; Affiliations......................... 24
Section 4.9. Investments in Competitors............................... 24
ARTICLE V Representations and Warranties of AMP and AMP Subsidiary........ 24
Section 5.1. Organization and Good Standing........................... 24
Section 5.2. Capitalization of AMP.................................... 24
Section 5.3. Capitalization of AMP Subsidiary......................... 24
Section 5.4. Authorization and Validity............................... 25
Section 5.5. No Violation............................................. 25
Section 5.6. Finder's Fee............................................. 25
Section 5.7. Consents................................................. 25
Section 5.8. Liabilities and Obligations.............................. 25
Section 5.9. Employee Benefit Plans................................... 26
Section 5.10. Taxes.................................................... 26
Section 5.11. Compliance with Laws..................................... 26
Section 5.12. Litigation............................................... 27
ARTICLE VI Covenants of the Company and the Owners........................ 27
Section 6.1. Consummation of Agreement................................ 27
Section 6.2. Business Operations...................................... 27
Section 6.3. Access................................................... 28
Section 6.4. Tax Returns.............................................. 28
Section 6.5. Notification of Certain Matters.......................... 28
Section 6.6. Approvals of Third Parties............................... 28
Section 6.7. Employee Matters......................................... 29
Section 6.8. Contracts................................................ 29
Section 6.9. Capital Assets; Payments of Liabilities.................. 30
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Section 6.10. Mortgages, Liens and Guaranties.......................... 30
Section 6.11. Acquisition Proposals.................................... 30
Section 6.12. Distributions and Repurchases............................ 30
Section 6.13. Requirements to Effect Acquisition....................... 31
Section 6.14. Licenses and Permits..................................... 31
Section 6.15. Delivery of Schedules.................................... 31
ARTICLE VII Covenants of AMP and AMP Subsidiary........................... 31
Section 7.1. Consummation of Agreement................................ 31
Section 7.2. Requirements to Effect Acquisition....................... 31
Section 7.3. Notification of Certain Matters.......................... 31
Section 7.4. Approvals of Third Parties............................... 31
Section 7.5. Stock Option Plan for Advisors and Consultants........... 32
Section 7.6. Licenses and Permits..................................... 32
Section 7.7. Delivery of Schedules.................................... 32
Section 7.8. Professional Liability Insurance......................... 32
ARTICLE VIII Covenants of AMP, the Company and the Owners................. 32
Section 8.1. Filings; Other Action.................................... 32
Section 8.2. Amendment of Schedules................................... 33
Section 8.3. Proration of Costs and Rents............................. 33
ARTICLE IX Conditions Precedent of AMP.................................... 33
Section 9.1. Proceedings.............................................. 33
Section 9.2. No Material Adverse Effect............................... 33
Section 9.3. Government Approvals and Required Consents............... 34
Section 9.4. Securities Approvals..................................... 34
Section 9.5. Closing Deliveries....................................... 34
Section 9.6. Charter Amendment........................................ 34
ARTICLE X Conditions Precedent of the Company and the Owner............... 34
Section 10.1. Proceedings.............................................. 34
Section 10.2. Government Approvals and Required Consents............... 34
Section 10.3. Securities Approvals..................................... 34
ARTICLE XI Closing Deliveries............................................. 35
Section 11.1. Deliveries of the Company and the Owners................. 35
Section 11.2. Deliveries of AMP........................................ 36
ARTICLE XII Post Closing Matters.......................................... 38
Section 12.1. Further Instruments of Transfer.......................... 38
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ARTICLE XIII Remedies..................................................... 38
Section 13.1. Indemnification by the Owner............................ 38
Section 13.2. Indemnification by AMP and AMP Subsidiary............... 39
Section 13.3. Indemnification Procedures.............................. 39
Section 13.4. Indemnification Limitations............................. 41
Section 13.5. Remedies Not Exclusive.................................. 41
Section 13.6. Costs, Expenses and Legal Fees.......................... 42
ARTICLE XIV Termination................................................... 42
Section 14.1. Termination............................................. 42
Section 14.2. Effect of Termination................................... 42
ARTICLE XV Noncompetition................................................. 43
Section 15.1. Prohibited Activities................................... 43
Section 15.2. Damages................................................. 43
Section 15.3. Reasonable Restraint.................................... 43
Section 15.4. Severability; Reformation............................... 43
Section 15.5. Term.................................................... 44
ARTICLE XVI Nondisclosure of Confidential Information..................... 44
Section 16.1. Nondisclosure........................................... 44
Section 16.2. Damages................................................. 44
Section 16.3. Survival................................................ 45
ARTICLE XVII General...................................................... 45
Section 17.1. Amendment; Waivers...................................... 45
Section 17.2. Assignment.............................................. 45
Section 17.3. Parties in Interest; No Third Party Beneficiaries....... 45
Section 17.4. Entire Agreement........................................ 45
Section 17.5. Severability............................................ 45
Section 17.6. Survival of Representations, Warranties and Covenants... 46
Section 17.7. Governing Law........................................... 46
Section 17.8. Captions................................................ 46
Section 17.9. Gender and Number....................................... 46
Section 17.10. Reference to Agreement.................................. 46
Section 17.11. Confidentiality; Publicity and Disclosures.............. 46
Section 17.12. Notice.................................................. 47
Section 17.13. Choice of Forum......................................... 47
Section 17.14. No Waiver; Remedies..................................... 47
Section 17.15. Counterparts............................................ 48
Section 17.16. Defined Terms........................................... 48
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STOCK PURCHASE AGREEMENT
Stock Purchase Agreement (this "Agreement"), dated as of November _____,
1997, among Jerald N. Kramer, D.P.M., P.C., a Georgia professional corporation
and its nonprofessional successor entity ("the "Company"), Jerald N. Kramer,
D.P.M., (collectively the "Owners" and individually an "Owner"), and American
Medical Providers, Inc., a Delaware corporation, its affiliates, successors or
assigns ("AMP").
The Company and the Owners of the Company desire to sell, and AMP desires
to purchase, all of the issued and outstanding shares (the "Shares") of the
capital stock of the Company, and, accordingly, the Owners, the Company and AMP
desire to effect the Acquisition (defined below) upon the terms and subject to
the conditions contained herein.
In order to effectuate the Acquisition, the Company will convert from a
Georgia professional entity to a Georgia business corporation immediately before
the Closing.
The Owner and AMP will enter into a Real Estate Purchase Agreement
contemporaneously with this Agreement (the "Real Estate Purchase Agreement") for
the purchase by AMP of certain real property in Decatur, Georgia owned by Owner
and more particularly described as 215 Clairmont Avenue, Decatur, Dekalb County,
Georgia (the "Decatur Property"). The Decatur Property is subject to a right of
first refusal and if that right is exercised will be purchased by another party,
not privy to this Agreement.
AMP will pay $10,000.00 to be applied to Owner's attorneys' fees for
negotiating the transactions contemplated by this Agreement. This earnest money
deposit will be non-refundable.
In consideration of the mutual representations, warranties and covenants
herein contained and such other good and valuable consideration, the receipt and
sufficiency of which are hereby mutually 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. The following terms have the meanings set forth
below:
"Acquisition" has the meaning set forth in Section 2.1.
"Acquisition Consideration" has the meaning set forth in Section 2.3.
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"actual knowledge," "have no actual knowledge of," "do not actually know
of" and similar phrases mean (i) in the case of a natural person, the actual
conscious awareness, or not, as the context requires, of the particular fact by
such person or (ii) in the case of an entity, the actual conscious awareness, or
not, as the context requires, of the particular fact by any stockholder,
partner, owner, director or officer of such entity, altogether as a product of
inquiry, consistent with the knowledge of a prudent person in the operation of
their business and personal affairs.
"Advisors Plan" has the meaning set forth in Section 7.5.
"Affiliate," with respect to any person, means a person that directly or
indirectly through one or more intermediaries controls, is controlled by or is
under common control with such person.
"AMP Common Stock" means the common stock, par value $0.01 per share, of
AMP.
"AMP Employee Benefit Plans" has the meaning set forth in Section 5.9.
"AMP Subsidiary" means the wholly-owned subsidiary of AMP formed prior to
Closing identified in Section 2.1.
"AMP Subsidiary Common Stock" means the common stock, par value $0.01 per
share, of AMP Subsidiary.
"Arthur Andersen" means Arthur Andersen LLP, independent certified public
accountants.
"Assets" means the Equipment and all properties and assets (tangible and
intangible, real and personal) of every kind and wherever situated that are
owned by the Company or the Owner or in which the Company has any right or
interest to the extent that such assets are used in the medical practice of the
Owner in Decatur, Georgia and in Griffin, Georgia (including all personal
property of every kind and character as used in connection with Equipment or
otherwise and its files, papers and records relating to the aforesaid properties
and assets), but excluding the Excluded Assets.
"Assignment and Assumption Agreement" has the meaning set forth in Section
11.1(m).
"Pre-Closing Liabilities" means those fixed and determinable liabilities
of the Company listed on Schedule 1.1. Except for the Pre-Closing Liabilities,
the Company shall, as of the Closing date not have (nor shall AMP assume or
agree to pay, perform or discharge) any liabilities or obligations of the
Company, whether accrued, absolute, contingent or otherwise.
"Balance Sheet" has the meaning set forth in Section 3.9.
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"Balance Sheet Date" has the meaning set forth in Section 3.9.
"best knowledge," "have no knowledge of," "do not know of" or "to the
knowledge of" and similar phrases mean (i) in the case of a natural person, the
particular fact was known, or not known, as the context requires, to such person
or (ii) in the case of an entity, the particular fact was known, or not known,
as the context requires, to any stockholder, partner, owner, director or officer
of such entity.
"Cash Compensation" has the meaning set forth in Section 3.11(a).
"Claim Notice" has the meaning set forth in Section 13.3.
"Closing" means the closing of the transactions contemplated by this
Agreement.
"Closing Date" has the meaning set forth in Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitments" has the meaning set forth in Section 3.16.
"Company" has the meaning set forth in the recitals hereto.
"Compensation Plans" has the meaning set forth in Section 3.11(b).
"Confidential Information" means all trade secrets and other confidential
and/or proprietary information of the particular person, including information
derived from reports and investigations, research, work in progress, codes,
marketing and sales programs, referral sources, patient lists, financial
projections, cost summaries, pricing formulae, 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 such person by such
person's stockholders, owners, partners, employees, officers, directors, agents,
representatives or consultants.
"Controlled Group" has the meaning set forth in Section 3.13(g).
"Damages" has the meaning set forth in Section 13.1.
"Decatur Property" has the meaning set forth in the recitals.
"Effective Date" means the date that the Registration Statement is
declared effective by the SEC.
"Election Period" has the meaning set forth in Section 13.3.
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"Employee Benefit Plans" has the meaning set forth in Section 3.13(a).
"Employee Policies and Procedures" has the meaning set forth in Section
3.11(d).
"Employment Agreements" has the meaning set forth in Section 3.11(c).
"Environmental Laws" means any laws or regulations pertaining to the
environment as in effect on the date hereof and the Closing Date, including
without limitation (i) the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (42 U.S.C. ss.ss. 9601 et seq.), as amended (including
without limitation as amended pursuant to the Superfund Amendments and
Reauthorization Act of 1986) and any regulations promulgated thereunder, (ii)
the Resource Conservation and Recovery Act of 1976 (42 U.S.C. ss.ss. 6901 et
seq.), as amended, and any regulations promulgated thereunder, and (iii) the
provisions contained in any similar federal, state or local statutes or
regulations relating to environmental matters applicable to the Company's assets
or operations.
"Equipment" means all equipment, machinery, tools and similar assets owned
by the Company and used by the Company in its business, including, without
limitation, all supplies of the Company related thereto.
"ERISA" has the meaning set forth in Section 3.13(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" means the following assets of the Company or the Owner:
bonds; cash (except for cash which Owner chooses to have Company retain at
Closing); accounts receivable; rights to payment for work performed by Owner
before Closing but not billed; stocks and bank accounts; employee benefit plans
and pension plans; 401(K) plans; HR10 plans; software programs (the "Kiss",
"UB92" and "Operative Notes" programs); any profit-sharing plan of any type or
nature (whether owned by the Company or the Owner); automobiles and personal
effects of Owner (including diplomas and art work).
"Financial Statements" has the meaning set forth in Section 3.9.
"Fixed Assets" has the meaning set forth in Section 3.23.
"Group Practice" means the Georgia professional entity that has entered
into a Management Services Agreement with AMP.
"Indemnified Party" has the meaning set forth in Section 13.3.
"Indemnifying Party" has the meaning set forth in Section 13.3.
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"Indemnity Notice" has the meaning set forth in Section 13.3.
"Initial Public Offering" means the initial underwritten public offering
of AMP Common Stock contemplated by the Registration Statement.
"Insurance Policies" has the meaning set forth in Section 3.17.
"IRS" means the Internal Revenue Service.
"Lease Assignments" has the meaning set forth in Section 11.1(m).
"Material Adverse Effect" means a material adverse effect on the business,
operations, condition (financial or otherwise), results of operations or
prospects of the Company in consideration of all relevant facts and
circumstances.
"Medical Waste" means (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" means the following, including regulations
promulgated and orders issued thereunder, as in effect on the date hereof and
the Closing Date: (i) the MWTA, (ii) the U.S. Public Vessel Medical Waste
Anti-Dumping Act of 1988, 33 U.S.C.A. ss.ss. 2501 et seq., (iii) the Marine
Protection, Research and Sanctuaries Act of 1972, 33 U.S.C.A. ss.ss. 1401 et
seq., (iv) the Occupational Safety and Health Act, 29 U.S.C.A. ss.ss. 651 et
seq., (v) the United States Department of Health and Human Services, National
Institute for Occupational Safety and Health, Infectious Waste Disposal
Guidelines, Publication No. 88-119 and (vi) any other federal, state, regional,
county, municipal or other local laws, regulations and ordinances insofar as
they are applicable to the Company's assets or operations and purport to
regulate Medical Waste or impose requirements relating to Medical Waste.
"MWTA" means the Medical Waste Tracing Act of 1988, 42 U.S.C. ss.ss. 6992,
et seq.
"ordinary course of business" means the usual and customary way in which
the particular entity has conducted its business in the past, in all cases, in
compliance with law.
"Owner(s)" means those person(s), all of whom are identified in the first
paragraph of this Agreement, who own, beneficially and of record, all of the
ownership interests in the Company, whatever form those interests may take,
including, without limitation, capital stock, partnership interests, units,
shares in profit, membership interests or the like.
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"Payors" has the meaning set forth in Section 3.30.
"person" means any natural person, corporation, partnership, joint
venture, limited liability company, association, group, organization or other
entity.
"Physician Employee" means any physician of the Company executing a
Physician Employment Agreement.
"Physician Employment Agreements" has the meaning set forth in Section
11.1(n).
"Physician Engagement Agreements" has the meaning set forth in Section
11.1(m).
"Private Placement Memorandum" means the Confidential Private Placement
Memorandum, dated June, 1997, provided by AMP to the Owners and the Company.
"Real Estate Purchase Agreement" has the meaning set forth in the
recitals.
"Registration Statement" has the meaning set forth in Section 8.1(a).
"Related Acquisitions" means, collectively, the Acquisition and the
mergers and acquisitions of entities and assets contemplated by the Other
Agreements.
"Reorganization" has the meaning set forth in Section 12.2.
"Schedules" means 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.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" has the meaning set forth in the recitals.
"Taxes" means all taxes, however denominated, including any interest,
penalties or other additions to tax that may become payable in respect thereof,
imposed by any federal, state, territorial, state, local or foreign government
or any agency or political subdivision of any such government, which taxes shall
include, without limiting the generality of the foregoing, all income or profits
taxes, real property gains taxes, payroll and employee withholding taxes,
unemployment insurance taxes, social security taxes, sales and use taxes, ad
valorem taxes, excise taxes, franchise taxes, gross receipts taxes, occupation
taxes, real and personal property taxes, stamp taxes, environmental taxes,
alternative minimum taxes, transfer taxes, workers compensation or Pension
Benefit Guaranty Corporation premiums, and other obligations of the
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same or of a similar nature, which the Company is required to pay, withhold or
collect.
"Tax Returns" shall mean all reports, estimates, information statements
and returns relating to, or required to be filed in connection with, any Taxes,
including information returns or reports with respect to backup withholding and
other payments to third parties.
"Third Party Claim" has the meaning set forth in Section 13.3.
"Underwriter Representative" means the underwriter in the Initial Public
Offering who acts as the lead managing underwriter of the Initial Public
Offering.
ARTICLE II
THE ACQUISITION
SECTION 2.1. THE ACQUISITION. Subject to the terms and conditions of this
Agreement, on the Closing Date, the Owner shall transfer, assign, convey and
deliver the Shares to AMP or its subsidiary ("AMP Subsidiary"), free and clear
of all security interests, liens, claims and encumbrances and shall commit to
all post-closing obligations in Sections 2.4, 2.5 and Article XII, and AMP or
AMP Subsidiary shall accept and acquire from the Company the Shares and assume
the Assumed Liabilities (the "Acquisition"). Prior to the Acquisition, all the
Excluded Assets and all liabilities except for Assumed Liabilities shall be
transferred from the Company to the Owner and distributed in advance of Closing.
The Owner shall be responsible for any and all liabilities, including but not
limited to Tax liabilities and liabilities related to pension, employee
benefits, profit-sharing 401(K) or other plans arising out of such
distributions, spin-offs or sales.
SECTION 2.2. THE CLOSING. The Closing of the Acquisition will take place
at 10:00 a.m., local time, at the offices of Baker & Hostetler, Suite 2000, 1000
Louisiana, Houston, Texas on the day on which the transactions contemplated by
the Initial Public Offering are consummated. The date on which the Closing
occurs is the "Closing Date." AMP or Owner's counsel as necessary, will have all
closing documents prepared in advance and circulated for signature to Owner in
Atlanta, Georgia, such that Closing can be accomplished through an escrow
arrangement and Owner shall not physically be required to attend Closing. At
Closing, and as a condition thereof, all proceeds will be wired to a bank
account of Owner's choice in the Atlanta, Georgia area.
SECTION 2.3. ACQUISITION CONSIDERATION. The total consideration for the
shares and for the post-closing obligations in Sections 2.4 and 2.5 and Article
XII will be (i) cash in the amounts set forth on Annex I hereto (the
"Acquisition Consideration") and (ii) the assumption of the Assumed Liabilities,
if any.
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SECTION 2.4 OTHER ACTIONS. Promptly after the Closing, AMP shall change
the name of the Company. If necessary, AMP will collect sums related to the
Excluded Assets after the Closing and, to the extent such sums are identifiable
as Excluded Assets, will forward them to the Owner, less any collection
expenses. Prior to and following the Acquisition, the Owner, who has
distributed, liquidated or frozen the pension, employee benefit, profit-sharing,
401(K) and other plans will cause the funds that were invested for particular
employees to be rolled over to individual retirement accounts for such employees
in accordance with all applicable laws. The Company and AMP will cooperate with
Owner after Closing in completion of all such actions.
SECTION 2.5 OWNER COMMITMENT. Owner agrees to work at the pre-closing
offices of the Company for thirty (30) days after Closing, and if requested by
AMP for thirty (30) additional days, training AMP's successor podiatrist(s) and
familiarizing such person(s) with the patients and the facilities. Owner shall
undertake the first thirty (30) days of this work in consideration of the
Acquisition Consideration. The second thirty (30) days will be at a consulting
fee of $1,000.00. AMP agrees that it will not introduce any such successor
podiatrist at the pre-closing offices of the Company until consummation of the
Closing, unless otherwise requested by the Owner.
SECTION 2.6 SUBSEQUENT ACTIONS. If, at any time after the Closing, AMP
shall be advised that any deeds, bills of sale, assignments, assurances or any
other actions or things are necessary to vest, perfect or confirm of record or
otherwise in AMP Subsidiary its right, title or interest in, to or under any of
the rights, properties or assets of the Company acquired or to be acquired by
AMP Subsidiary as a result of, or in connection with, the Acquisition or
otherwise to carry out this Agreement, and to transfer the Shares in return for
the consideration set forth in this Agreement, the officers and directors of AMP
Subsidiary shall be authorized to execute and deliver, in the name and on behalf
of the Company, all such deeds, bills of sale, assignments and assurances and to
take and do, in the name and on behalf of the Company, 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 such rights, properties or assets
in AMP Subsidiary or otherwise to carry out this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE OWNER
The Company and the Owner represent and warrant to AMP and AMP Subsidiary
that the following are true and correct as of the Closing Date:
SECTION 3.1. ORGANIZATION AND GOOD STANDING; QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of its state of organization with all requisite power and authority to
carry on the business in which it is
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engaged, to own the properties it owns, to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The Company is not
qualified or licensed to do business in any other jurisdiction. The Company has
no assets, employees or offices in a state other than the state of its
organization. Except as set forth in Schedule 3.1, or as a passive investor
neither the Company, nor the Owner owns, directly or indirectly, any of the
capital stock of any other corporation or any entity or a profit sharing,
participation or other interest in any corporation, partnership, joint venture
or other entity that is engaged in a business that is in or related to the
healthcare industry.
SECTION 3.2. CAPITAL STRUCTURE. The Owner owns all of the Company's issued
and outstanding common stock free and clear of all security interests, liens,
adverse claims, encumbrances, equities, proxies and shareholders' agreements,
except to the extent specifically disclosed in detail on Schedule 3.2. Each
outstanding share of common stock of the Company has been legally and validly
issued and is fully paid and nonassessable. No share of capital stock is owned
by the Company in treasury. No shares of capital stock of the Company have been
issued or disposed of in violation of the preemptive rights, rights of first
refusal or similar rights of any of the Company's stockholders. The Company has
no bonds, debentures, notes or other obligations the holders of which have the
right to vote (or are convertible into or exercisable for securities having the
right to vote) with the stockholders of the Company on any matter.
SECTION 3.3. TRANSACTIONS IN CAPITAL. The Company has not acquired any of
its capital stock. Except as set forth in Schedule 3.3, there exist no options,
warrants, subscriptions or other rights to purchase, or securities convertible
into or exchangeable for, any of the authorized or outstanding securities of the
Company, and no option, warrant, call, conversion right or commitment of any
kind exists that obligates the Company to issue any of its authorized but
unissued capital stock. Except as set forth in Schedule 3.3, the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of its equity securities or any interests therein or to pay any dividend or
make any distribution in respect thereof. Except as set forth in Schedule 3.3,
neither the equity structure of the Company nor the relative ownership of shares
among any of its stockholders has been altered or changed in contemplation of
the transactions contemplated hereby.
SECTION 3.4. CONTINUITY OF BUSINESS ENTERPRISE. Except as set forth in
Schedule 3.4 and except as contemplated by Section 2.1, there has not been any
sale, distribution or spin-off of assets of the Company or any of its
Affiliates, other than in the ordinary course of business within the five years
preceding the date of this Agreement.
SECTION 3.5. RECORDS. The copies of the Articles of Incorporation or
Articles of Association, as the case may be, and Bylaws, and all amendment
thereto, of the Company that have been or are to be delivered to AMP are true,
correct and complete copies thereof, as in effect on the date hereof. The minute
books of the Company, copies of which have been or are to be delivered to AMP,
contain or will contain materially accurate minutes of meetings of, and
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accurate consents to all actions taken without meetings by, the Board of
Directors (and any committees thereof) and the stockholders of the Company to
the extent such minutes and consents exist or have been re-created since its
formation as to material matters reflected therein.
SECTION 3.6. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by the Company of this Agreement and the other agreements expressly
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been, or before December 15, 1997, will be duly
authorized by the Company. This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms. The
Company has obtained, or before December 15, 1997 will obtain in accordance with
applicable law and its Bylaws and its Articles of Incorporation the approval of
its stockholders necessary to consummate the transactions contemplated hereby.
SECTION 3.7. NO VIOLATION. Except as set forth specifically in detail in
Schedule 3.7 or Schedule 3.8, neither the execution, delivery or performance of
this Agreement or the other agreements contemplated hereby nor the consummation
of the transactions contemplated hereby or thereby will (a) conflict with,
result in a violation or breach of the terms, conditions or provisions of or
constitute a default under the Bylaws or the Articles of Incorporation of the
Company, (b) except as would not, individually or in the aggregate, result in a
Material Adverse Effect, conflict with, result in a violation or breach of the
terms conditions or provisions of or constitute a default under any agreement,
indenture or other instrument by which the Company is bound or to which any of
the assets of the Company is subject, or to the Company's or the Owner's
knowledge, result in the creation or imposition of any security interest, lien,
charge or encumbrance upon any assets of the Company or (c) except as would not,
individually or in the aggregate, result in a Material Adverse Effect, violate
or conflict with any judgment, decree, order, statute, rule or regulation of any
court or any public, governmental or regulatory agency or body.
SECTION 3.8. CONSENTS. Except as set forth in Schedule 3.8, to the
Company's or the Owner's knowledge no consent, authorization, approval, permit
or license of, or filing with, any governmental or public body or authority, any
lender, any lessor or any other person or entity is required to authorize, or is
required in connection with, the execution, delivery or performance of this
Agreement or the agreements contemplated hereby; provided, however, AMP
acknowledges that a tenant of the real property has a right of first refusal as
to any sale of the Owner's real property to be purchased by AMP.
SECTION 3.9. FINANCIAL STATEMENTS. The Company has furnished AMP its
balance sheet and related statements of income, retained earnings and cash flows
for its prior three full fiscal years and its balance sheet dated as of June 30,
1997 (the "Balance Sheet," and the date thereof the "Balance Sheet Date") and
related statements of income, retained earnings and cash flows for the six (6)
months then ended (all such financial information, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly present
the financial condition and
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results of operations of the Company as of the dates and for the periods
indicated and have been prepared on a consistent basis with prior periods,
except as otherwise specifically indicated in the Financial Statements.
SECTION 3.10. LIABILITIES AND OBLIGATIONS. The Financial Statements and
Schedule 3.10 reflect all material liabilities of the Company, except for
liabilities or obligations incurred in the ordinary course of business
consistent with reasonable past practice since the Balance Sheet Date. Except as
specifically set forth in the Financial Statements or Schedule 3.10, the Company
is not liable upon or with respect to, or obligated in any other way to provide
funds in respect of or to guarantee or assume in any manner, any debt,
obligation or dividend of any person, corporation, association, partnership,
joint venture, trust or other entity, and the Company does not know of any valid
basis for the assertion of any claims or liabilities of any nature or in any
amount.
SECTION 3.11. EMPLOYEE MATTERS.
(a) CASH COMPENSATION. Schedule 3.11(a) contains a complete and accurate
list of the names, titles and annual cash compensation as of June 30, 1997,
including, without limitation, wages, salaries, bonuses (discretionary and
formula) and other cash compensation (the "Cash Compensation"), of all full and
part-time employees of the Company. In addition, Schedule 3.11(a) contains a
complete and accurate description of (i) all increases in Cash Compensation of
employees of the Company during the current fiscal year and the immediately
preceding fiscal year and (ii) any promised increases in Cash Compensation of
employees of the Company that have not yet been effected.
(b) COMPENSATION PLANS. Schedule 3.11(b) contains a complete and accurate
list of all compensation plans, arrangements or practices (the "Compensation
Plans") sponsored by the Company or to which the Company contributes on behalf
of its employees, other than Employment Agreements listed in Schedule 3.11(c)
and Employee Benefit Plans listed in Schedule 3.13(a). The Compensation Plans
include, without limitation, plans, arrangements or practices that provide for
severance pay, deferred compensation, incentive, bonus or performance awards and
stock ownership or stock options. The Company has provided to AMP a copy of each
written Compensation Plan and a written description of each unwritten
Compensation Plan.
(c) EMPLOYMENT AGREEMENTS. Except as set forth in Schedule 3.11(c), the
Company is not a party to any employment agreement (the "Employment Agreements")
with respect to any of its employees. Employment Agreements include, without
limitation, employee leasing agreements, employee services agreements and
noncompetition agreements.
(d) EMPLOYEE POLICIES AND PROCEDURES. Schedule 3.11(d) contains a complete
and accurate list of all employee manuals and all policies, procedures and
work-related rules (the "Employee Policies and Procedures") that apply to
employees of the Company. The Company
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has provided or made available to AMP, or will provide before December 15, 1997,
a copy of all written Employee Policies and Procedures and a written description
of all unwritten Employee Policies and Procedures.
(e) UNWRITTEN AMENDMENTS. Except as described in Schedule 3.11(b),
3.11(c), or 3.11(d), no unwritten material amendments have been made, whether by
oral communication, pattern of conduct or otherwise, with respect to any
Compensation Plans, Employment Agreements or Employee Policies and Procedures.
(f) LABOR COMPLIANCE. To its and the Owner's actual knowledge, the Company
has been and is in compliance with all applicable laws, rules, regulations and
ordinances respecting employment and employment practices, terms and conditions
of employment and wages and hours, except for any such failures to be in
compliance that, individually or in the aggregate, would not result in a
Material Adverse Effect, and the Company is not liable for any arrears of wages
or penalties for failure to comply with any of the foregoing. To its and the
Owner's actual knowledge, the Company has not engaged in any unfair labor
practice or discriminated on the basis of race, color, religion, sex, national
origin, age, disability or handicap in its employment conditions or practices.
Except as set forth in Schedule 3.11(f), there are no (i) unfair labor practice
charges or complaints or racial, color, religious, sex, national origin, age,
disability or handicap discrimination charges or complaints pending or, to the
knowledge of the Company, threatened against the Company before any federal,
state or local court, board, department, commission or agency (nor, to the
knowledge of the Company, does any valid basis therefor exist) or (ii) existing
or, to the knowledge of the Company, threatened labor strikes, disputes,
grievances, controversies or other labor troubles affecting the Company (nor, to
the knowledge of the Company, does any valid basis therefor exist).
(g) UNIONS. The Company has never been a party to any agreement with any
union, labor organization or collective bargaining unit. No employees of the
Company are represented by any union, labor organization or collective
bargaining unit. Except as set forth in Schedule 3.11(g), to the knowledge of
the Company, none of the employees of the Company has threatened to organize or
join a union, labor organization or collective bargaining unit.
SECTION 3.12. ALIENS. To the actual knowledge of the Company and the
Owner, all employees of the Company are citizens of, or are authorized in
accordance with federal immigration laws to be employed in, the United States.
SECTION 3.13. EMPLOYEE BENEFIT AND OTHER COMPENSATION PLANS. The Company
and the Owner have maintained all employee benefit plans, pension plans,
profit-sharing plans, 401(k) plans, HR 10 plans or any other such arrangement
whether covered under the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or not (the "Employee Benefit Plans") in accordance with all
applicable laws. Prior to and after closing, the Owner will effect the
distribution, liquidation, freeze, rollover or other transition of the Employee
Benefit Plans with no liability to the Company or AMP. The Company and AMP will
reasonably cooperate
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with Owner in such transition after Closing.
Except as set forth in Schedules 3.11(a), 3.11(b), 3.11(c), 3.11(d),
3.13(a) and 3.13(l), none of the Company, any Owner or any Physician Employee is
a party to any compensation or other arrangement with any person relating to the
provision of healthcare related services, other than arrangements with the
Company.
SECTION 3.14. ABSENCE OF CERTAIN CHANGES. Except as set forth on Schedule
3.14 since the Balance Sheet Date, the Company has not
(a) suffered a Material Adverse Effect, whether or not caused by any
deliberate act or omission of the Company or any Owner;
(b) contracted for the purchase of any capital asset having a cost in
excess of $5,000 or made any single capital expenditure in excess of $5,000;
(c) incurred any indebtedness for borrowed money (other than short-term
borrowings in the ordinary course of business consistent with reasonable past
practice) or issued or sold any debt securities;
(d) incurred or discharged any material liabilities or obligations, except
in the ordinary course of business consistent with reasonable past practice;
(e) paid any amount on any indebtedness prior to the due date, forgiven or
cancelled any claims or any debt in excess of $5,000 or released or waived any
rights or claims, except in the ordinary course of business consistent with
reasonable past practice;
(f) mortgaged, pledged or subjected to any security interest, lien, lease
or other charge or encumbrance any of its properties or assets (other than
statutory liens arising in the ordinary course of business consistent with
reasonable past practice or other liens that do not materially detract from the
value or interfere with the use of such properties or assets);
(g) suffered any damages or destruction to or loss of any assets (whether
or not covered by insurance) that has resulted, or might reasonably be expected
to result, individually or in the aggregate, in a Material Adverse Effect;
(h) acquired or disposed of any assets having an aggregate value in excess
of $5,000, except in the ordinary course of business consistent with reasonable
past practice or except as contemplated in this Agreement;
(i) written up or written down the carrying value of any of its assets,
other than accounts receivable in the ordinary course of business consistent
with reasonable past practice;
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(j) changed the costing system or depreciation methods of accounting for
its assets;
(k) lost or terminated any employee, patient, customer or supplier that
has resulted, or might reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect;
(l) increased the compensation of any Owner, director, officer, key
employee or consultant;
(m) increased the compensation of any employee (except for increases in
the ordinary course of business consistent with reasonable past practice) or
hired any new employee who, in either case, is expected to receive annualized
compensation of $15,000 or more;
(n) made any payments of cash or assets to or loaned any money or assets
to any person or entity referred to in Section 3.26;
(o) formed, or acquired or disposed of any interest in, any corporation,
partnership, joint venture, limited liability company or other entity;
(p) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of its capital stock,
securities or other ownership interests or any rights to acquire such capital
stock, securities or other ownership interests, or agreed to change the terms
and conditions of any such capital stock, securities or other ownership
interests or rights;
(q) entered into any agreement providing for total payments in excess of
$5,000 in any 12 month period with any person or group, or modified or amended
in any material respect the terms of any such existing agreement, except in the
ordinary course of business consistent with reasonable past practice;
(r) entered into, adopted or amended any Employee Benefit Plan, except as
contemplated hereby; or
(s) entered into any commitment or transaction, or experienced any event,
that would materially interfere with its performance under this Agreement or any
other agreements or document executed or to be executed pursuant to this
Agreement or otherwise has resulted, or might reasonably be expected to result,
individually or in the aggregate, in a Material Adverse Effect.
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SECTION 3.15. TITLE; LEASED ASSETS.
(a) REAL PROPERTY. The Company does not own any interest in any real
property, other than the leases provided or to be provided to AMP before
December 15, 1997 and identified in Schedule 3.15.
(b) PERSONAL PROPERTY. Except as set forth in Schedule 3.15, the Company
has good and marketable title to all the real and personal property, including
the Assets, owned by it, but excluding the Excluded Assets as of the Closing.
(c) LEASES. Copies of (i) all leases of real property and (ii) leases of
personal property involving rental payments within any 12-month period in excess
of $5,000, in either case to which the Company is a party, either as lessor or
lessee, have been or will be provided to AMP before December 15, 1997 and are
listed in Schedule 3.15. All such leases are valid and, to the knowledge of the
Company, enforceable in accordance with their respective terms.
SECTION 3.16. COMMITMENTS. Except as set forth in Schedule 3.16, the
Company is not a party to nor is it bound by, nor are any of its partnership
interests subject to, nor are the assets or the business of the Company bound
by, whether or not in writing, any of the following (collectively, the
"Commitments"):
(i) partnership or joint venture agreement;
(ii) guaranty or suretyship, indemnification or contribution
agreement or performance bond;
(iii) debt instrument, loan agreement or other obligation relating
to indebtedness for borrowed money or money lent or to be lent to another;
(iv) contract to purchase real property;
(v) agreement with dealers or sales or commission agents, public
relations or advertising agencies, accountants or attorneys (other than in
connection with this Agreement and the transactions contemplated hereby)
involving total payments within any 12-month period in excess of $5,000
and that is not terminable on 30 days' notice with or without penalty;
(vi) agreement relating to any matter or transaction involving more
than $5,000 in the aggregate;
(vii) powers of attorney;
(viii) contracts containing noncompetition covenants;
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(ix) agreement providing for the purchase from a supplier of all or
substantially all of the requirements of the Company of a particular
product or service; or
(x) any other agreement or commitment not made in the ordinary
course of business or that is material to the Company's business,
operations, condition (financial or otherwise), results of operations or
prospects.
True, correct and complete copies of the written Commitments, and true, correct
and complete written descriptions of the oral Commitments, will be delivered to
AMP before December 15, 1997. Except as set forth in Schedule 3.16, there are no
existing or asserted defaults, events of default or events, occurrences, acts or
omissions that, with the giving of notice or lapse of time or both, would
constitute defaults by the Company or, to the best knowledge of the Company, any
other party to a material Commitment, and no penalties have been incurred nor
are amendments pending with respect to any material Commitment, except as
described in Schedule 3.16. The Commitments are in full force and effect and are
valid and enforceable obligations of the Company and, to the best knowledge of
the Company, the other parties thereto in accordance with their respective
terms, and no defenses, off-sets or counterclaims have been asserted or, to the
best knowledge of the Company, may be made by any party thereto (other than by
the Company) nor has the Company waived any rights thereunder, except as
described in Schedule 3.16. Except as disclosed specifically in Schedule 3.16,
(i) none of the Company or any Owner has received notice of any plan or
intention of any other party to any Commitment to exercise any right to cancel
or terminate any Commitment, and neither the Company nor any Owner knows of any
fact that would justify the exercise of such a right and (ii) none of the
Company or any Owner currently contemplates, or has a reason to believe any
other person currently contemplates, any amendment or change to any Commitment.
SECTION 3.17. INSURANCE. The Company and the Owner carry property,
liability, malpractice, workers' compensation and such other types of insurance
pursuant to the insurance policies listed and described in Schedule 3.17 (the
"Insurance Policies"). The Insurance Policies are all of the insurance policies
of the Company and the Owners relating to the Company. All of the Insurance
Policies are issued by insurers of recognized responsibility, and, to the best
knowledge of the Company, are valid and enforceable policies. All Insurance
Policies have been maintained in force without interruption up to and including
the Closing Date. True, complete and correct copies of all Insurance Policies
have been provided to AMP. Except as set forth in Schedule 3.17, neither the
Company, nor the Owner has received any notice or other communication from any
issuer of any Insurance 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 acknowledge of the Company, no
such cancellation or increase of deductibles, retainages or premiums is
threatened. Except as set forth on Schedule 3.17, neither the Company, nor the
Owner has any outstanding claims, settlements or premiums owed against any
Insurance Policy, and the Company and the Owner have given all notices or has
presented all potential or actual claims under any Insurance Policy in a due and
timely fashion. Except as set forth on Schedule 3.17, neither the Company, nor
the Owner has
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filed a written application for any professional liability insurance coverage
that has been denied by an insurance agency or carrier, and the Company, and the
Owner have been continuously insured for professional malpractice claims for at
least the past seven years (or such shorter periods of time that the Company has
been in existence or the Owner has been licensed to practice podiatry). Schedule
3.17 also sets forth a list of all claims under any Insurance Policy in excess
of $5,000 per occurrence filed by the Company or the Owner during the
immediately preceding five years.
SECTION 3.18. PROPRIETARY RIGHTS AND INFORMATION. The Company does not
own, and will not convey at Closing, any proprietary rights or information
necessary for the conduct of its business.
SECTION 3.19. TAXES.
(a) FILING OF TAX RETURNS. The Company has duly and timely filed (in
accordance with any extensions duly granted by the appropriate governmental
agency, if applicable) with the appropriate governmental agencies all material
Tax Returns and reports required to be filed in the United States, 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 the Company for the periods covered thereby.
(b) PAYMENT OF TAXES. To the actual knowledge of the Company and the
Owner, except for such items as the Company may be disputing in good faith by
proceedings in compliance with applicable law, which are described in Schedule
3.19(b) and are adequately provided for, (i) the Company has paid all Taxes that
have become due (including those related to employment) and has properly
accounted for on its books and records for all of the same that have not yet
become due and (ii) the Company is not delinquent in the payment of any Tax.
(c) NO PENDING DEFICIENCIES, DELINQUENCIES, ASSESSMENTS OR AUDITS. Except
as set forth in Schedule 3.19(c), the Company has not received any notice that
any Tax deficiency or delinquency has been asserted against the Company. To the
actual knowledge of the Company and the Owner, there is no unpaid assessment,
proposal for additional Taxes, deficiency or delinquency in the payment of any
of the Taxes of the Company that could be asserted by any Taxing authority.
There is no Taxing authority audit of the Company pending, or, to the actual
knowledge of the Company, threatened, and the results of any completed audits
are properly reflected in the Financial Statements. To the actual knowledge of
the Company and the Owner, the Company has not violated in any material respect
any federal, state, local or foreign Tax law.
(d) NO EXTENSION OF LIMITATION PERIOD. The Company has not granted an
extension to any taxing authority of the limitation period during which any Tax
liability may be assessed or collected.
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(e) ALL WITHHOLDING REQUIREMENTS SATISFIED. To the actual knowledge of the
Company and the Owner, all monies required to be withheld by the Company and
paid to governmental agencies for all income, social security, unemployment
insurance, sales, excise, use and other Taxes have been collected or withheld
and paid to the respective governmental agencies.
(f) FOREIGN PERSON. The Company is not a foreign person, as such term is
referred to in Section 1445(f)(3) of the Code.
(g) SAFE HARBOR LEASE. None of the Assets of the Company constitutes
property that the Company, AMP or any Affiliate of AMP 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 of the Company are subject to a
lease to a "tax exempt entity" as such term is defined in Section 168(h)(2) of
the Code.
SECTION 3.20. COMPLIANCE WITH LAWS. To the actual knowledge of the Company
and the Owner, the Company and the Owner have complied in all material respects
with, and are in compliance in all material respects with, all applicable laws,
regulations and licensing requirements and has filed with the proper authorities
all necessary statements and reports, except where the failure to so comply or
file would not, and is not reasonably expected to, individually or in the
aggregate, result in a Material Adverse Effect. To the actual knowledge of the
Company and Owner, there are no existing violations by the Company, or the Owner
of any federal, state or local law or regulation that could, individually or in
the aggregate, result in a Material Adverse Effect. To the actual knowledge of
the Company and the Owner, the Company possesses all materially necessary
licenses, franchises, permits and governmental authorizations for the conduct of
its, his or her business as now conducted, all of which are listed (with
expiration dates, if applicable) in Schedule 3.20. To the actual knowledge of
the Company and the Owner except as set forth in Schedule 3.20, the transactions
expressly contemplated by this Agreement will not result in a default under or a
breach or violation of, or adversely affect the rights and benefits afforded by,
any such licenses, franchises, permits or government authorizations, except for
any such default, breach or violation that would not, and is not reasonably
expected to, individually or in the aggregate, have a Material Adverse Effect.
Except as set forth in Schedule 3.20, neither the Company, nor the Owner has
received any notice from any federal, state or other governmental authority or
agency having jurisdiction over its or his properties or activities, or any
insurance or inspection body, that its or his operations or any of its or his
properties, facilities, equipment or business practices fail to comply with any
applicable law, ordinance, regulation, building or zoning law or requirement of
any public or quasi-public authority or body, except where failure to so comply
would not, and is not reasonably expected to, individually or in the aggregate,
have a Material Adverse Effect.
SECTION 3.21. FINDER'S FEE. Except as set forth in Schedule 3.21, none of
the
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Company, any Owner or any of their Affiliates has incurred any obligation for
any finder's, broker's, agent's or similar fee in connection with the
transactions expressly contemplated hereby.
SECTION 3.22. LITIGATION. Except as described specifically in detail in
Schedule 3.22, there are no legal actions, administrative proceedings or
investigations instituted, or, to the actual knowledge of the Company,
threatened, affecting or that could affect the Company, any Owner, any Physician
Employee, the outstanding ownership interests in the Company, any of the assets
of the Company or the operations, business, condition (financial or otherwise),
results of operations or prospects of the Company which (i) if successful,
could, or might reasonably be expected to, individually or in the aggregate,
have a Material Adverse Effect or (ii) could adversely affect the ability of the
Company or any Owner to effect the transactions contemplated hereby. None of the
Company, any Owner or any Physician Employee is (a) subject to any court or
administrative order, judgment, writ, injunction or decree or that would cause a
Material Adverse Effect (b) in default with respect to any such order, judgment,
writ, injunction or decree that would cause a Material Adverse Effect. The
Company and the Owners have no actual knowledge of any valid basis for any such
action, proceeding or investigation. Except as set forth in Schedule 3.22, to
the actual knowledge of the Company, all medical malpractice claims asserted
against the Company or any of its Affiliates, general liability incidents and
incident reports have been submitted on a timely basis and in the proper manner
to the Company's insurer therefor. To the actual knowledge of the Company and
the Owner, all claims made or threatened against the Company in excess of its
deductible are covered under its Insurance Policies.
SECTION 3.23. CONDITION OF FIXED ASSETS. All of the facilities, structures
and equipment (the "Fixed Assets") regularly used by the Company in its business
are in good condition and repair, subject to normal wear and tear, and conform
in all material respects with all applicable ordinances, regulations and other
laws, and the Company and the Owners have no actual knowledge of any material
latent defects therein. Notwithstanding anything to the contrary herein, the
Fixed Assets will be as accepted by AMP at the Closing "as is".
SECTION 3.24. DISTRIBUTIONS AND REPURCHASES. Except as described in
Schedule 3.24, or contemplated by this Agreement, no distribution, payment or
dividend of any kind has been declared or paid by the Company on any of its
ownership interests since the Balance Sheet Date. No repurchase of any of the
Company's ownership interests has been approved or effected or is pending or
contemplated by the Board of Directors of the Company.
SECTION 3.25. BANKING RELATIONS. For information purposes for the Company
after the Closing, set forth in Schedule 3.25 is a complete and accurate list of
all borrowing and investing arrangements that the Company 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.
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SECTION 3.26. INTERESTED PERSONS; AFFILIATIONS. To the actual knowledge of
the Company and the Owner, except as set forth in Schedule 3.26, no Owner,
Physician Employee, officer, employee or director of the Company, or any of
their respective spouses, children or Affiliates, owns, directly or indirectly,
on an individual or joint basis, any interest in, has a compensation or other
financial arrangement with or serves as an officer or director of any customer
or supplier of the Company or any organization that has a contract or
arrangement with the Company. To the actual knowledge of the Company and the
Owner except as set forth in Schedule 3.26, none of the Company, any of its
directors, officers, employees or consultants, any Owner, any Physician Employee
or any Affiliate of any such person is, or within the last five years was, a
party to any contract, lease, agreement or arrangement, including, but not
limited to, any joint venture or consulting agreement, with any physician,
hospital, pharmacy, home health agency or other person that is in a position to
make or influence referrals to, or otherwise generate business for, the Company.
SECTION 3.27. ENVIRONMENTAL MATTERS.
(a) ENVIRONMENTAL LAWS. To the actual knowledge of the Company and the
Owner, neither the Company nor any of its assets is currently in violation of,
or subject to any existing, pending or, to the actual knowledge of the Company,
threatened investigation or inquiry by any governmental authority or to any
remedial obligations under, any Environmental Law.
(b) PERMITS. To its and the Owner's actual knowledge, the Company is not
required to obtain, by reason of any Environmental Law, any permits, licenses or
similar authorizations to occupy, operate or use any buildings, improvements,
fixtures or equipment owned or leased by the Company.
(c) SUPERFUND LIST. To its and the Owner's actual knowledge, none of the
assets owned or leased by the Company are on any federal or state "Superfund"
list or subject to any environmentally related liens.
SECTION 3.28. CERTAIN PAYMENTS. None of the Company, any director, officer
or employee of the Company, any Owner by his or her own act or any of their
respective Affiliates has paid, caused to be paid or received, directly or
indirectly:
(a) to or from any government or agency thereof or any agent of any
supplier or customer, any bribe, kick-back or other similar payment; or
(b) any contribution to any political party or candidate, other than from
personal funds not reimbursed by their respective employers or as otherwise
permitted by applicable law.
SECTION 3.29. MEDICAL WASTE. To the actual knowledge of the Company and
the Owner, with respect to the generation, transportation, treatment, storage,
disposal or other handling of Medical Waste, the Company has complied with all
Medical Waste Laws in all
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material respects.
SECTION 3.30. MEDICARE AND MEDICAID PROGRAMS. The Company and the Owner,
to the extent necessary, are qualified for participation in the Medicare and
Medicaid programs and are parties to provider agreements for Medicaid programs
that are in full force and effect with no events of default having occurred
thereunder. The Company and the Owner require no other certification or
qualification under Medicare or Medicaid to lawfully conduct their podiatry
practice or to receive payment for their services, including the use of surgical
facilities. To its and the Owner's actual knowledge, the Company and the Owner
have timely filed all claims or other reports required to be filed prior to the
Effective Date with respect to the purchase of services by third-party payors
("Payors"), including but not limited to Medicare and Medicaid programs. To the
actual knowledge of the Company and the Owner, all such claims or reports are
complete and accurate in all material respects. The Company and the Owner have
paid or have properly recorded on the Financial Statements all actually known
and undisputed refunds, discounts or adjustments that have become due pursuant
to such claims, and neither of the Company, nor the Owner has any material
liability to any Payor with respect thereto, except as has been reserved for in
the Balance Sheet. There are no pending appeals, overpayment determinations,
adjustments, challenges, audits, litigation or notices of intent to reopen
Medicare and/or Medicaid claims determinations or other reports required to be
filed by the Company or the Owner in order to be paid by a Payor for services
rendered. During the past six years, and without any continuing course of
action, none of the Company, any of its directors, officers or the Owner have
been convicted of, or pled guilty or nolo contendere to, patient abuse or
neglect or any other Medicare or Medicaid program-related offense. None of the
Company or any of its directors, officers, Owners or, to the best of the
Company's or the Owner's actual knowledge, its employees, consultants or any of
the aforesaid persons' respective Affiliates has committed any offense that may
serve as the basis for the Company's suspension or exclusion from the Medicare
and Medicaid programs, including, but not limited to, defrauding a government
program, loss of a license to provide health care services or failure to provide
quality care.
SECTION 3.31. FRAUD AND ABUSE. None of the Company, the Owner, nor any
other person or entity providing professional services on their behalf have been
subject to a "final adverse action" as defined in 42 U.S.C. 1128E(g)(1). During
the past six years, and without any continuing course of action, the Company,
the Owner and all other persons and entities providing professional services for
or on behalf of the Company, to their actual knowledge, have not engaged in any
activities that are prohibited under 42 U.S.C. ss.ss. 1320a-7, 7a or 7b or 42
U.S.C. ss. 1395nn (subject to the exceptions set forth in such legislation) or
the regulations promulgated thereunder or pursuant to similar state or local
statutes or regulations or that are prohibited by rules of professional conduct,
including, but not limited to, the following:
(a) 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;
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(b) 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;
(c) failure to disclose knowledge by a Medicare or Medicaid claimant of
the occurrence of any event affecting the initial or continued right to any
benefit or payment on their own behalf or on behalf of another with intent to
fraudulently secure such benefit or payment;
(d) knowingly and willfully offering, paying or soliciting or receiving
any remuneration (including any kickback, bribe or rebate), directly or
indirectly, overtly or covertly, in cash or in kind (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 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; or
(e) referring a patient for designated health services (as defined in 42
U.S.C. ss. 1395nn) to or providing designated 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 and to which no exception under 42
U.S.C. ss. 1395nn applies.
SECTION 3.32. PAYORS. Schedule 3.32 sets forth a true, correct and
complete list of the names and addresses of each Payor, including any private
pay patient as a single payor, of the Company's services that accounted for more
than 5% of the aggregate revenues of the Company in the five previous fiscal
years. Except as set forth in Section 3.32, the Company has good relations with
such Payors, and none of such Payors has notified the Company that it intends to
discontinue its relationship with the Company or to deny any claims submitted to
such Payor for payment.
SECTION 3.33. REPRESENTATIONS AND WARRANTIES NOT A GUARANTEE OF FUTURE
PERFORMANCE. It is understood between the Company, the Owner, and AMP, that the
representations and warranties of the Owner and/or the Company hereunder are not
intended to be a guarantee of how the Company or the Assets will perform in the
future.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE OWNERS
The Owner represents and warrants to AMP and AMP Subsidiary that the
following are true and correct as of the Closing Date:
SECTION 4.1. VALIDITY; OWNER'S CAPACITY. This Agreement and each other
agreement contemplated hereby has been or will be, as the case may be, as of the
Closing Date duly
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executed and delivered by the Owner and constitute or will constitute, as the
case may be, legal, valid and binding obligations of the Owner, enforceable
against the Owner in accordance with their respective terms. The Owner has legal
capacity to enter into and perform this Agreement and the other such agreements
to which the Owner is a party.
SECTION 4.2. NO VIOLATION. To the actual knowledge of the Owner, neither
the execution, delivery or performance of this Agreement or the other agreements
of the Owner contemplated hereby nor the consummation of the transactions
contemplated hereby or thereby will (a) conflict with, result in a violation or
breach of the terms, conditions or provisions of or constitute a default under
any agreement, indenture or other instrument by which any Owner is bound or to
which any of the ownership interests in the Company are subject, or result in
the creation or imposition of any security interest, lien, charge or encumbrance
upon any of the ownership interests in the Company or (b) to the actual
knowledge of each Owner, violate or conflict with any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body.
SECTION 4.3. PERSONAL HOLDING COMPANIES; CONTROL OF RELATED BUSINESSES.
The Owner owns no ownership interests in the Company, directly or indirectly,
beneficially or of record, through a personal holding company. Except as set
forth in Schedule 4.3, the Owner controls no other business that is in the same
or similar line of business as the Company or that has or is engaged in a
transaction with the Company.
SECTION 4.4. TRANSFERS OF OWNERSHIP INTERESTS. Set forth in Schedule 4.4
is a list of all transfers or other transactions involving ownership interests
in the Company. All such transfers by the Owner were made for valid business
reasons and not in anticipation or contemplation of the consummation of the
transactions contemplated by this Agreement.
SECTION 4.5. CONSENTS. Except as specifically disclosed pursuant to
Article III, no consent, authorization or approval of any person is required to
authorize, or is required in connection with, the Owner's execution, delivery
and performance of this Agreement or the agreements contemplated hereby.
SECTION 4.6. CERTAIN PAYMENTS. Owner has not paid, caused to be paid or
received, directly or indirectly, in connection with the business of the
Company:
(a) to or from any government or agency thereof or any agent of any
supplier or customer, any bribe, kick-back or similar payment; or
(b) any contribution to any political party or candidate, other than from
personal funds not reimbursed by the Company or as otherwise permitted by
applicable law.
SECTION 4.7. FINDER'S FEE. Except as set forth in Schedule 4.7, Owner has
not incurred any obligation for any finder's, broker's, agent's or similar fee
in connection with the
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transactions contemplated hereby.
SECTION 4.8. INTERESTED PERSONS; AFFILIATIONS. Except as set forth in
Schedule 4.8, no Owner and no Owner's spouse, children or Affiliates owns,
directly or indirectly, on an individual or joint basis, any interest in, has a
compensation or other financial arrangement with or serves as an officer or
director of, any customer or supplier of the Company or any organization that
has a contract or arrangement with the Company. No Owner or any of such Owner's
Affiliates is, or within the last five years was, a party to any contract,
lease, agreement or arrangement, including, but not limited to, any joint
venture or consulting agreement, with any physician, hospital, pharmacy, home
health agency or other person that is in a position to make or influence
referrals to, or otherwise generate business for, the Company.
SECTION 4.9. INVESTMENTS IN COMPETITORS. Except as disclosed in Schedule
4.9, Owner does not own, directly or indirectly, any interests or has any
investment in any person that is a competitor of the Company; provided, however,
Owner is landlord and Owner of the premises for the Decatur Property.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF AMP AND AMP SUBSIDIARY
AMP and AMP Subsidiary each represent and warrant to the Company and the
Owners that the following are true and correct as of the Closing Date:
SECTION 5.1. ORGANIZATION AND GOOD STANDING. AMP 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 carry on the
business in which it is engaged, to own the properties it owns, to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
Prior to the Closing, neither AMP nor AMP Subsidiary will have had any
operations, other than in connection with its formation and capitalization and
the transactions contemplated by this Agreement and the Other Agreements.
SECTION 5.2. CAPITALIZATION OF AMP. The authorized and outstanding capital
stock of AMP are as disclosed in the Registration Statement.
SECTION 5.3. CAPITALIZATION OF AMP SUBSIDIARY. AMP owns all of the
outstanding capital stock of AMP Subsidiary. AMP Subsidiary does not have any
bonds, debentures, notes or other obligations the holders of which will have the
right to vote (or will be convertible into or exercisable for securities having
the right to vote) with the stockholders of AMP Subsidiary on any matter. There
exist no options, warrants, subscriptions or other rights to purchase, or
securities convertible into or exchangeable for, any of the authorized or
outstanding securities of AMP Subsidiary, and no option, warrant, call,
conversion right or commitment of any kind
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will exist that obligates AMP Subsidiary to issue any of its authorized but
unissued capital stock. AMP Subsidiary has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay a dividend or make any distribution in
respect thereof. No stockholder of AMP Subsidiary has granted options or other
rights to purchase any shares of AMP Subsidiary Common Stock from such
stockholder.
SECTION 5.4. AUTHORIZATION AND VALIDITY. The execution, delivery and
performance by AMP and AMP Subsidiary of this Agreement and the other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by AMP and AMP Subsidiary. This
Agreement and each other agreement contemplated hereby to be executed by AMP and
AMP Subsidiary have been or will be, as the case may be, as of the Closing Date
duly executed and delivered by AMP and AMP Subsidiary and constitute or will
constitute, as the case may be, legal, valid and binding obligations of AMP and
AMP Subsidiary.
SECTION 5.5. NO VIOLATION. Neither the execution, delivery or performance
of this Agreement or the other agreements contemplated hereby nor the
consummation of the transactions contemplated hereby or thereby will (a)
conflict with, result in a violation or breach of the terms, conditions and
provisions of or constitute a default under the Certificate of Incorporation or
Bylaws of AMP or AMP Subsidiary or any agreement, indenture or other instrument
by which AMP or AMP Subsidiary is or will be, as of the Closing, bound or (b)
except as would not, individually or in the aggregate, have a material adverse
effect on the business, operations, condition (financial or otherwise) or
results of operations of AMP or AMP Subsidiary, violate or conflict with any
judgment, decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over AMP or AMP
Subsidiary or the properties or assets of AMP or AMP Subsidiary.
SECTION 5.6. FINDER'S FEE. To their actual knowledge, neither AMP nor AMP
Subsidiary has incurred any obligation for any finder's, broker's, agent's or
similar fee in connection with the transactions contemplated hereby.
SECTION 5.7. CONSENTS. Except as have been obtained or as may be required
by the exchange or automated quotation system on which the AMP Common Stock may
be listed or under the applicable state Business Corporation Act, the Exchange
Act, the Securities Act or state securities laws, no consent, authorization,
approval, permit or license of, or filing with, any governmental or public body
or authority, any lender, any lessor or any other person is required to
authorize, or is required in connection with, the execution, delivery and
performance of this Agreement or the agreements contemplated hereby on the part
of AMP or AMP Subsidiary.
SECTION 5.8. LIABILITIES AND OBLIGATIONS. To the actual knowledge of AMP,
the Registration Statement will reflect material liabilities of AMP, except for
liabilities or obligations incurred in the ordinary course of business
consistent with reasonable past practice. To its
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actual knowledge, AMP is not liable upon or with respect to, or obligated in any
other way to provide a material amount of funds in respect of or to guarantee or
assume in any manner, any debt, obligation or dividend of any person,
corporation, association, partnership, joint venture, trust or other entity, and
AMP does not know of any valid basis for the assertion of any claims or
liabilities of any nature or in any amount.
SECTION 5.9. EMPLOYEE BENEFIT PLANS. Schedule 5.9 contains a complete and
accurate list of all employee benefit plans (within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
sponsored by AMP or to which AMP contributes on behalf of its employees and all
employee benefit plans previously sponsored or contributed to on behalf of its
employees within the five years preceding the date hereof (the "AMP Employee
Benefit Plans").
SECTION 5.10. TAXES.
(a) FILING OF TAX RETURNS. To its actual knowledge, AMP 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 material Tax Returns and reports required to be filed in the United States,
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 AMP for the periods covered thereby.
(b) PAYMENT OF TAXES. To its actual knowledge, except for such items as
AMP may be disputing in good faith by proceedings in compliance with applicable
law, (i) AMP has paid all Taxes, penalties, assessments and interest that have
become due with respect to any Tax Return that it has filed (including those
related to employment) and has properly accrued on its books and records for all
of the same that have not yet become due and (ii) AMP is not delinquent in the
payment of any Tax, assessment or governmental charge.
(c) NO PENDING DEFICIENCIES, DELINQUENCIES, ASSESSMENTS OR AUDITS. To its
actual knowledge, AMP has not received any notice that any Tax deficiency or
delinquency has been asserted against AMP. There is no unpaid assessment,
proposal for additional Taxes, deficiency or delinquency in the payment of any
of the Taxes of AMP that could be asserted by any Taxing authority. There is no
Taxing authority audit of AMP pending, or, to the actual knowledge of AMP,
threatened, and the results of any completed audits are properly reflected in
the Financial Statements. AMP has not violated in any material respect any
federal, state, local or foreign Tax law.
(d) NO EXTENSION OF LIMITATION PERIOD. AMP has not granted an extension to
any taxing authority of the limitation period during which any Tax liability may
be assessed or collected.
SECTION 5.11. COMPLIANCE WITH LAWS. Except as set forth in Schedule 5.11
and to the
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actual knowledge of AMP, AMP and its predecessors have complied in all material
respects with, and are in compliance in all material respects with, all
applicable laws, regulations (including applicable state and federal securities
laws) and licensing requirements and has filed with the proper authorities all
necessary statements and reports, except where the failure to so comply or file
would not, and is not reasonably expected to, individually or in the aggregate,
result in a Material Adverse Effect. There are no existing violations by AMP of
any federal, state or local law or regulation that could, individually or in the
aggregate, result in a Material Adverse Effect. To its actual knowledge, AMP has
not received any notice from any federal, state or other governmental authority
or agency having jurisdiction over its, his or her properties or activities, or
any insurance or inspection body, that its, his or her operations or any of its,
his or her properties, facilities, equipment or business practices fail to
comply with any applicable law, ordinance, regulation, building or zoning law or
requirement of any public or quasi-public authority or body, except where
failure to so comply would not, and is not reasonably expected to, individually
or in the aggregate, have a Material Adverse Effect.
SECTION 5.12. LITIGATION. Except as set forth on Schedule 5.12 and to the
actual knowledge of AMP, there are no material legal actions, administrative
proceedings or investigations instituted, or, to the actual knowledge of AMP,
threatened, against AMP. AMP is not (a) subject to any material court or
administrative order, judgment, writ, injunction or decree or (b) in default
with respect to any such order, judgment, writ, injunction or decree. AMP has no
actual knowledge of any valid basis for any such material action, proceeding or
investigation. To the actual knowledge of AMP, all material claims asserted
against AMP, general liability incidents and incident reports have been
submitted on a timely basis and in the proper manner to AMP's insurer therefor.
To AMP's knowledge, all material claims made or threatened against AMP in excess
of its deductible would be covered under insurance policies.
ARTICLE VI
COVENANTS OF THE COMPANY AND THE OWNERS
The Company and the Owners agree that between the date hereof and the
Closing:
SECTION 6.1. CONSUMMATION OF AGREEMENT. The Company and the Owners will
use their commercially reasonable best efforts to cause the consummation of the
transactions contemplated hereby in accordance with their terms and conditions.
SECTION 6.2. BUSINESS OPERATIONS. The Company will operate its business in
the ordinary course. The Company and the Owners will use their commercially
reasonable best efforts to preserve the businesses of the Company intact.
Neither the Company nor any Owners will knowingly take any action that would,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect. Except as set forth in Schedule 6.2, the Company will use its
commercially reasonable best efforts to preserve intact its relationships
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with Payors, referral sources, customers, suppliers, patients, employees and
others having significant business relations with it, unless doing so would
impair its goodwill or, individually or in the aggregate, result in a Material
Adverse Effect. The Company will collect its receivables and pay its trade
payables in the ordinary course of business consistent with reasonable past
practice.
SECTION 6.3. ACCESS. The Company and the Owners will, at reasonable times
as agreed upon with Owner, and in each instance outside of normal business hours
and on reasonable notice, permit AMP and its authorized representatives
reasonable access to, and make available for inspection, all of the assets and
business of the Company, including its employees, if expressly permitted by
Owner, and permit AMP and its authorized representatives to inspect and make
copies of all documents, records (other than confidential portions of patient
medical records) and information with respect to the affairs of the Company as
AMP and its representatives may reasonably request, all for the sole purpose of
permitting AMP to become familiar with the businesses and assets and liabilities
of the Company. AMP shall not have any contact or access to the premises or
business of the Company during regular office hours, will instruct its employees
and agents not to call, mail, or deliver any materials or communications
regarding this transaction to the business location, will prohibit any
communication with employees of the Company but with the express consent in each
instance of Owner, and shall direct all communications regarding this
transaction solely through the private telephone service of Owner (telephone
404-697-6110), the address for Owner set forth below, or through legal counsel
of Owner as set forth below. However, Owner agrees that at AMP's authorized
visits as provided for above, that Owner will be present to produce the
requested documentation and information.
SECTION 6.4. TAX RETURNS. The Owner will file a tax return for the Company
for the period from January 1, 1998 to the Closing Date. AMP will have the right
to review the tax returns of the Company for years prior to 1998 and for the
period from January 1, 1998 to the Closing Date.
SECTION 6.5. NOTIFICATION OF CERTAIN MATTERS. The Company and the Owners
will promptly inform AMP in writing of (a) any notice of, or other communication
relating to, a default or event that, with notice or lapse of time or both,
would become a default, received by the Company or any Owner subsequent to the
date of this Agreement and prior to Closing under any Commitment material to the
Company's condition (financial or otherwise), operations, assets, liabilities,
business or prospects and to which it is subject, (b) any event or information
that would cause the Company or any Owner to believe reasonably that any of
their respective representations and warranties under this Agreement to be
untrue or (c) any material adverse change in the Company's condition (financial
or otherwise), operations, assets, liabilities, business or prospects.
SECTION 6.6. APPROVALS OF THIRD PARTIES. The Company and the Owners will
use their commercially reasonable best efforts to secure, or will cooperate with
AMP to obtain, as soon
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as practicable after the date hereof, all necessary approvals and consents of
third parties to the consummation of the acquisition transactions contemplated
hereby, including, without limitation, all necessary approvals and consents
required under any real property and personal property leases.
SECTION 6.7. EMPLOYEE MATTERS. Except as set forth in Schedule 6.7 or as
otherwise specifically contemplated by this Agreement, the Company will not,
without the prior written approval of AMP, which approval shall not be delayed
or unreasonably withheld, except as required by law:
(a) increase the Cash Compensation of any Owner or other employee of the
Company;
(b) adopt, amend or terminate any Compensation Plan;
(c) adopt, amend or terminate any Employment Agreement;
(d) adopt, amend or terminate any Employee Policies and Procedures;
(e) adopt, amend or terminate any Employee Benefit Plan;
(f) take any action that could deplete the assets of any Employee Benefit
Plan, other than payment of benefits in the ordinary course to participants and
beneficiaries;
(g) fail to pay any premium or contribution due or with respect to any
Employee Benefit Plan;
(h) fail to file any return or report with respect to any Employee Benefit
Plan;
(i) institute, settle or dismiss any employment litigation, except as
could not, individually or in the aggregate, result in a Material Adverse
Effect;
(j) enter into, modify, amend or terminate any agreement with any union,
labor organization or collective bargaining unit; or
(k) take or fail to take any action with respect to any past or present
employee of the Company that would, individually or in the aggregate, result in
a Material Adverse Effect.
SECTION 6.8. CONTRACTS. Except with AMP's prior written consent, which
consent shall not be delayed or unreasonably withheld, the Company will not
assume or enter into any contract, lease, license, obligation, indebtedness,
commitment, purchase or sale that is material to the Company's business nor will
it waive any material right or cancel any material contract, debt or claim,
except as contemplated by this Agreement.
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SECTION 6.9. CAPITAL ASSETS; PAYMENTS OF LIABILITIES. The Company will
not, without the prior written approval of AMP (a) acquire or dispose of any
capital asset having a fair market value of $5,000 or more or acquire or dispose
of any capital asset outside of the ordinary course of business or (b) discharge
or satisfy any lien or encumbrance or pay or perform any obligation or
liability, other than (i) liabilities and obligations reflected in the Financial
Statements or (ii) current liabilities and obligations incurred in the usual and
ordinary course of business since the Balance Sheet Date and, in either case (i)
or (ii) above, only as required by the express terms of the agreement or other
instrument pursuant to which the liability or obligation was incurred.
SECTION 6.10. MORTGAGES, LIENS AND GUARANTIES. The Company will not,
without the prior written approval of AMP, which consent shall not be delayed or
unreasonably withheld, enter into or assume any mortgage, pledge, conditional
sale or other title retention agreement, permit any security interest, lien,
encumbrance or claim of any kind to attach to any of its assets (other than
statutory liens and contractual liens of landlords arising in the ordinary
course of business and other liens that do not materially detract from the value
or interfere with the use of such assets), whether now owned or hereafter
acquired, or guarantee or otherwise become contingently liable for any
obligation of another, except obligations arising by reason of enforcement for
collection and other similar transactions in the ordinary course of business, or
make any capital contribution or investment in any person.
SECTION 6.11. ACQUISITION PROPOSALS. From the date of this Agreement
through January 31, 1998 (a) no Owner nor the Company nor any of their
respective officers, directors or partners will, and the Owners and the Company
will direct and use their best efforts to cause the Company's employees, agents
and representatives not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets, any equity securities or partnership interests of the Company (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal") or
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal; (b) each Owner and the Company will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any of the foregoing, and each
will take the necessary steps to inform the individuals or entities referred to
in the first sentence hereof of the obligations undertaken in this Section; and
(c) the Owners and the Company will notify AMP immediately if any such inquiries
or proposals are received by, any such information is requested from or any such
negotiations or discussions are sought to be initiated or continued with the
Company or any Owner.
SECTION 6.12. DISTRIBUTIONS AND REPURCHASES. Except as set forth on
Schedule 6.12 or as contemplated by this Agreement, no distribution, payment or
dividend of any kind will be declared or paid by the Company in respect of its
shares of capital stock nor will any repurchase
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of any equity interests of the Company be approved or effected.
SECTION 6.13. REQUIREMENTS TO EFFECT ACQUISITION. The Company and the
Owners will use their best efforts to take, or cause to be taken, or will
cooperate with AMP in taking all actions necessary to effect the Acquisition
under applicable law, including, without limitation, the filing with the
appropriate government officials of all necessary documents in form approved by
counsel for the parties to this Agreement.
SECTION 6.14. LICENSES AND PERMITS. The Company and the Owners will use
their best efforts to transfer, or will cooperate with AMP to obtain, all
licenses, permits, approvals or other authorizations required under any law,
statute, rule, regulation or ordinance, or otherwise necessary or desirable, for
the Company to conduct its business after the Closing.
SECTION 6.15. DELIVERY OF SCHEDULES. The Company and the Owners will
deliver to AMP all schedules required to be delivered by them prior to the
Closing.
ARTICLE VII
COVENANTS OF AMP AND AMP SUBSIDIARY
AMP and AMP Subsidiary agree that between the date hereof and the Closing:
SECTION 7.1. CONSUMMATION OF AGREEMENT. AMP will use its commercially
reasonable efforts to cause the consummation of the transactions contemplated
hereby in accordance with their terms and conditions and take all corporate and
other action necessary to approve the Acquisition.
SECTION 7.2. REQUIREMENTS TO EFFECT ACQUISITION. AMP will use its best
efforts to take, or cause to be taken, all actions necessary to effect the
Acquisition under applicable law, including, without limitation, the filing with
the appropriate government officials of all necessary documents in form approved
by counsel for the parties to this Agreement.
SECTION 7.3. NOTIFICATION OF CERTAIN MATTERS. AMP will promptly inform the
Company and the Owners in writing of any material adverse change in AMP's
prospects, proposed public offering, condition (financial or otherwise),
operations, assets, liabilities or business or (b) any event or information that
would cause AMP to believe reasonably that any of its respective representations
and warranties under this Agreement to be untrue.
SECTION 7.4. APPROVALS OF THIRD PARTIES. AMP will use its best efforts to
secure, as soon as practicable after the date hereof, all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby.
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SECTION 7.5. STOCK OPTION PLAN FOR ADVISORS AND CONSULTANTS. Prior to
Closing, AMP will adopt a non-statutory stock option plan for the benefit of
advisors and consultants to AMP (the "Advisors Plan"). Physician Employees who
agree to and serve as advisors or consultants to AMP may be eligible to receive
non-statutory options under the Advisors Plan.
SECTION 7.6. LICENSES AND PERMITS. AMP will use its best efforts to obtain
all licenses, permits, approvals or other authorizations required under any law,
statute, rule, regulation or ordinance, or otherwise necessary or desirable, to
consummate the transactions or provide the services contemplated by the
Management Agreement and to conduct the intended businesses of AMP and AMP
Subsidiary.
SECTION 7.7. DELIVERY OF SCHEDULES. AMP will deliver to the Company and
the Owners all schedules required to be delivered by it prior to the Closing.
SECTION 7.8. PROFESSIONAL LIABILITY INSURANCE. AMP will use commercially
reasonable methods to obtain professional liability insurance for Owner after
the Closing Date but only so long as Owner is providing services or consulting
to the Company or AMP. Owner agrees to pay the portion of any premium
attributable to the period after the termination of such service or consulting
relationship within thirty (30) days after such termination. AMP will cooperate
with Owner in obtaining the tail insurance at Owner's cost.
ARTICLE VIII
COVENANTS OF AMP, THE COMPANY AND THE OWNERS
AMP, the Company and the Owners agree as follows:
SECTION 8.1. FILINGS; OTHER ACTION.
(a) AMP will promptly prepare and file with the SEC the Registration
Statement on Form S-1 (or other appropriate Form) to be filed by AMP in
connection with its Initial Public Offering (including the prospectus
constituting a part thereof, the "Registration Statement"). AMP will obtain all
necessary state securities law or "Blue Sky" permits and approvals required to
carry out the transactions contemplated by this Agreement. The Company and the
Owners will cooperate as may be reasonably requested in connection with any such
action.
(b) The Company and the Owner will, upon request, furnish AMP with all
information concerning itself, its subsidiaries, directors, officers, partners
and stockholders and such other matters as may be reasonably requested by AMP in
connection with the preparation of the Registration Statement and each amendment
or supplement thereto, or any other statement, filing, notice or application
made by or on behalf of each such party or any of its subsidiaries to any
governmental entity in connection with the Acquisition and the other
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transactions contemplated by this Agreement.
SECTION 8.2. AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party will have the continuing obligation until the Closing to
supplement or amend promptly the Schedules with respect to any matter that would
have been or would be required to be set forth or described in the Schedules in
order to not materially breach any representation, warranty or covenant of such
party contained herein; provided, that no amendment or supplement to a Schedule
that constitutes or reflects a material adverse change to the Company may be
made unless AMP consents to such amendment or supplement, and no amendment or
supplement to a Schedule that constitutes or reflects a material adverse change
to AMP may be made unless the Company and the Owners consent to such amendment
or supplement. If either AMP or the Owner and the Company do not consent to such
amendments, this Agreement (including the Acquisition Consideration) may be
modified in order to obtain such consent or this Agreement may be terminated in
accordance with Section 14.1(c). For all purposes of this Agreement, including,
without limitation, for purposes of determining whether the conditions set forth
herein have been fulfilled, the Schedules hereto will be deemed to be the
Schedules as completed, amended or supplemented with consent pursuant to this
Section.
SECTION 8.3. PRORATION OF COSTS AND RENTS. All rents, personal property
taxes and other sums actually paid under the lease agreements between the
Company and its lessors pertaining to the Assets (but not the Excluded Assets),
all expenses and costs related to the Assets (but not the Excluded Assets), and
the premiums on Owner's malpractice insurance for the month of Closing will be
prorated as of the Closing Date.
SECTION 8.4. EMPLOYEES. AMP shall cause the Company to retain all current
Employees (excluding Owner), as listed on Schedule 3.11(a), at their current
positions and rates of pay for at least ninety (90) days after the Closing Date.
ARTICLE IX
CONDITIONS PRECEDENT OF AMP
Except as may be waived in writing by AMP, or if this Agreement is
terminated pursuant to Article XIV, the obligations of AMP hereunder are subject
to the fulfillment at or prior to the Effective Date of each of the following
conditions:
SECTION 9.1. PROCEEDINGS. No action, proceeding or order by any court or
governmental body or agency will have been threatened, orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
SECTION 9.2. NO MATERIAL ADVERSE EFFECT. No Material Adverse Effect will
have
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occurred, whether or not such effect shall have been caused by the deliberate
act or omission of the Company or any Owner.
SECTION 9.3. GOVERNMENT APPROVALS AND REQUIRED CONSENTS. The Company, the
Owners, the Group Practice and AMP will have obtained all necessary government
and other third-party approvals and consents.
SECTION 9.4. SECURITIES APPROVALS. The Registration Statement will have
become effective under the Securities Act, and no stop order suspending the
effectiveness of the Registration Statement will have been issued and no
proceedings for that purpose will have been initiated or threatened by the SEC.
At or prior to the Effective Date, AMP will have received all state securities
and "Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The AMP Common Stock will have been approved for listing on The Nasdaq
Stock Market, subject only to official notification of issuance.
SECTION 9.5. CLOSING DELIVERIES. AMP will have received all documents and
agreements, duly executed and delivered in form satisfactory to AMP, referred to
in Section 11.1.
SECTION 9.6. CHARTER AMENDMENT. The Company will have amended its charter
or other constitutive documents simultaneously with the Closing so that the
Company is no longer a "professional" corporation or other such "professional"
legal entity.
ARTICLE X
CONDITIONS PRECEDENT OF THE COMPANY AND THE OWNER
Except as may be waived in writing by the Company and the Owner, or if
this Agreement is terminated pursuant to Article XIV, the obligations of the
Company and the Owners hereunder are subject to fulfillment at or prior to the
Effective Date of each of the following conditions:
SECTION 10.1. PROCEEDINGS. No action, proceeding or order by any court or
governmental body or agency will have been threatened, orally or in writing,
asserted, instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.
SECTION 10.2. GOVERNMENT APPROVALS AND REQUIRED CONSENTS. The Company, the
Owners, the Group Practice and AMP will have obtained all necessary government
and other third-party approvals and consents.
SECTION 10.3. SECURITIES APPROVALS. The Registration Statement will have
become effective under the Securities Act, and no stop order suspending the
effectiveness of the
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Registration Statement will have been issued and no proceedings for that purpose
will have been initiated or threatened by the SEC. At or prior to the Effective
Date, AMP will have received all state securities and "Blue Sky" permits
necessary to consummate the transactions contemplated hereby. At or prior to the
Effective Date, the AMP Common Stock will have been approved for listing on The
Nasdaq Stock Market, subject only to official notification of issuance.
SECTION 10.4. SALE OF DECATUR PROPERTY. The obligations of Owner to
perform hereunder and to convey the Shares are conditioned upon a
contemporaneous closing of the sale of the Decatur Property.
ARTICLE XI
CLOSING DELIVERIES
SECTION 11.1. DELIVERIES OF THE COMPANY AND THE OWNERS. At or prior to the
Closing Date, the Company and the Owners will deliver to AMP c/o Baker &
Hostetler LLP, counsel to AMP, the following, all of which will be in a form
reasonably satisfactory to AMP and Owner and will be held by Baker & Hostetler
in escrow pending Closing, pursuant to an escrow agreement in form and substance
mutually acceptable to the parties hereto:
(a) a copy of resolutions of the Board of Directors of the Company
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements and consummation of the Acquisition, certified
by the Secretary of the Company as being true and correct copies of the
originals thereof subject to no modification or amendment;
(b) a certificate of the President of the Company and each Owner, dated
the Closing Date, as to the truth and correctness of the representations and
warranties of the Company and the Owners contained herein on and as of the
Closing Date;
(c) a certificate of the President, of the Company and the Owner, dated
the Closing Date, (i) as to the performance of and compliance in all material
respects by the Company and the Owners with all covenants contained herein on
and as of the Closing Date and (ii) certifying that all conditions precedent of
the Company and the Owner to the Closing Date have been satisfied;
(d) a certificate of the Secretary of the Company certifying as to the
incumbency of the directors and officers of the Company and as to the signatures
of such directors and officers who have executed documents delivered at Closing
on behalf of the Company;
(e) a certificate, dated within five days prior to the Closing Date, of
the Secretary of State of the respective states of organization or qualification
of the Company establishing that
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such corporation is in existence, has paid all franchise or similar taxes, if
any, and, if applicable, otherwise is in good standing to transact business in
its state of organization;
(f) certificates, dated within five days prior to the Closing Date, of the
Secretaries of State of the states in which the Company is qualified to do
business, to the effect that such corporation is validly existing and qualified
to do business and, if applicable, is validly existing as foreign corporation,
as the case may be, in each of such states;
(g) an opinion of counsel to the Company and the Owner, dated as of the
Closing Date;
(h) all authorizations, consents, approvals, permits and licenses
referenced in Section 3.8;
(i) the resignations of the officers and directors of the Company as
requested by AMP;
(j) a nonforeign affidavit, as such affidavit is referred to in Section
1445(b)(2) of the Code, of the Owner, signed under a penalty of perjury and
dated as of the Closing Date, to the effect that the Owner is a United States
citizen or a resident alien (and thus not a foreign person) and providing such
Owner's United States taxpayer identification number;
(k) an executed stock transfer conveying the Shares to AMP Subsidiary in
substantially the form attached hereto as Exhibit 11.1(l);
(l) an executed Assignment and Assumption Agreement in the form attached
hereto as Exhibit 11.1(m) with respect to the Assumed Liabilities (the
"Assignment and Assumption Agreement");
(m) an assignment to AMP or AMP Subsidiary of each lease for real
property, in form and substance reasonably satisfactory to AMP (the "Lease
Assignments"); and
(n) such other instrument or instruments as may be necessary or
appropriate, as AMP or its counsel will reasonably request, to carry out and
effect the purpose and intent of this Agreement.
SECTION 11.2. DELIVERIES OF AMP. At or prior to the Closing Date, AMP will
deliver to the Company and the Owners c/o Baker & Hostetler LLP, counsel to AMP,
the following, all of which will be in a form reasonably satisfactory to the
Company, the Owner and AMP and will be held by Baker & Hostetler in escrow
pending Closing, pursuant to an escrow agreement in form and substance mutually
acceptable to the parties hereto:
(a) a copy of the resolution of the Board of Directors of AMP authorizing
the
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execution, delivery and performance of this Agreement, and all related documents
and agreements, certified by AMP's Secretary 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 AMP authorizing the
execution, delivery and performance of the Management Agreement, certified by
the Secretary of AMP as being true correct copies of the originals thereof
subject to no modification or amendments;
(c) a certificate of an officer of AMP dated the Closing Date as to the
truth and correctness of the representations and warranties of AMP contained
herein on and as of the Closing Date;
(d) a certificate of an officer of AMP dated the Closing Date (i) as to
the performance and compliance by AMP with all covenants contained herein on and
as of the Closing Date and (ii) certifying that all conditions precedent of AMP
to the Closing have been satisfied;
(e) a certificate of the Secretary of AMP certifying as to the incumbency
of the officers of AMP who have executed documents delivered at the Closing on
behalf of AMP;
(f) a certificate, dated within five days prior to the Closing Date, of
the Secretary of State of the respective states of incorporation of AMP and AMP
Subsidiary establishing that such corporation is in existence, has paid all
franchise or similar taxes, if any, and, if applicable, otherwise is in good
standing to transact business in its state of incorporation;
(g) certificates, dated within five days prior to the Closing Date, of the
Secretaries of State of the states in which AMP is qualified to do business, to
the effect that AMP is qualified to do business and, if applicable, is in good
standing as a foreign corporation in such state;
(h) an opinion of Baker & Hostetler, counsel to AMP, dated as of the
Closing Date;
(i) the Acquisition Consideration in accordance with Article II and Annex
I hereof;
(j) the executed Assignment and Assumption Agreement;
(k) the executed Lease Assignments;
(l) such other instrument or instruments as may be necessary or
appropriate, as the Company, the Owners or their counsel may reasonably request,
to carry out and effect the purpose and intent of this Agreement.
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ARTICLE XII
POST CLOSING MATTERS
SECTION 12.1. FURTHER INSTRUMENTS OF TRANSFER. Following the Closing, at
the request of AMP, the Owners and the Company will 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 12.2. POST-CLOSING AGREEMENTS. AMP agrees to take all actions
necessary or appropriate to effect its obligations in Section 2.4 and Owner
agrees to the transition commitment in Section 2.5. After Closing, AMP agrees to
respond to all reasonable requests by Owner for information retained by the
Company that Owner needs for tax returns or other necessary filings.
ARTICLE XIII
REMEDIES
SECTION 13.1. INDEMNIFICATION BY THE OWNER. Subject to the terms and
conditions of this Article XIII, Owner agrees to indemnify, defend and hold AMP,
AMP Subsidiary 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"), as incurred, asserted against or incurred by such indemnities
arising out of or resulting from:
(a) a breach of any representation, warranty or covenant of the Company or
any Owner contained herein or in any schedule or certificate delivered
hereunder;
(b) any and all liabilities, including Tax and ERISA, related to the
Company's and the Owner's pre-closing actions regarding any Employee Benefit
Plans or other arrangements; or
(c) any violation (or alleged violation) by the Owners, the Company and/or
any of their past or present directors, officers, members, partners, managers,
shareholders, employees (including, without limitation, Physician Employees),
agents, consultants and Affiliates of state or federal laws governing healthcare
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 third party payor (including the
Medicare and Medicaid programs) on or before the Closing Date.
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SECTION 13.2. INDEMNIFICATION BY AMP AND AMP SUBSIDIARY. Subject to the
terms and conditions of this Article XIII, AMP and AMP Subsidiary hereby agree
to indemnify, defend and hold the Owners and their respective agents, attorneys
and Affiliates harmless from and against all Damages, as incurred, asserted
against or incurred by such indemnities arising out of or resulting from:
(a) a breach by AMP and AMP Subsidiary of any representation, warranty or
covenant of AMP or AMP Subsidiary contained herein or in any schedule or
certificate delivered hereunder; or
(b) all claims, demands, causes of action, loses, damages, liabilities,
costs and expenses (including, without limitation, attorneys' fees and
disbursements) asserted against or incurred by Owner (except in cases of Owner's
negligence or willful misconduct), against, in connection with or arising out of
(i) the ownership, maintenance or operation of the Real Property and
attributable to events occurring after the Closing and during AMP's ownership of
the Real Property; (ii) any of the Leases of the Real Property as to any matters
or obligations of lessor from and after the date of Closing during AMP's tenure
as lessor; (iii) the operations, business and activities of the Company from and
after the date of Closing.
SECTION 13.3. INDEMNIFICATION PROCEDURES. All claims for indemnification
under this Agreement will be asserted and resolved as follows:
(a) A party claiming indemnification under this Agreement (an "Indemnified
Party") shall promptly (and, in any event, at least 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. 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.
Within 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 XIII with respect to such Third Party Claim or (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
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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, with the consent of the Indemnified Party. The Indemnifying 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
Indemnifying Party shall deem necessary or appropriate to protect its interests
or those of the Indemnified Party and not prejudicial to the Indemnified Party.
If requested by the Indemnifying Party, the Indemnified Party agrees, at the
sole cost and expense of the Indemnifying Party, to cooperate with the
Indemnifying Party and its counsel in contesting any Third Party Claim that the
Indemnifying Party elects to contest, including, without limitation, the making
of any related counterclaim against the person asserting the Third Party Claim
or any cross-complaint against any person. The Indemnified Party may participate
in, but not control, any defense or settlement of any Third Party Claim
controlled by the Indemnifying Party pursuant to this Section 13.3(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 Indemnifying 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 13.3(b), or if the Indemnifying Party elects to defend
the Indemnified Party pursuant to Section 13.3(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 if 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.
The Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this Section 13.3(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
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one or more legal defenses available to it that are different from or additional
to those available to the Indemnified Party, then the Indemnified 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) If 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 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.
(e) Payments of all amounts owing by an Indemnifying Party pursuant to
this Article XIII relating to a Third Party Claim shall be made within 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 13.3(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.
SECTION 13.4. INDEMNIFICATION LIMITATIONS. All claims for indemnification
under this Agreement shall be subject to the following limitations:
(a) The initial Claim Notice for indemnification must have been
transmitted to the Indemnifying Party within two (2) years of the Closing Date,
unless the subject matter upon which the claim for indemnification is based
involves income tax, environmental or ERISA matters, in which event the initial
Claim Notice must have been transmitted within the applicable statute of
limitations; and
(b) Any amounts paid under this Article XIII shall be for actual costs or
liabilities incurred by the Indemnified Party.
SECTION 13.5. REMEDIES NOT EXCLUSIVE. 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.
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SECTION 13.6. 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; furthermore, that AMP agrees to pay
$10,000.00 toward Owner's attorneys' fees in negotiating this transaction which
amount shall not be refundable.
ARTICLE XIV
TERMINATION
SECTION 14.1. TERMINATION. This Agreement may be terminated:
(a) by the Owner, seventy-two hours after receipt of a fully executed copy
of this Agreement and the Real Estate Purchase Agreement;
(b) at any time prior to December 31, 1997, if, as a result of its due
diligence, AMP reasonably deems termination to be advisable;
(c) by AMP, the Owner or the Company, if such party does not consent to a
Schedule amendment under Section 14.1(c);
(d) if a party is in material breach of this Agreement, by the other party
not then in material breach of this Agreement;
(e) by AMP, the Owner or the Company if the Acquisition has not been
consummated due to the failure of the Initial Public Offering;
(f) prior to December 31, 1997, by the Owner if AMP or another party has
not contracted to purchase the Decatur Property.
SECTION 14.2. EFFECT OF TERMINATION. In the event of a termination of this
Agreement under the provisions of this Article, a party not then in material
breach of this Agreement shall stand fully released and discharged of any and
all obligations under this Agreement.
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ARTICLE XV
NONCOMPETITION
SECTION 15.1. PROHIBITED ACTIVITIES. In order to protect AMP against the
unauthorized use or the disclosure of any of its Confidential Information
presently known or hereinafter obtained by the Owners, and other good and
valuable consideration, each Owner hereby agrees that, subject to adjustment
pursuant to Section 15.5, for a period of two years following the Closing Date,
neither the Owner nor any of his or her Affiliates, shall knowingly, directly or
indirectly, for himself or herself or on behalf of any other corporation,
person, firm, partnership, association or any other entity (whether as an
individual, agent, servant, employee, employer, officer, director, shareholder,
investor, principal, consultant or in any other capacity):
(a) establish, operate or provide physician services at any medical
office, clinic or out-patient and/or ambulatory treatment or diagnostic facility
providing services similar to those provided by the Company or engage or
participate in or finance any business which engages in competition with the
business being conducted by AMP (unless the Owner participated in such business
(other than the practice of medicine) within the geographical area designated
below prior to the Closing Date or the date the Owner became aware of planning
for such business operations by AMP), anywhere within twenty (20) miles of the
pre-Closing offices of the Company in Decatur, Georgia or Griffin, Georgia;
(b) induce or attempt to influence any employee of the Group Practice or
AMP to terminate his or her employment or hire any such employee, whether or not
so induced or influenced; or
(c) induce or attempt to induce any patient of the Owner to seek podiatric
services at any location other than the facilities of the Company or Group
Practice locations or from any non-Group Practice podiatrist.
SECTION 15.2. DAMAGES. Because of the difficulty of measuring economic
losses to AMP as a result of the breach of the foregoing covenant and because of
the immediate and irreparable damage that would be caused to AMP for which it
would have no other adequate remedy, each Owner agrees that, in the event of a
breach by him or her of the foregoing covenant, the covenant may be enforced by
AMP by injunctions and restraining orders.
SECTION 15.3. REASONABLE RESTRAINT. It is agreed by the parties that the
foregoing covenants in this Article XV impose a reasonable restraint on the
Owners in light of the activities and businesses of the Company on the date of
the execution of this Agreement and the future plans of the Group Practice.
SECTION 15.4. SEVERABILITY; REFORMATION. The covenants in this Article XV
are
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severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall thereby be reformed.
SECTION 15.5. TERM. It is specifically agreed that the period of two years
stated above shall be computed by excluding from such computation any time
during which an Owner is in violation of any provision of this Article XV. The
covenants contained in this Article XV shall have no effect if the transactions
contemplated by this Agreement are not consummated for any reason (including
termination pursuant to Section 14.1(b)), but otherwise shall not be affected by
any breach of any other provision hereof by any party hereto.
ARTICLE XVI
NONDISCLOSURE OF CONFIDENTIAL INFORMATION
SECTION 16.1. NONDISCLOSURE. Each of the parties hereto recognize and
acknowledge that they had in the past, currently have and in the future may
possibly have access to certain Confidential Information of the other that is
valuable, special and a unique asset. Each of the parties hereto 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 the other and (b) to counsel and
other advisors, respectively, provided that such advisors (other than counsel)
agree to the confidentiality provisions of this Section, unless (i) such
information becomes available to or known by the public generally through no
fault of any party, (ii) disclosure is required by law or the order of any
governmental authority, provided, that, prior to disclosing any information
pursuant to this clause, (iii), each party, as the case may be, shall, if
possible, give prior written notice thereof to the other and provide the other
with the opportunity to contest such disclosure, (iv) 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. In the event of a breach or threatened breach by any party of
the provisions of this Section, the other parties shall be entitled to an
injunction restraining such party from disclosing, in whole or in part, such
Confidential Information. In the event this Agreement is not consummated by
January 31, 1998, all documented Confidential Information of one party that has
been delivered to the other party shall be returned. Nothing herein shall be
construed as prohibiting any party from pursuing any other available remedy for
such breach or threatened breach, including the recovery of damages.
Confidential Information shall not include the medical knowledge of the Owner or
the general practice management skills known to and utilized by the Owner.
SECTION 16.2. DAMAGES. Because of the difficulty of measuring economic
losses as a
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result of the breach of the foregoing covenants and because of the immediate and
irreparable damage that would be caused for which no other adequate remedy would
exist, the parties 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 or
restraining orders.
SECTION 16.3. SURVIVAL. The obligations of the parties under this Article
XVI shall survive the termination of this Agreement.
ARTICLE XVII
GENERAL
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 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 AMP to a
wholly owned subsidiary of AMP; provided, that any such assignment shall not
relieve AMP of its obligations hereunder.
SECTION 17.3. PARTIES IN INTEREST; NO THIRD PARTY BENEFICIARIES. Except as
otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and permitted assigns of the parties hereto. Neither
this Agreement nor any other agreement contemplated hereby shall be deemed to
confer upon any person not a party hereto or thereto, except AMP Subsidiary, any
rights or remedies hereunder or thereunder.
SECTION 17.4. ENTIRE AGREEMENT. This Agreement and the agreements
contemplated hereby, including the Real Estate Purchase Agreement, 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 effecting
during the term hereof, such provisions 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
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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 but only as provided herein. All statements contained in any
certificate, exhibit or other instrument delivered by or on behalf of the
Company, any Owner or AMP pursuant to this Agreement shall be deemed to have
been an integral part of this Agreement by such Company, such Owner or AMP, as
the case may be.
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 TEXAS.
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 AMP 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 AMP in connection with the conduct of its Initial Public Offering and
conducting an examination of the operations and assets of the Company. 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
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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 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
when actually received by the party to whom notice is sent, 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 AMP: American Medical Providers, Inc.
3555 Timmons Lane, Suite 1550
Houston, Texas 77027
Attn: Mr. Jack N. McCrary
with a copy to: Baker & Hostetler LLP
1000 Louisiana, Suite 2000
Houston, Texas 77002
Attn: Ivan Wood, Esq.
If to the Company
or any Owner: Jerald N. Kramer, D.P.M., P.C.
630 Mt. Vernon Highway N.W.
Atlanta, GA 30327
Attn: Jerald N. Kramer, D.P.M.
with a copy to: Bodker, Ramsey & Andrews
A Professional Corporation
Suite 615
1800 Peachtree Street, N.W.
Atlanta, Georgia 30309-2507
Attn: Brian Bodker
SECTION 17.13. CHOICE OF FORUM. The parties hereto agree that should any
suit, action or proceeding arising out of this Agreement be instituted by any
party hereto (other than a suit, action or proceeding to enforce or realize upon
any final court judgment arising out of this Agreement), such suit, action or
proceeding shall be instituted only in a state or federal court in DeKalb
County, Georgia. Each of the parties hereto consents to the in personam
jurisdiction of any state or federal court in DeKalb County, Georgia and waives
any objection to the venue of any such suit, action or proceeding.
SECTION 17.14. 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
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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 17.15. 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 17.16. DEFINED TERMS. Terms used in Annex I and the Schedules
attached hereto with their initial letter capitalized and not otherwise defined
therein shall have the meanings assigned to such terms in this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first written above.
AMERICAN MEDICAL PROVIDERS, INC.:
By: /s/ Wayne A. Bertsch
THE COMPANY:
JERALD N. KRAMER, D.P.M., P.C.
By: /s/ Jerald N. Kramer, D.P.M.
THE OWNERS:
By: /s/ Jerald N. Kramer, D.P.M.
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ANNEX I
ACQUISITION CONSIDERATION
$922,799.00 plus XX(1) as consideration for the Shares
1,000.00 as consideration for the Owner Commitment in Section 2.5
- -----------
$923,799.00 plus XX Aggregate Consideration
-------
Initial
- ----------------
(1)XX is the amount of cash on hand and which remains with the Company at, and
immediately after, the Closing.
1
EXHIBIT 10.16
ANKLE & FOOT CENTERS OF AMERICA, L.L.C.
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of , between Ankle & Foot
Centers of America, L.L.C., a Delaware limited liability corporation (the
"Company") and David LaGuardia (the "Executive").
In consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Executive and the
Executive hereby agrees to serve the Company on the terms and conditions set
forth herein. In addition, the Executive and the Company hereby agree that
subject to and effective as of the closing of the proposed Initial Public
Offering ("IPO") of American Medical Providers, Inc., (formerly Podiatric
Newco, Inc., ("AMP"), this Employment Agreement (the "Agreement") shall be
assumed by "AMP" and shall supersede that certain letter agreement regarding
employment between the Company and the Executive dated as of
(the "Prior Agreement"), and the Prior Agreement
shall thereupon automatically terminate without further obligation by either
Executive or the Company. Upon AMP's assumption of this Agreement, all
references to the Company herein shall refer to AMP.
2. TERM OF EMPLOYMENT: DUTIES. From the period commencing on the date
hereof and ending immediately prior to the Effective Time (as defined in the S-1
registration filed by "AMP" in connection with its IPO, the employment of the
Executive shall be governed by the terms and conditions set forth in the Prior
Agreement. The term of this Agreement (the "Term") and Executive's employment
with the Company hereunder shall commence at the Effective Time and, unless
earlier terminated in accordance with the terms hereof, shall continue until the
third anniversary of the Effective Time (such initial term of the Agreement
referred to as the "Initial Term"); PROVIDED, HOWEVER, that the Term shall
automatically be renewed for successive additional two year periods at the end
of the Initial Term and each renewal term thereafter, unless either the Company
or the Executive provides at least one year's notice to the other of its
intention not to renew the Term; and PROVIDED, FURTHER, that if the "IPO" is
terminated in accordance with its terms prior to the Effective Time or the
"IPO" is abandoned or otherwise does not close, (x) this Agreement shall
automatically terminate without further obligation by either party hereto, (y)
the terms and conditions set forth in this Agreement shall not apply and (z) the
employment of the Executive shall continue to be governed by the terms and
conditions set forth in the Prior Agreement.
During the Term, the Executive shall be employed as the
of the Company, reporting to the President of the
Company, serving at the will of the Board of Directors of the Company (the
"Board") with the traditional duties, responsibilities and authority of such
office in companies similar in size to the Company. The Executive agrees that he
shall perform his duties hereunder faithfully and to the best of his abilities
and in furtherance of the business of the Company and its subsidiaries and shall
devote substantially all of his business time, energy and attention to the
business of the Company and its subsidiaries; provided, however, that Executive
shall be permitted to devote a reasonable amount of business time, energy and
attention to the pursuit of activities on behalf of the entities described on
the attached Exhibit B hereto and disclosed to Company in connection with
Company's acquisition of the assets of Pyramid Anesthesiology Group, Inc. so
long as such devotion does not unreasonably interfere with the performance of
Executive's duties hereunder.
3. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. During the Term, the Company shall pay to the Executive
an annual base salary (the "Base Salary") as set forth on Exhibit A per year,
payable in accordance with the Company's normal payroll practices or as the
Company and Executive may otherwise agree. The Base Salary shall be reviewed
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by the Company annually and shall be subject to discretionary increase by the
Company from time to time, but shall not be decreased from the rate in effect at
any time and from time to time during the Term.
(b) ANNUAL PERFORMANCE BONUS. Executive shall be entitled to participate
in the Company's Executive Officer Performance Bonus Plan or any similar or
successor annual bonus plan of the Company (the "Performance Bonus Plan") and
to receive an annual performance bonus upon the achievement of one or more
performance goals (the "Performance Goals") in accordance with the terms of
the Performance Bonus Plan; PROVIDED, that Executive's annual target bonus under
the Performance Bonus Plan (the "Annual Target Bonus") shall not be less than
60% of the Base Salary in effect at the time the Performance Goals for such plan
year are established.
(c) LONG-TERM INCENTIVE. The Executive shall be eligible to participate
in any long-term incentive compensation and/or stock option plans maintained
from time to time by the Company. In addition, pursuant to prior action of the
Stock Option Committee of the Board, Executive has previously been granted an
option (the "Market Option") to purchase 15,000 shares of Company common
stock, no stated par value (the "Common Stock"), at an exercise price equal to
the price to the public in connection with AMP's IPO, with a term of 10 years
from the date of grant. The Market Option will vest twenty (20%) per annum over
5 years commencing with the Effective Time; PROVIDED, that the Market Option
will not become exercisable in whole or in part in the event the Market Option
is terminated in accordance with its terms prior to the Effective Time or if the
"IPO" is abandoned or otherwise does not close; and PROVIDED, FURTHER, that
the Market Option shall be subject to the terms of the American Medical
Providers, Inc., 1997 Stock Incentive Plan and the stock option agreement to be
entered into in connection with the grant of the Market Option.
(d) BENEFITS PERQUISITES AND EXPENSES. During the Term, the Executive
shall be eligible to participate in employee benefit and fringe benefit plans
and programs generally available to the executive officers of the Company and
such additional benefits as the Board may from time to time provide. In
addition, Executive shall be entitled to receive the personal benefits described
on Exhibit A hereto. Executive shall be entitled to reimbursement for business
expenses, including travel and entertainment; PROVIDED, that such reimbursement
shall be limited to reasonable and necessary expenses incurred by Executive in
connection with the performance of duties on behalf of the Company subject to:
(i) timely submission of a properly executed Company expense report form
accompanied by appropriate supporting documentation, and (ii) compliance with
Company policies and procedures governing business expense reimbursement and
reporting based upon principles and guidelines established by the Audit
Committee of the Board, including periodic audits by the Internal Audit
Department of the Company and/or the Audit Committee of the Board.
Notwithstanding the foregoing, Executive shall in all events be entitled to
reimbursement for travel expenses incurred in the performance of job duties
commensurate with reimbursement policies generally available to similarly
situated Vice Presidents.
(e) RETIREMENT BENEFITS. The Executive shall be entitled to participate
in any Supplemental Executive Retirement Plan or any similar or successor plan
(the "SERP") and in any tax qualified and any other supplemental pension plans
should such plans become generally available to the executive officers of the
Company.
(f) EXECUTIVE ASSISTANT. The Executive shall be entitled to employ an
executive assistant selected by the Executive who will work for the Executive
from Newnan, Georgia and whose salary and benefits package shall be at least
equal in value to the salary and benefits available to similarly situated
executive assistants employed by the Company.
4. TERMINATION OF EXECUTIVE. Prior to the expiration of the Term and
subject to the payment of any amounts required under Section 5, the Executive's
employment with the Company may be terminated (a) by the Company for Cause (as
defined herein) or without Cause, (b) by the Executive for or without Good
Reason (as defined herein), (c) by reason of the Executive's death or Disability
(as defined herein) or (d) by the mutual written consent of the parties hereto.
For purposes of this Agreement.
(i) "Cause" means (A) conviction of, plea of guilty or settlement
for embezzlement, theft and fraud; (B) actions which have had or will
likely have a material adverse financial effect on the
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Company as a whole for an extended period of time, where appropriate
evidence exists that such actions are directly attributable to the (I)
gross management negligence or repeated ineptitude of the Executive and/or
(II) deliberate refusal of the Executive to follow the instructions or
directions of the Board; (C) conviction of or a plea of guilty or NOLO
CONTENDERE to a felony (other than a felony involving a moving violation);
(D) violation of the non compete or confidentiality provisions of this
Agreement, PROVIDED, that no such violation will be deemed to have occurred
if, within 30 days following receipt by Executive of a notice from the
Board identifying the violation, the Executive (I) cures the violation and
(II) establishes that the violation was unintentional and not reasonably
likely to result in harm to the Company, in each case to be reasonable
satisfaction of the Board; (E) material incapacitation or repeated absence
from work due to reckless and self-abusive behavior or conduct, such as
alcoholism and drug abuse, which renders Executive incapable of performing
his duties; PROVIDED, that physical or mental disability due to injury or
disease shall not be grounds for termination for Cause; (F) gross
insubordination or persistent refusal to follow reasonable instructions; or
(G) inability to perform the duties of the Executive's officer or
consistent failure to perform in accordance with reasonable expectations
due to incompetence or due to repeated and unexcused absence from work
having a material adverse effect on the AMP Subsidiary or other discrete
business division to which the assets of Pyramid Anesthesiology Group, Inc.
were transferred; PROVIDED, that mere failure to achieve performance
targets or expectations (including without limitation those set forth in
the Performance Bonus Plan) shall not in and of itself constitute Cause
hereunder. Notwithstanding the foregoing, the deliberate refusal of
Executive to act shall not be deemed to constitute Cause hereunder if such
refusal is grounded in the Executive's good faith that the course of action
proposed would not be in the best financial interests of the Company
(unless there is released to Executive free and clear any and all property
or funds remaining in the certain escrow account established pursuant to
the terms of that certain Asset Purchase Agreement ("Asset Purchase
Agreement") among Executive, Company and Pyramid Anesthesiology Group,
Inc. ("Escrow Balance"), in which case such deliberate refusal will
constitute Cause if such deliberate refusal otherwise constitutes Cause in
accordance with the terms hereof).
For purposes of this Agreement, the Board shall have 60 days to
terminate the Executive for Cause following the date on which the Board
discovers the existence of a specific set of facts that, in the aggregate,
then constitute Cause, after which period no Cause with respect to such
specific set of facts shall be deemed to exist; PROVIDED, that the
repetition or reoccurrence of the same or a similar set of facts shall
constitute separate ground for termination for Cause.
(ii) "Disability" means the Executive's absence from the full-time
performance of his duties with the Company for one hundred eighty (180)
days or more within any period of 12 consecutive months as a result of the
Executive's incapacity due to mental or physical illness; PROVIDED, that
during any period prior to the termination of Executive's employment by
reason of Disability in which Executive is absent from the full-time
performance of his duties with the Company due to Disability, the Company
shall continue to pay Executive his Base Salary at the rate in effect at
the commencement of such period of Disability;
(iii) "Good Reason" means, without the Executive's express written
consent, the occurrence of any of the following events:
(A) a reduction by the Company in the Executive's Base Salary or
Annual Target Bonus in effect from time to time; (B) a material
reduction in the aggregate level of participation in and/or compensation
and benefit opportunities under all other compensation and employee
benefit plans in which Executive is entitled to participate from time to
time, PROVIDED, HOWEVER, that changes affecting the participation in or
benefits under such plans (other than the Performance Bonus Plan, any
SERP and the benefits described in Exhibit A) with respect to similarly
situated executives of the Company shall not constitute Good Reason
hereunder; (C) a reduction in the Executive's titles, duties or
authority with the Company; (D) notification by the Company of its
intention not to renew this Agreement pursuant to the provisions of
Section 2; (E) the termination of the
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Executive's employment for any reason within 12 months following a
Change in Control (as defined herein); or (F) relocation by more than 25
miles from 3025 Highway 154, Building B, Newman, Georgia.
(iv) "Change in Control" means the occurrence of any one of the
following events:
(A) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) becomes an
Acquiring Person (as such term is defined in the Company's Shareholder
Protection Rights Agreement to be adopted at the Effective Time) or any
person that is not bound by the Shareholder Agreement of the Company to
be entered into in connection with the Merger (the "Shareholder
Agreement") becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing 25% or more of the undiluted total voting power of
the Company's then outstanding securities eligible to vote for the
election of members of the Board (the "Company Voting Securities");
PROVIDED, HOWEVER, that no event described in the immediately preceding
clause shall be deemed to constitute a Change in Control by virtue of
any of the following: (I) an acquisition of Company Voting Securities by
the Company and/or one or more direct or indirect majority-owned
subsidiaries of the Company; (II) an acquisition of Company Voting
Securities by any employee benefit plan sponsored or maintained by the
Company or any corporation controlled by the Company; (III) an
acquisition by any underwriter temporarily holding securities pursuant
to an offering of such securities; or (IV) any acquisition by the
Executive or any "group" (as such term is defined in Rule 3d-5 under
the Exchange Act) of persons including the Executive; or
(B) individuals who, at the beginning of any period of twenty-four
(24) consecutive months, constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof,
PROVIDED, HOWEVER, that any person becoming a director subsequent to the
beginning of such twenty-four (24) month period, whose election, or
nomination for election, by the Company's shareholders was approved by
either (i) the Board consistent with the terms of the Shareholder
Agreement, during the period the Shareholder Agreement is in effect, or
(ii) a vote of at least 75% of the directors comprising the Incumbent
Board (either by a specific vote or by approval of the proxy statement
of the Company in which such person is named as a nominee for director,
without objection to such nomination) shall be, for the purposes of this
paragraph (B), considered as though such person were a member of the
Incumbent Board; PROVIDED, FURTHER, that no individual initially elected
or nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors or any other
actual or threatened solicitation of proxies or consents by or on behalf
of any person other than the Board shall be deemed to be a member of the
Incumbent Board, or
(C) there is consummated a merger or consolidation of the Company
or a subsidiary thereof with or into any other corporation other than a
merger or consolidation which would result in the holders of the voting
securities of the Company outstanding immediately prior thereto holding
securities which, in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, represent immediately after such merger or consolidation at
least 60% of the combined voting power of the then outstanding voting
securities of either the Company or the other entity which survives such
merger or consolidation or any parent of such other entity; or
(D) the stockholders of the Company approve (i) a plan of complete
liquidation or dissolution of the Company or (ii) an agreement for the
sale or disposition by the Company of all or substantially all the
Company's assets.
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5. PAYMENTS UPON TERMINATION OF EXECUTIVE.
(a) If the employment of the Executive shall be terminated other than by
reason of death or Disability (i) by the Company (other than for Cause) or (ii)
by the Executive for Good Reason, then the Company shall pay or provide to the
Executive (or the Executive's beneficiary or estate):
(1) within thirty (30) days following the date of such termination of
employment ("Termination Date"), a lump-sum cash amount equal to the sum
of (i) the Executive's unpaid Base Salary through the Termination Date;
(ii) any accrued but unpaid annual bonus under the Performance Bonus Plan
in respect of the annual bonus period preceding the bonus period in which
the Termination Date occurs; (iii) any unpaid reimbursable business
expenses properly incurred through the Termination Date; and (iv) a bonus
equal to the Executive's Annual Target Bonus in the year of termination,
multiplied by a fraction the numerator of which is the number of months in
the bonus year of termination in which the Executive has worked at least
one day and the denominator of which is 12;
(2) within thirty (30) days following the Termination Date, a
lump-sum cash amount equal to the greater of (A) the Executive's then Base
Salary payable over the remainder of the Term plus a bonus equal to the
Executive's Annual Target Bonus in the year of termination multiplied by a
fraction the numerator of which is the number of complete months remaining
in the Term and the denominator of which is 12, or (B) 2.0 times the sum
of: (i) the Executive's annual rate of Base Salary as of the Termination
Date plus (ii) the Annual Target Bonus for the year in which the
Termination Date occurs (in each such case, Executive's Base Salary and
Annual Target Bonus being determined without taking into account any
reductions thereto constituting Good Reason); PROVIDED, HOWEVER, that the
Executive shall not be entitled to any severance benefits from the Company
or under any Company severance plan, policy or arrangement other than as
specified in this Agreement;
(3) for a period terminating on the earlier of (A) the commencement
of the provision of substantially equivalent benefits by a new employer or
(B) the later of (I) the last day of the Term, or (II) twenty-four (24)
months following the Termination Date, the Company shall continue to keep
in full force and effect (or otherwise provide) all policies of medical,
accident, disability and life insurance with respect to the Executive and
his dependents with substantially the same level of coverage, upon
substantially the same terms and otherwise substantially to the same extent
as such policies shall have been in effect immediately prior to the
Termination Date, and, as applicable, the Company and the Executive shall
share the costs of the continuation of such insurance coverage in the same
proportion as such costs were shared immediately prior to the date of
termination;
(4) for purposes of determining final average compensation (or making
any similar calculation) and years of service (for purposes of eligibility,
vesting or benefit accrual) under any tax-qualified or supplemental defined
benefit retirement plan (including without limitation any SERP), Executive
shall be deemed to have remained employed by the Company hereunder until
the end of the Term and to have received his then current Base Salary and
Annual Target Bonus through the end of the Term; PROVIDED, that to the
extent such benefits cannot be accrued under and paid from any
tax-qualified pension plan, such benefits shall be accrued under and paid
from any SERP or other supplemental plan.
(5) all options to purchase Common Stock held by the Executive shall
immediately become fully vested and exercisable and shall remain
exercisable until the later of (A) the date that is 24 months following the
Termination Date and (B) the expiration of the stated term of such options;
(6) payment of the Escrow Balance to Executive; and
(b) if the employment of the Executive shall be terminated (i) by
reason of the Executive's death or Disability, (ii) by the Company for
Cause, (iii) by the Executive without Good Reason, or (iv) by the mutual
written consent of the parties hereto (each a "Non qualifying
Termination"), then the Company shall pay to the Executive (or the
Executive's beneficiary or estate) within thirty (30) days following the
Termination Date a lump-sum cash amount equal to the sum of the Executive's
unpaid Base Salary through the Termination Date plus any bonus payments
which have been earned or
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become payable, to the extent not theretofore paid, plus any unpaid
reimbursable business expenses properly incurred through the Termination
Date (in addition to, in the case of employment termination by mutual
consent, any amounts required to be paid in accordance with the written
agreement between Company and Executive). In addition, Executive (or the
Executive's beneficiary or estate) shall have no less than ninety days
following the termination of his employment pursuant to a Non qualifying
Termination to exercise any outstanding options to the extent vested and
exercisable as of the Termination Date.
6. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Notwithstanding anything in this Agreement to the contrary, in the
event that any payment or distribution by the Company, by any affiliate of the
Company or by any person whose actions result in a change in control of the
Company (to the extent the Company approves of the arrangements pursuant to
which the payment by such person is made to the Executive) to or for the benefit
of the Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 6) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code, or any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in
an amount such that, after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes) including, without
limitation, any income and employment taxes and Excise Tax, imposed upon the
Gross-Up Payment but before deduction for any federal, state or local income or
other tax upon the Payments, the Executive will retain a net amount equal to the
sum of (i) the Payments and (ii) an amount equal to the product of any
deductions (or portions thereof) disallowed because of the inclusion of the
Gross-Up Payment in the Executive's adjusted gross income for federal income tax
purposes and the highest applicable marginal rate of federal income taxation for
the calendar year in which the GrossUp Payment is to be made. For purposes of
determining the amount of the Gross-Up Payment, the Executive shall be deemed to
(1) pay applicable federal income taxes at the highest applicable marginal rates
of federal income taxation (including surcharges) for the calendar year in which
the Gross-Up Payment is to be made, (2) pay applicable state and local income
taxes at the highest applicable marginal rate of taxation (including surcharges)
for the calendar in which the Gross-Up Payment is to be made, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such
state and local taxes and (3) have otherwise allowable deductions for federal
income tax purposes at least equal to those disallowed because of the inclusion
of the Gross-Up Payment in the Executive's adjusted gross income.
(b) Subject to the provisions of Section 6(a), all determinations required
to be made under this Section 6, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by the public
accounting firm that is retained by the Company as of the date immediately prior
to the change in control (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within fifteen
(15) business days of the receipt of notice from the Company or the Executive
that there has been a Payment, or such earlier time as is requested by the
Company (collectively, the "Determination"). In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the change in control, the Executive may appoint another nationally
recognized public accounting firm reasonably acceptable to the Company to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All reasonable fees and expenses
of the Accounting Firm shall be borne solely by the Company and, subject to
applicable law and obligations to the Company's stockholders, the Company shall
enter into any agreement reasonably requested by the Accounting Firm that is
generally recognized as standard in connection with the performance of the
services hereunder. The Gross-Up Payment under this Section 6 with respect to
any Payment shall be made no later than thirty (30) days following the date of
such Payment. If the Accounting Firm determines that no Excise Tax is payable by
the Executive, it shall furnish the Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on the
Executive's
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applicable federal income tax return should not result in the imposition of a
negligence or similar penalty. The Determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of uncertainty in the
application of Section 4999 of the Code at the time of the Determination, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment") or Gross-Up Payments are made by the
Company which should not have been made ("Overpayment"), consistent with the
calculations required to be made hereunder. In the event that the Executive
thereafter is required to make payment of any additional Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or
for the benefit of the Executive. In the event the amount of the Gross-Up
Payment exceeds the amount necessary to reimburse the Executive for his Excise
Tax, the Accounting Firm shall determine the amount of the Overpayment that has
been made and any such Overpayment (together with interest at the rate provided
in Section 1274(b)(2) of the Code) shall be promptly paid by the Executive to or
for the benefit of the Company. The Executive shall cooperate, to the extent his
reasonable expenses in connection therewith are reimbursed by the Company, with
any reasonable request by the Company in connection with any contests or
disputes with the Internal Revenue Service in connection with the Excise Tax.
7. WITHHOLDING TAXES. The Company shall have the right to withhold from
any and all payments due to the Executive (or his beneficiary or estate)
hereunder all taxes which, by applicable federal, state, local or other law, the
Company is required to withhold therefrom.
8. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement is personal in nature and none of the parties hereto
shall, without the consent of the other, assign, or transfer this Agreement or
any rights or obligations hereunder; PROVIDED, that in the event of the merger,
consolidation, transfer or sale of substantially all of the assets of the
Company with or to any other individual or entity, this Agreement shall, subject
to the provisions hereof, be binding upon and inure to the benefit of such
successor and such successor shall discharge and perform all the promises,
covenants, duties and obligations of the Company hereunder, and all references
herein to the "Company" shall refer to such successor.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amounts remain payable to the Executive hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this agreement to such person or persons appointed in writing by the
Executive to receive such amounts or, if no person is so appointed, to the
Executive's estate.
9. RESOLUTION OF DISPUTES; LEGAL FEES; NO MITIGATION.
(a) Except as provided in Sections 10 and 11, all disputes hereunder shall
be settled by final, binding arbitration, conducted before a panel of three (3)
arbitrators in Texas in accordance with the rules of the American Arbitration
Association then in effect. Judgment on the arbitration award may be entered in
any court having jurisdiction. The Company shall bear the expenses of such
arbitration.
(b) If any contest or dispute shall arise under this Agreement involving
termination of the Executive's employment with the Company or involving the
failure or refusal of the Company to perform fully in accordance with the terms
hereof, the Company shall advance and reimburse the Executive, on a current
basis, all legal fees and expenses, if any, incurred by the Executive in
connection with such contest or dispute; PROVIDED, that the Executive agrees to
return any advanced or reimbursed expenses to the extent the arbitrators (or the
court, in the case of a dispute described in Section 10 or 11) determine that
the Company has prevailed as to the material issues raised in determination of
the dispute.
(c) The Company's obligation to make any payments provided for in this
Agreement to the Executive and otherwise to perform its obligations hereunder
shall not be affected by any setoff, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take other
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action by way of mitigation of the amounts payable to the Executive under any of
the provisions of this Agreement, and such amounts shall not be reduced whether
or not the Executive obtains other employment.
10. NONCOMPETITION.
(a) DISCLOSURE. The Executive has disclosed to the Board, in writing, all
healthcare-related interests, investments, or business activities, whether as
proprietor, stockholder, partner, co-venturer, director, officer, employee,
independent contractor, agent, consultant, or in any other capacity or manner
whatsoever. The Executive shall notify the Board, in writing, of any changes in
or additions to such interests, activities or investments permitted in
accordance with the terms of this Agreement, within 15 days of such change or
addition.
(b) PROHIBITED ACTIVITY. Without the written consent of a majority of the
Independent Directors, the Executive may not engage in any of the following
actions during the period that is (A) prior to the Executive's termination of
employment with the Company, (B) within the two years following the termination
of his employment with the Company during the Initial Term if such termination
is by the Company for Cause or by the Executive other than for Good Reason and
(C) within one year following his termination of employment during the Term but
after the Initial Term if such termination is by the Company for Cause or by the
Executive other than for Good Reason.
(i) own, either directly or indirectly, any interest in any business
that competes with the "Primary Business" in which the Company or any
subsidiary or affiliate is engaged, within a radius of 30 miles from any
site, facility, or location which is owned, managed or operated by or
affiliated with the Company or any of its subsidiaries and affiliates,
including physician practices of any kind. For purposes of this Agreement,
"Primary Business" shall mean the delivery of integrated healthcare
services in markets where the Company or its subsidiaries own, operate or
manage Physician Practices or Ambulatory Surgery Centers. These integrated
healthcare services can include but are not limited to (A) individual
Physician Practices and/or physician-based organizations such as primary
care and specialty clinics, physician-hospital organizations ("PMOs") or
medical service organizations ("MSOs"), or physician medical groups and
(B) ambulatory programs such as home health care, ambulatory surgery,
occupational and sports medicine centers, and other diagnostic,
rehabilitative and treatment services. Some of these services, sites and
facilities may be located in satellite areas for the purpose of extending
the Physician Practice's geographic service area and to serve as access
points and/or referral sources for either the local delivery system or the
Physician Practice's geographic service area and to serve as access points
and/or referral sources for either the local delivery system or the
Physician Practice's. The Board may modify, from time to time, the
definition of Primary Business to include any additional business or
service activity in which the Company may engage during the Term or to
exclude any business or service in which the Company ceases to engage. The
definition of "Primary Business" may also be modified to include any
business or service into which, as of the Termination Date, the Company
definitively intends to expand, regardless of whether such expansion
actually occurs after the Executive's termination. For purposes of the
preceding sentence, the date on which a modification of the definition of
"Primary Business" shall be effective shall be the date on which the
Executive is provided written notice of such modification (the "Notice
Date"); PROVIDED, HOWEVER, that no such modification as to which notice is
provided on or after the Termination Date shall be effective against the
Executive; and PROVIDED, FURTHER, that no such modification shall be
effective with respect to any interests, investments or business activities
engaged in by Executive prior to the Notice Date of such modification and
properly disclosed prior to such Notice Date pursuant to Section 10(a) or
in the Asset Purchase Agreement;
(ii) participate or serve, either directly or indirectly, whether as
a proprietor, stockholder, partner, co-venturer, director, officer,
employee, independent contractor, agent, consultant, or in any other
capacity or manner whatsoever in any business or service activity that
competes with the Primary Business;
(iii) directly or indirectly, solicit or recruit any individual
employed by the Company, its subsidiaries or affiliates for the purpose of
being employed by him or by any competitor of the
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Company on whose behalf he is acting as an agent, representative or
employee, or convey any confidential information or trade secrets regarding
other employees of the Company, its subsidiaries or affiliates to any other
person; or
(iv) directly or indirectly, influence or attempt to influence
customers of the Company or any of its subsidiaries or affiliates to direct
their businiess to any competitor of the Company;
PROVIDED, HOWEVER, that neither (i) the "beneficial ownership" by Executive,
either individually or as a member of a "group," as such terms are used in
Rule 13d under the Exchange Act, as a passive investment, of not more than five
percent (5%) of the voting stock of any publicly held corporation, nor (ii) the
beneficial ownership by Executive of any interest described in the first
sentence of Section 10(a) and properly and timely disclosed in accordance with
the terms therewith or disclosed in connection with the Asset Purchase
Agreement, shall alone constitute a violation of this Agreement, PROVIDED,
FURTHER, that nothing herein shall be deemed to prohibit Executive after
termination of employment for any reason from engaging in the provision of
professional anesthesia services to patients.
In the event that the Executive engages in the conduct proscribed by this
Section 10, the Executive agrees to repay any lump-sum severance amount received
pursuant to Section 5 of this Agreement (but not any Escrow Balance received),
and all outstanding stock options held by the Executive shall expire as of the
date of the Executive's commencement of such proscribed conduct. It is further
expressly agreed that the Company will or would suffer irreparable injury if
Executive were to compete with the Company or any subsidiary or affiliate in
violation of this Agreement and that the Company would by reason of such
competition be entitled to preliminary or injunctive relief in a court of
appropriate jurisdiction, and Executive further consents and stipulates to the
entry of such preliminary or injunctive relief in such a court prohibiting
Executive from competing with the Company or any subsidiary or affiliate of the
Company in violation of this Agreement upon an appropriate finding by such court
that Executive has violated this Section 10.
(c) UNENFORCEABLE PROVISIONS. It is the desire and the intent of the
parties that the provisions of this Section 10 shall be enforceable to the
fullest extent permissible under applicable law and public policy. Accordingly,
if this Section 10 or any portion thereof shall be adjudicated to be invalid or
unenforceable whether because of the duration and scope of the covenants set
forth herein or otherwise, the length and scope of the restrictions set forth in
this Section 10 shall be reduced to the extent necessary so that this covenant
may be enforced to the fullest extent possible under applicable law.
11. CONFIDENTIAL INFORMATION. The Executive acknowledges that in his
employment hereunder, and during prior periods of employment with the Company
and/or its subsidiaries, he has occupied and will continue to occupy a position
of trust and confidence. The Executive shall not, except as may be required to
perform his duties hereunder or as required by applicable law, until the
expiration of the applicable periods described in Section 10(b) or until such
information shall have become public other than by the Executive's unauthorized
disclosure, disclose to others or use, whether directly or indirectly, any
Confidential Information regarding the Company, its subsidiaries and affiliates.
"Confidential Information" shall mean information about the Company, its
subsidiaries and affiliates, and their respective clients and customers that is
not publicly disclosed by the Company or otherwise generally available to
members of the public seeking such information and that was learned by the
Executive in the course of his employment by the Company, its subsidiaries and
affiliates, including (without limitation) any proprietary knowledge, trade
secrets, data, formulae, information and client and customer lists and all
papers, resumes, and records (including computer records) of the documents
containing such Confidential Information. The Executive acknowledges that such
Confidential Information is specified, unique in nature and of great value to
the Company, its subsidiaries and affiliates, and that such information gives
the Company, its subsidiaries and affiliates a competitive advantage. The
Executive agrees to deliver or return to the Company, at the Company's request
at any time or upon termination or expiration of his employment or as soon
thereafter as possible, all documents, computer tapes and disks, records, lists,
data, drawings, prints, notes and written information (and all copies thereof)
furnished by the Company, its subsidiaries or affiliates or prepared by the
Executive during the term of his employment by the Company, its subsidiaries and
affiliates.
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In the event that the Executive engages in any conduct proscribed by this
Section 11, the Executive agrees to repay any lump-sum severance amount received
pursuant to Section 5 of this Agreement (but not any Escrow Balance received),
and all outstanding stock options held by the Executive shall expire as of the
date of the Executive's commencement of such proscribed conduct. It is further
expressly agreed that the Company will or would suffer irreparable injury if
Executive were to disclose or threaten to disclose Confidential Information
regarding the Company or any subsidiary or affiliate in violation of this
Agreement or otherwise fail to comply with the provisions of this Section 11,
and that the Company would, by reason of such disclosure or threatened
disclosure or other failure to comply, be entitled to preliminary or permanent
injunctive relief in a court of appropriate jurisdiction, and Executive further
consents and stipulates to the entry of such preliminary or permanent injunctive
relief in such a court prohibiting Executive from disclosing Confidential
Information in violation of this Agreement or otherwise requiring Executive to
comply with the provisions of this Section 11 upon an appropriate finding by
such court that Executive has violated this Section 11.
12. NOTICE. For the purposes of this agreement, any notices, demands and
all other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given upon (a) transmitter's confirmation of a
receipt of a facsimile transmission, (b) confirmed delivery by a standard
overnight carrier or (c) the expiration of five business days after the day when
mailed by certified or registered mail, postage prepaid, addressed as follows
(or at such other address as the parties hereto shall specify by like notice):
If to Executive: Mr. David LaGuardia
3025, Highway 154
Building B
Newnan, Georgia 30265
If to Company: American Medical Providers, Inc.
3555 Timmons Lane, Suite 1550
Houston, Texas 77027
Attention: Chief Executive Officer
13. AMENDMENT WAIVER. No provisions of this Agreement may be waived,
modified or discharged unless such waiver, modification or discharge is agreed
to in a written document signed by the Executive and such officer of the
Company, as may be specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.
14. ENTIRE AGREEMENT. This Agreement and Exhibit A hereto set forth the
entire agreement of the parties hereto in respect of the subject matter
contained herein and supersede all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto.
15. GOVERNING LAW; VENUE: VALIDITY. The interpretation, construction and
performance of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Texas without regard to the
principle of conflicts of laws and, at the election of the Executive, the venue
of any dispute arising under this Agreement shall be Texas. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which other
provisions shall remain in full force and effect.
16. HEADINGS. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
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17. SEVERABILITY. In the event that a court of competent jurisdiction
determines that any portion of this Agreement is in violation of any statute or
public policy, only the portions of this Agreement that violate such statute or
public policy shall be stricken. All portions of this Agreement that do not
violate any statute or public policy shall continue in full force and effect.
Further, any court order striking any portion of this Agreement shall modify the
stricken terms as narrowly as possible to give as much effect as possible to the
intentions of the parties under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first written above.
American Medical Providers, Inc.
By: /s/JACK N. McCRARY
Jack N. McCrary
President
Executive: /s/DAVID LaGUARDIA
David LaGuardia
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EXHIBT A
COMPENSATION AND LEAVE POLICIES
BASE COMPENSATION
Executive shall be paid a base salary of One Hundred Fifty Thousand Dollars
($150,000) per annum, subject to annual merit increases as determined by the
Compensation Committee of the Company.
INCENTIVE COMPENSATION
Executive shall participate in the Company's Executive Officers Performance
Plan with his annual "Target Bonus" not being less than 60 per cent of his
Base Salary.
LEAVE-VACATION AND HOLIDAYS
Executive shall be entitled to leave of at least four (4) weeks per annum
(or, if greater, to the number of vacation days to which Senior Vice Presidents
of the Company are entitled), to be taken in accordance with Employer's regular
vacation policies. Executive shall be entitled to nine (9) paid holidays per
annum in accordance with Employer regular paid holidays policies.
BENEFITS
Health Insurance including major medical for personal, family and
dependents
Life Insurance equivalent to 3 times Executive salary.
Disability insurance equivalent to 60% of Executives salary upon permanent
disability (provided, however, that Company shall upon request pay to
Executive the cash equivalent of the premium cost for such coverage)
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EXHIBIT B
OutMed Board meetings 2nd Thursday each month
Executive meetings 2nd Tuesday each month
Bank of Coweta Board meetings 2nd Thursday each month
Executive meetings 2nd Tuesday quarterly
SCNA Board meetings 2nd Monday each month
SCA Board meeting 2nd Monday each month
Heritage School Board meeting monthly
GRC Board meeting monthly
As to SCA, SCNA, and GRC, LaGuardia will devote whatever time is necessary
to ensure that the maintenance and renewal of existing contracts and future
contracts for the provision of services by AMP Subsidiary.
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EXHIBIT 10.17
ANKLE & FOOT CENTERS OF AMERICA, L.L.C.
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of , between Ankle & Foot Centers of
America, L.L.C. a Delaware limited liability corporation (the "Company") and
Roger Bigham (the "Executive").
In consideration of the premises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties agree as follows:
1. EMPLOYMENT. The Company hereby agrees to employ the Executive and the
Executive hereby agrees to serve the Company on the terms and conditions set
forth herein. In addition, the Executive and the Company hereby agree that
subject to and effective as of the closing of the proposed Initial Public
Offering ("IPO") of American Medical Providers, Inc., (formerly Podiatric
Newco, Inc., ("AMP"), this Employment Agreement (the "Agreement") shall be
assumed by "AMP" and shall supersede that certain letter agreement regarding
employment between the Company and the Executive dated as of (the
"Prior Agreement"), and the Prior Agreement shall thereupon automatically
terminate without further obligation by either Executive or the Company. Upon
AMP's assumption of this Agreement, all references to the Company herein shall
refer to AMP.
2. TERM OF EMPLOYMENT: DUTIES. From the period commencing on the date
hereof and ending immediately prior to the Effective Time (as defined in the S-1
registration filed by "AMP" in connection with its IPO, the employment of the
Executive shall be governed by the terms and conditions set forth in the Prior
Agreement. The term of this Agreement (the "Term") and Executive's employment
with the Company hereunder shall commence at the Effective Time and, unless
earlier terminated in accordance with the terms hereof, shall continue until the
third anniversary of the Effective Time (such initial term of the Agreement
referred to as the "Initial Term"); PROVIDED, HOWEVER, that the Term shall
automatically be renewed for successive, additional two year periods at the end
of the Initial Term and each renewal term thereafter, unless either the Company
or the Executive provides at least one year's notice to the other of its
intention not to renew the Term; and PROVIDED, FURTHER, that if the "IPO" is
terminated in accordance with its terms prior to the Effective Time or the
"IPO" is abandoned or otherwise does not close, (x) this Agreement shall
automatically terminate without further obligation by either party hereto, (y)
the terms and conditions set forth in this Agreement shall not apply and (z) the
employment of the Executive shall continue to be governed by the terms and
conditions set forth in the Prior Agreement.
During the Term, the Executive shall be employed as the of
the Company, reporting to the President of the Company, serving at the will of
the Board of Directors of the Company (the "Board") with the traditional
duties, responsibilities and authority of such office in companies similar in
size to the Company. The Executive agrees that he shall perform his duties
hereunder faithfully and to the best of his abilities and in furtherance of the
business of the Company and its subsidiaries and shall devote substantially all
of his business time, energy and attention to the business of the Company and
its subsidiaries, provided, however, that Executive shall be permitted to devote
a reasonable amount of business time, energy and attention to the pursuit of
activities on behalf of the entities described on the attached Exhibit B hereto
and disclosed to Company in connection with Company's acquisition of the assets
of Pyramid Anesthesiology Group, Inc. so long as such devotion does not
unreasonably interfere with the performance of Executive's duties hereunder.
3. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. During the Term, the Company shall pay to the Executive
an annual base salary (the "Base Salary") as set forth on Exhibit A per year,
payable in accordance with the Company's normal payroll practices or as the
Company and Executive may otherwise agree. The Base Salary shall be reviewed by
the Company annually and shall be subject to discretionary increase by the
Company from time to time, but shall not be decreased from the rate in effect at
any time and from time to time during the Term.
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(b) ANNUAL PERFORMANCE BONUS. Executive shall be entitled to participate
in the Company's Executive Officer Performance Bonus Plan or any similar or
successor annual bonus plan of the Company (the "Performance Bonus Plan") and
to receive an annual performance bonus upon the achievement of one or more
annual performance goals (the "Performance Goals") in accordance with the
terms of the Performance Bonus Plan; PROVIDED, that Executive's annual target
bonus under the Performance Bonus Plan (the "Annual Target Bonus") shall not
be less than 60% of the Base Salary in effect at the time the Performance Goals
for such plan year are established.
(c) LONG-TERM INCENTIVE. The Executive shall be eligible to participate
in any long-term incentive compensation and/or stock option plans maintained
from time to time by the Company. In addition, pursuant to prior action of the
Stock Option Committee of the Board, Executive has previously been granted an
option (the "Market Option") to purchase 15,000 shares of Company common
stock, no stated par value (the "Common Stock"), at an exercise price equal to
the price to the public in connection with AMP's IPO, with a term of 10 years
from the date of grant. The Market Option will vest twenty (20%) per annum over
5 years commencing with the Effective Time; PROVIDED, that the Market Option
will not become exercisable in whole or in part in the event the Market Option
is terminated in accordance with its terms prior to the Effective Time or if the
"IPO" is abandoned or otherwise does not close; and PROVIDED, FURTHER, that
the Market Option shall be subject to the terms of the American Medical
Providers, Inc., 1997 Stock Incentive Plan and the stock option agreement to be
entered into in connection with the grant of the Market Option.
(d) BENEFITS, PERQUISITES AND EXPENSES. During the Term, the Executive
shall be eligible to participate in employee benefit and fringe benefit plans
and programs generally available to the executive officers of the Company and
such additional benefits as the Board may from time to time provide. In
addition, Executive shall be entitled to receive the personal benefits described
on Exhibit A hereto. Executive shall be entitled to reimbursement for business
expenses, including travel and entertainment; PROVIDED, that such reimbursement
shall be limited to reasonable and necessary expenses incurred by Executive in
connection with the performance of duties on behalf of the Company subject to:
(i) timely submission of a properly executed Company expense report form
accompanied by appropriate supporting documentation, and (ii) compliance with
Company policies and procedures governing business expense reimbursement and
reporting based upon principles and guidelines established by the Audit
Committee of the Board, including periodic audits by the Internal Audit
Department of the Company and/or the Audit Committee of the Board.
Notwithstanding the foregoing, Executive shall in all events be entitled to
reimbursement for travel expenses incurred in the performance of job duties
commensurate with reimbursement policies generally available to similarly
situated Vice Presidents.
(e) RETIREMENT BENEFITS. The Executive shall be entitled to participate
in any Supplemental Executive Retirement Plan or any similar or successor plan
(the "SERP") and in any tax qualified and any other supplemental pension plans
should such plans become generally available to the executive officers of the
Company.
4. TERMINATION OF EXECUTIVE. Prior to the expiration of the Term and
subject to the payment of any amounts required under Section 5, the Executive's
employment with the Company may be terminated (a) by the Company for Cause (as
defined herein) or without Cause, (b) by the Executive for or without Good
Reason (as defined herein), (c) by reason of the Executive's death or Disability
(as defined herein) or (d) by the mutual written consent of the parties hereto.
For purposes of this Agreement:
(1) "Cause" means (A) conviction of, plea of guilty or settlement
for embezzlement, theft and fraud; (B) actions which have had or will
likely have a material adverse financial effect on the Company as a whole
for an extended period of time, where appropriate evidence exists that such
actions are directly attributable to the (I) gross management negligence or
repeated ineptitude of the Executive and/or (II) deliberate refusal of the
Executive to follow the instructions or directions of the Board; (C)
conviction of or a plea of guilty or NOLO CONTENDERE to a felony (other
than a felony involving a moving violation); (D) violation of the non
compete or confidentiality provisions of this Agreement, PROVIDED, that no
such violation will be deemed to have occurred if, within 30 days following
receipt by Executive of a notice from the Board identifying the violation,
the Executive (I)
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cures the violation and (II) establishes that the violation was
unintentional and not reasonably likely to result in harm to the Company,
in each case to the reasonable satisfaction of the Board; (E) material
incapacitation or repeated absence from work due to reckless and
self-abusive behavior or conduct, such as alcoholism and drug abuse, which
renders Executive incapable of performing his duties; PROVIDED, that
physical or mental disability due to injury or disease shall not be grounds
for termination for Cause; (F) gross insubordination or persistent refusal
to follow reasonable instructions; or (G) inability to perform the duties
of the Executive's office or consistent failure to perform in accordance
with reasonable expectations due to incompetence or due to repeated and
unexcused absence from work having a material adverse effect on the AMP
Subsidiary or other discrete business division to which the assets of
Pyramid Anesthesiology Group, Inc. were transferred; PROVIDED, that mere
failure to achieve performance targets or expectations (including without
limitation those set forth in the Performance Bonus Plan) shall not in and
of itself constitute Cause hereunder. Notwithstanding the foregoing, the
deliberate refusal of Executives to act shall not be deemed to constitute
Cause hereunder if such refusal is grounded in the Executive's good faith
belief that the course of action proposed would not be in the financial
interests of the Company (unless there is released to Executive free and
clear any and all property or funds remaining in the certain escrow account
established pursuant to the terms of that certain Asset Purchase Agreement
("Asset Purchase Agreement") among Executive, Company and Pyramid
Anesthesiology Group, Inc. ("Escrow Balance"), in which case such
deliberate refusal will constitute Cause if such deliberate refusal or
otherwise constitute Cause in accordance with the terms hereof).
For purposes of this Agreement, the Board shall have 60 days to
terminate the Executive for Cause following the date on which the Board
discovers the existence of a specific set of facts that, in the aggregate,
then constitute Cause, after which period no Cause with respect to such
specific set of facts shall be deemed to exist; PROVIDED, the repetition or
recurrence of the same or a similar set of facts shall constitute separate
ground for termination for Cause.
(i) "Disability" means the Executive's absence from the full-time
performance of his duties with the Company for one hundred eighty (180)
days or more within any period of 12 consecutive months as a result of the
Executive's incapacity due to mental or physical illness; PROVIDED, that
during any period prior to the termination of Executive's employment by
reason of Disability in which Executive is absent from the full-time
performance of his duties with the Company due to Disability, the Company
shall continue to pay Executive his Base Salary at the rate in effect at
the commencement of such period of Disability;
(iii) "Good Reason" means, without the Executive's express written
consent, the occurrence of any of the following events:
(A) a reduction by the Company in the Executive's Base Salary or
Annual Target Bonus in effect from time to time; (B) a material
reduction in the aggregate level of participation in and/or compensation
and benefit opportunities under all other compensation and employee
benefit plans in which Executive is entitled to participate from time to
time; PROVIDED, HOWEVER, that changes affecting the participation in or
benefits under such plans (other than the Performance Bonus Plan, any
SERP and the benefits described in Exhibit A) with respect to similarly
situated executives of the Company shall not constitute Good Reason
hereunder; (C) a reduction in the Executive's titles, duties or
authority with the Company; (D) notification by the Company of its
intention not to renew this Agreement pursuant to the provisions of
Section 2; (E) the termination of the Executive's employment for any
reason within 12 months following a Change in Control (as defined
herein); or (F) relocation by more than 25 miles from 3025 Highway 154,
Building B, Newnan, Georgia.
(iv) "Change in Control" means the occurrence of any one of the
following events:
(A) any "person" (as such term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934 (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) becomes an
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Acquiring Person (as such term is defined in the Company's Shareholder
Protection Rights Agreement to be adopted at the Effective Time) or any
person that is not bound by the Shareholder Agreement of the Company to
be entered into in connection with the Merger (the "Shareholder
Agreement") becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing 25 or more of the undiluted total voting power of
the Company's then outstanding securities eligible to vote for the
election of members of the Board (the "Company Voting Securities");
PROVIDED, HOWEVER, that no event described in the immediately preceding
clause shall be deemed to constitute a Change in Control by virtue of
any of the following: (I) an acquisition of Company Voting Securities by
the Company and/or one or more direct or indirect majority-owned
subsidiaries of the Company; (II) an acquisition of Company Voting
Securities by any employee benefit plan sponsored or maintained by the
Company or any corporation controlled by the Company, (III) an
acquisition by any underwriter temporarily holding securities pursuant
to an offering of such securities; or (IV) any acquisition by the
Executive or any "group" (as such term is defined in Rule 3d-5 under
the Exchange Act) of persons including the Executive; or
(B) individuals who, at the beginning of any period of twenty-four
(24) consecutive months, constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a majority thereof;
PROVIDED, HOWEVER, that any person becoming a director subsequent to the
beginning of such twenty-four (24) month period, whose election, or
nomination for election, by the Company's shareholders was approved by
either (i) the Board consistent with the terms of the Shareholder
Agreement, during the period the Shareholder Agreement is in effect, or
(ii) a vote of at least 75% of the directors comprising the Incumbent
Board (either by a specific vote or by approval of the proxy statement
of the Company in which such person is named as a nominee for director,
without objection to such nomination) shall be, for the purposes of this
paragraph (B), considered as though such person were a member of the
Incumbent Board; PROVIDED, FURTHER, that no individual initially elected
or nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors or any other
actual or threatened solicitation of proxies or consents by or on behalf
of any person other than the Board shall be deemed to be a member of the
Incumbent Board; or
(C) there is consummated a merger or consolidation of the Company
or a subsidiary thereof with or into any other corporation other than a
merger or consolidation which would result in the holders of the voting
securities of the Company outstanding immediately prior thereto holding
securities which, in combination with the ownership of any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, represent immediately after such merger or consolidation at
least 60% of the combined voting power of the then outstanding voting
securities of either the Company or the other entity which survives such
merger or consolidation or any parent of such other entity; or
(D) the stockholders of the Company approve (i) a plan of complete
liquidation or dissolution of the Company or (ii) an agreement for the
sale or disposition by the Company of all or substantially all the
Company's assets.
5. PAYMENTS UPON TERMINATION OF EXECUTIVE.
(a) If the employment of the Executive shall be terminated other than by
reason of death or Disability (i) by the Company (other than for Cause) or (ii)
by the Executive for Good Reason, then the Company shall pay or provide to the
Executive (or the Executive's beneficiary or estate):
(1) within thirty (30) days following the date of such termination of
employment ("Termination Date"), a lump-sum cash amount equal to the sum
of (i) the Executive's unpaid Base Salary through the Termination Date;
(ii) any accrued but unpaid annual bonus under the Performance Bonus Plan
in respect of the annual bonus period preceding the bonus period in which
the Termination Date occurs; (iii) any unpaid reimbursable business
expenses properly incurred through the Termination Date; and (iv) a bonus
payment equal to the Executive's Annual Target Bonus in the year of
termination,
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multiplied by a fraction the numerator of which is the number of months in
the bonus year of termination in which the Executive has worked at least
one day and the denominator of which is 12;
(2) within thirty (30) days following the Termination Date, a
lump-sum cash amount equal to the greater of (A) the Executive's then Base
Salary payable over the remainder of the Term plus a bonus equal to the
Executive's Annual Target Bonus in the year of termination multiplied by a
fraction the numerator of which is the number of complete months remaining
in the Term and the denominator of which is 12, or (B) 2.0 times the sum
of: (i) the Executive's annual rate of Base Salary as of the Termination
Date plus (ii) the Annual Target Bonus for the year in which the
Termination Date occurs (in each such case, Executive's Base Salary and
Annual Target Bonus being determined without taking into account any
reductions thereto constituting Good Reason); PROVIDED, HOWEVER, that the
Executive shall not be entitled to any severance benefits from the Company
or under any Company severance plan, policy or arrangement other than as
specified in this Agreement;
(3) for a period terminating on the earlier of (A) the commencement
of the provision of substantially equivalent benefits by a new employer or
(B) the later of (I) the last day of the Term, or (II) twenty-four (24)
months following the Termination Date, the Company shall continue to keep
in full force and effect (or otherwise provide) all policies of medical,
accident, disability and life insurance with respect to the Executive and
his dependents with substantially the same level of coverage, upon
substantially the same terms and otherwise substantially to the same extent
as such policies shall have been in effect immediately prior to the
Termination Date, and, as applicable, the Company and the Executive shall
share the costs of the continuation of such insurance coverage in the same
proportion as such costs were shared immediately prior to the date of
termination;
(4) for purposes of determining final average compensation (or making
any similar calculation) and years of service (for purposes of eligibility,
vesting and benefit accrual) under any tax-qualified or supplemental
defined benefit retirement plan (including without limitation any SERP),
Executive shall be deemed to have remained employed by the Company
hereunder until the end of the Term and to have received his then current
Base Salary and Annual Target Bonus through the end of the Term; PROVIDED,
that to the extent such benefits cannot be accrued under and paid from any
tax-qualified pension plan, such benefits shall be accrued under and paid
from any SERP or other supplemental plan.
(5) all options to purchase Common Stock held by the Executive shall
immediately become fully vested and exercisable and shall remain
exercisable until the later of (A) the date that is 24 months following the
Termination Date and (B) the expiration of the stated term of such options:
(6) payment of the Escrow Balance to Executive; and
(b) If the employment of the Executive shall be terminated (i) by
reason of the Executive's death or Disability, (ii) by the Company for
Cause, (iii) by the Executive without Good Reason, or (iv) by the mutual
written consent of the parties hereto (each a "Non qualifying
Termination"), then the Company shall pay to the Executive (or the
Executive's beneficiary or estate) within thirty (30) days following the
Termination Date a lump-sum cash amount equal to the sum of the Executive's
unpaid Base Salary through the Termination Date plus any bonus payments
which have been earned or become payable, to the extent not theretofore
paid, plus any unpaid reimbursable business expenses properly incurred
through the Termination Date (in addition to, in the case of employment
termination by mutual consent, any amounts required to be paid in
accordance with the written agreement between Company and Executive). In
addition, Executive (or the Executive's beneficiary or estate) shall have
no less than ninety days following the termination of his employment
pursuant to a Non qualifying Termination to exercise any outstanding
options to the extent vested and exercisable as of the Termination Date.
6. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Notwithstanding anything in this Agreement to the contrary, in the
event that any payment or distribution by the Company, by any affiliate of the
Company or by any person whose actions result in a
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change in control of the Company (to the extent the Company approves of the
arrangements pursuant to which the payment by such person is made to the
Executive) to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 6) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code, or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that, after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes) including, without limitation, any income and employment taxes
and Excise Tax, imposed upon the Gross-Up Payment but before deduction for any
federal, state or local income or other tax upon the Payments, the Executive
will retain a net amount equal to the sum of (i) the Payments and (ii) an amount
equal to the product of any deductions (or portions thereof) disallowed because
of the inclusion of the Gross-Up Payment in the Executive's adjusted gross
income for federal income tax purposes and the highest applicable marginal rate
of federal income taxation for the calendar year in which the Gross-Up Payment
is to be made. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to (1) pay applicable federal income taxes at the
highest applicable marginal rates of federal income taxation (including
surcharges) for the calendar year in which the Gross-Up Payment is to be made,
(2) pay applicable state and local income taxes at the highest applicable
marginal rate of taxation (including surcharges) for the calendar year in which
the Gross-Up Payment is to be made, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes and (3) have otherwise allowable deductions for federal income tax
purposes at least equal to those disallowed because of the inclusion of the
Gross-Up Payment in the Executive's adjusted gross income.
(b) Subject to the provisions of Section 6(a), all determinations required
to be made under this Section 6, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by the public
accounting firm that is retained by the Company as of the date immediately prior
to the change in control (the "Accounting firm") which shall provide detailed
supporting calculations both to the Company and the Executive within fifteen
(15) business days of the receipt of notice from the Company or the Executive
that there has been a Payment, or such earlier time as is requested by the
Company (collectively, the "Determination"). In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the change in control, the Executive may appoint another nationally
recognized public accounting firm reasonably acceptable to the Company to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All reasonable fees and expenses
of the Accounting Firm shall be borne solely by the Company and, subject to
applicable law and obligations to the Company's stockholders, the Company shall
enter into any agreement reasonably requested by the Accounting Firm that is
generally recognized as standard in connection with the performance of the
services hereunder. The Gross-Up Payment under this Section 6 with respect to
any Payment shall be made no later than thirty (30) days following the date of
such Payment. If the Accounting Firm determines that no Excise Tax is payable by
the Executive, it shall furnish the Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on the
Executive's applicable federal income tax return should not result in the
imposition of a negligence or similar penalty. The Determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of uncertainty in the application of Section 4999 of the Code at the time of the
Determination, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made ("Underpayment") or Gross-Up
Payments are made by the Company which should not have been made
("Overpayment"), consistent with the calculations required to be made
hereunder. In the event that the Executive thereafter is required to make
payment of any additional Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code) shall
be promptly paid by the Company to or for the benefit of the Executive. In the
event the amount of the Gross-Up Payment exceeds the amount
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necessary to reimburse the Executive for his Excise Tax, the Accounting Firm
shall determine the amount of the Overpayment that has been made and any such
Overpayment (together with interest at the rate provided in Section 1274(b)(2)
of the Code) shall be promptly paid by the Executive to or for the benefit of
the Company. The Executive shall cooperate, to the extent his reasonable
expenses in connection therewith are reimbursed by the Company, with any
reasonable request by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.
7. WITHHOLDING TAXES. The Company shall have the right to withhold from
any and all payments due to the Executive (or his beneficiary or estate)
hereunder all taxes which, by applicable federal, state, local or other law, the
Company is required to withhold therefrom.
8. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement is personal in nature and none of the parties hereto
shall, without the consent of the other, assign, or transfer this Agreement or
any rights or obligations hereunder; PROVIDED, that in the event of the merger,
consolidation, transfer or sale of substantially all of the assets of the
Company with or to any other individual or entity, this Agreement shall, subject
to the provisions hereof, be binding upon and inure to the benefit of such
successor and such successor shall discharge and perform all the promises,
covenants, duties and obligations of the Company hereunder, and all references
herein to the "Company" shall refer to such successor.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amounts remain payable to the Executive hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this agreement to such person or persons appointed in writing by the
Executive to receive such amounts or, if no person is so appointed, to the
Executive's estate.
9. RESOLUTION OF DISPUTES; LEGAL FEES; NO MITIGATION.
(a) Except as provided in Sections 10 and 11, all disputes hereunder shall
be settled by final, binding arbitration, conducted before a panel of three (3)
arbitrators in Texas in accordance with the rules of the American Arbitration
Association then in effect. Judgment on the arbitration award may be entered in
any court having jurisdiction. The Company shall bear the expenses of such
arbitration.
(b) If any contest or dispute shall arise under this Agreement involving
termination of the Executive's employment with the Company or involving the
failure or refusal of the Company to perform fully in accordance with the terms
hereof, the Company shall advance and reimburse the Executive, on a current
basis, all legal fees and expenses, if any, incurred by the Executive in
connection with such contest or dispute; PROVIDED, that the Executive agrees to
return any advanced or reimbursed expenses to the extent the arbitrators (or the
court, in the case of a dispute described in Section 10 or 11) determine that
the Company has prevailed as to the material issues raised in determination of
the dispute.
(c) The Company's obligation to make any payments provided for in this
Agreement to the Executive and otherwise to perform its obligations hereunder
shall not be affected by any setoff, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement, and such amounts shall not be
reduced whether or not the Executive obtains other employment.
10. NONCOMPETITION.
(a) DISCLOSURE. The Executive has disclosed to the Board, in writing, all
healthcare-related interests, investments, or business activities, whether as
proprietor, stockholder, partner, co-venturer, director, officer, employee,
independent contractor, agent, consultant, or in any other capacity or manner
whatsoever. The Executive shall notify the Board, in writing, of any changes in
or additions to such interests, activities or investments permitted in
accordance with the terms of this Agreement, within 15 days of such change or
addition.
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(b) PROHIBITED ACTIVITY. Without the written consent of a majority of the
Independent Directors, the Executive may not engage in any of the following
actions during the period that is (A) prior to the Executive's termination of
employment with the Company, (B) within the two years following the termination
of his employment with the Company during the Initial Term if such termination
is by the Company for Cause or by the Executive other than for Good Reason and
(C) within one year following his termination of employment during the Term but
after the Initial Term if such termination is by the Company for Cause or by the
Executive other than for Good Reason.
(i) own, either directly or indirectly, any interest in any business
that competes with the "Primary Business" in which the Company or any
subsidiary or affiliate is engaged, within a radius of 30 miles from any
site, facility, or location which is owned, managed or operated by or
affiliated with the Company or any of its subsidiaries and affiliates,
including physician practices of any kind. For purposes of this Agreement,
"Primary Business" shall mean the delivery of integrated healthcare
services in markets where the Company or its subsidiaries own, operate or
manage Physician Practices or Ambulatory Surgery Centers. These integrated
healthcare services can include but are not limited to (A) individual
Physician Practices and/or physician-based organizations such as primary
care and specialty clinics, physician-hospital organizations ("PMOs") or
medical service organizations ("MSOs"), or physician medical groups and
(B) ambulatory programs such as home health care, ambulatory surgery,
occupational and sports medicine centers, and other diagnostic,
rehabilitative and treatment services. Some of these services, sites and
facilities may be located in satellite areas for the purpose of extending
the Physician Practice's geographic service area and to serve as access
points and/or referral sources for either the local delivery system or the
Physician Practice's geographic service area and to serve as access points
and/or referral sources for either the local delivery system or the
Physician Practice's. The Board may modify, from time to time, the
definition of Primary Business to include any additional business or
service activity in which the Company may engage during the Term or to
exclude any business or service in which the Company ceases to engage. The
definition of "Primary Business" may also be modified to include any
business or service into which, as of the Termination Date, the Company
definitively intends to expand, regardless of whether such expansion
actually occurs after the Executive's termination. For purposes of the
preceding sentence, the date on which a modification of the definition of
"Primary Business" shall be effective shall be the date on which the
Executive is provided written notice of such modification (the "Notice
Date"); PROVIDED, HOWEVER, that no such modification as to which notice is
provided on or after the Termination Date shall be effective against the
Executive; and PROVIDED, FURTHER, that no such modification shall be
effective with respect to any interests, investments or business activities
engaged in by Executive prior to the Notice Date of such modification and
properly disclosed prior to such Notice Date pursuant to Section 10(a) or
in the Asset Purchase Agreement;
(ii) participate or serve, either directly or indirectly, whether as
a proprietor, stockholder, partner, co-venturer, director, officer,
employee, independent contractor, agent, consultant, or in any other
capacity or manner whatsoever in any business or service activity that
competes with the Primary Business;
(iii) directly or indirectly, solicit or recruit any individual
employed by the Company, its subsidiaries or affiliates for the purpose of
being employed by him or by any competitor of the Company on whose behalf
he is acting as an agent, representative or employee, or convey any
confidential information or trade secrets regarding other employees of the
Company, its subsidiaries or affiliates to any other person; or
(iv) directly or indirectly, influence or attempt to influence
customers of the Company or any of its subsidiaries or affiliates to direct
their business to any competitor of the Company;
PROVIDED, HOWEVER, that neither (i) the "beneficial ownership" by Executive,
either individually or as a member of a "group," as such terms are used in
Rule 13d under the Exchange Act, as a passive investment, of not more than five
percent (5%) of the voting stock of any publicly held corporation, nor (ii) the
beneficial ownership by Executive of any interest described in the first
sentence of Section 10(a) and
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properly and timely disclosed in accordance with the terms therewith or
disclosed in connection with the Asset Purchase Agreement, shall alone
constitute a violation of this Agreement, PROVIDED, FURTHER, that nothing herein
shall be deemed to prohibit Executive after termination of employment for any
reason from engaging in the provision of professional anesthesia services to
patients.
In the event that the Executive engages in the conduct proscribed by this
Section 10, the Executive agrees to repay any lump-sum severance amount received
pursuant to Section 5 of this Agreement (but not any Escrow Balance received),
and all outstanding stock options held by the Executive shall expire as of the
date of the Executive's commencement of such proscribed conduct. It is further
expressly agreed that the Company will or would suffer irreparable injury if
Executive were to compete with the Company or any subsidiary or affiliate in
violation of this Agreement and that the Company would by reason of such
competition be entitled to preliminary or injunctive relief in a court of
appropriate jurisdiction, and Executive further consents and stipulates to the
entry of such preliminary or injunctive relief in such a court prohibiting
Executive from competing with the Company or any subsidiary or affiliate of the
Company in violation of this Agreement upon an appropriate finding by such court
that Executive has violated this Section 10.
(c) UNENFORCEABLE PROVISIONS. It is the desire and the intent of the
parties that the provisions of this Section 10 shall be enforceable to the
fullest extent permissible under applicable law and public policy. Accordingly,
if this Section 10 or any portion thereof shall be adjudicated to be invalid or
unenforceable whether because of the duration and scope of the covenants set
forth herein or otherwise, the length and scope of the restrictions set forth in
this Section 10 shall be reduced to the extent necessary so that this covenant
may be enforced to the fullest extent possible under applicable law.
11. CONFIDENTIAL INFORMATION. The Executive acknowledges that in his
employment hereunder, and during prior periods of employment with the Company
and/or its subsidiaries, he has occupied and will continue to occupy a position
of trust and confidence. The Executive shall not, except as may be required to
perform his duties hereunder or as required by applicable law, until the
expiration of the applicable periods described in Section 10(b) or until such
information shall have become public other than by the Executive's unauthorized
disclosure, disclose to others or use, whether directly or indirectly, any
Confidential Information regarding the Company, its subsidiaries and affiliates.
"Confidential Information" shall mean information about the Company, its
subsidiaries and affiliates, and their respective clients and customers that is
not publicly disclosed by the Company or otherwise generally available to
members of the public seeking such information and that was learned by the
Executive in the course of his employment by the Company, its subsidiaries and
affiliates, including (without limitation) any proprietary knowledge, trade
secrets, data, formulae, information and client and customer lists and all
papers, resumes, and records (including computer records) of the documents
containing such Confidential Information. The Executive acknowledges that such
Confidential Information is specialized, unique in nature and of great value to
the Company, its subsidiaries and affiliates, and that such information gives
the Company, its subsidiaries and affiliates a competitive advantage. The
Executive agrees to deliver or return to the Company, at the Company's request
at any time or upon termination or expiration of his employment or as soon
thereafter as possible, all documents, computer tapes and disks, records, lists,
data, drawings, prints, notes and written information (and all copies thereof)
furnished by the Company, its subsidiaries or affiliates or prepared by the
Executive during the term of his employment by the Company, its subsidiaries and
affiliates.
In the event that the Executive engages in any conduct proscribed by this
Section 11, the Executive agrees to repay any lump-sum severance amount received
pursuant to Section 5 of this Agreement (but not any Escrow Balance received),
and all outstanding stock options held by the Executive shall expire as of the
date of the Executive's commencement of such proscribed conduct. It is further
expressly agreed that the Company will or would suffer irreparable injury if
Executive were to disclose or threaten to disclose Confidential Information
regarding the Company or any subsidiary or affiliate in violation of this
Agreement or otherwise fail to comply with the provisions of this Section 11,
and that the Company would, by reason of such disclosure or threatened
disclosure or other failure to comply, be entitled to preliminary or permanent
injunctive relief in a court of appropriate jurisdiction, and Executive further
consents and
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stipulates to the entry of such preliminary or permanent injunctive relief in
such a court prohibiting Executive from disclosing Confidential Information in
violation of this Agreement or otherwise requiring Executive to comply with the
provisions of this Section 11 upon an appropriate finding by such court that
Executive has violated this Section 11.
12. NOTICE. For the purposes of this agreement, any notices, demands and
all other communications required or permitted hereunder shall be in writing and
shall be deemed to have been duly given upon (a) transmitter's confirmation of a
receipt of a facsimile transmission, (b) confirmed delivery by a standard
overnight carrier or (c) the expiration of five business days after the day when
mailed by certified or registered mail, postage prepaid, addressed as follows
(or at such other address as the parties hereto shall specify by like notice):
If to Executive: Mr. Roger Bigham
3025, Highway 154
Building B
Newnan, Georgia 30265
If to Company: American Medical Providers, Inc.
3555 Timmons Lane, Suite 1550
Houston, Texas 77027
Attention: Chief Executive Officer
13. AMENDMENT WAIVER. No provisions of this Agreement may be waived,
modified or discharged unless such waiver, modification or discharge is agreed
to in a written document signed by the Executive and such officer of the
Company, as may be specifically designated by the Board. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not set forth expressly in this
Agreement.
14. ENTIRE AGREEMENT. This Agreement and Exhibit A hereto set forth the
entire agreement of the parties hereto in respect of the subject matter
contained herein and supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto.
15. GOVERNING LAW; VENUE; VALIDITY. The interpretation, construction and
performance of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Texas without regard to the
principle of conflicts of laws and, at the election of the Executive, the venue
of any dispute arising under this Agreement shall be Texas. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which other
provisions shall remain in full force and effect.
16. HEADINGS. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
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17. SEVERABILITY. In the event that a court of competent jurisdiction
determines that any portion of this Agreement is in violation of any statute or
public policy, only the portions of this Agreement that violate such statute or
public policy shall be stricken. All portions of this Agreement that do not
violate any statute or public policy shall continue in full force and effect.
Further, any court order striking any portion of this Agreement shall modify the
stricken terms as narrowly as possible to give as much effect as possible to the
intentions of the parties under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
and year first written above.
American Medical Providers, Inc.
By: /s/JACK N. McCRARY
Jack N. McCrary
President
Executive: /s/ROGER BIGHAM
Roger Bigham
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EXHIBIT A
COMPENSATION AND LEAVE POLICIES
BASE COMPENSATION
Executive shall be paid a base salary of One Hundred Fifty Thousand Dollars
($150,000) per annum, subject to annual merit increases as determined by the
Compensation Committee of the Company.
INCENTIVE COMPENSATION
Executive shall participate in the Company's Executive Officers Performance
Plan with his annual "Target Bonus" not being less than 60 per cent of his
Base Salary.
LEAVE-VACATION AND HOLIDAYS
Executive shall be entitled to leave of at least four (4) weeks per annum
(or, if greater, to the number of vacation days to which Senior Vice Presidents
of the Company are entitled), to be taken in accordance with Employer's regular
vacation policies. Executive shall be entitled to nine (9) paid holidays per
annum in accordance with Employer regular paid holidays policies.
BENEFITS
Health Insurance including major medical for personal, family and
dependents
Life Insurance equivalent to 3 times Executive salary.
Disability insurance equivalent to 60% of Executives salary upon permanent
disability (provided, however, that Company shall upon request pay to
Executive the cash equivalent of the premium cost for such coverage)
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EXHIBIT B
OutMed Board meetings 2nd Thursday each month
Executive meetings 2nd Tuesday each month
SCNA Board meetings 2nd Monday each month
SCA Board meeting 2nd Monday each month
Heritage School Board meeting monthly
GRC Board meeting monthly
As to SCA, SCNA, and GRC, Bigham will devote whatever time is necessary to
ensure the maintenance and renewal of existing contracts and future contracts
for the provision of services by AMP Subsidiary. Further, Bigham shall be
entitled to pursue fellow status in the following professional associations:
American College of Healthcare Executives; Healthcare Financial Managers
Association; Medical Group Management Association.
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EXHIBIT 10.18
LEASE AGREEMENT
This LEASE AGREEMENT (this "Agreement") is made and entered into
effective as of, January 19,1997 (the "Effective Date") by and between Doctors
Hospital 1997, LP a Texas limited partnership doing business as Doctors Hospital
Tidwell (the "Hospital" or "Owners"), and, American Medical Providers, Inc. or
its nominee ("Lessee").
RECITALS:
A. Owner owns a general acute care hospital located at 510 West Tidwell,
Houston, Texas 77091, (the Facility.) containing operating rooms, surgery
suites, a preop area, and a recovery room (collectively, the "Surgery Areas").
B. Lessee is a corporation organized under the laws of the State of
Texas, and will be authorized to do business in Texas at the Commencement Date
(as defined herein) of this Agreement and Lessee has entered into certain
Business Purchase Agreements pursuant to which Lessee is purchasing certain
practice assets from Physicians (the "Affiliated Physicians")who are thereafter
entering into employment agreements with a regional group practice limited
liability corporation ("RGP") which will enter into a management agreement with
Lessee or its wholly owned subsidiary corporation.
C. Lessee desires to use the Surgery Area for the purpose of providing
ambulatory surgical services to patients of the RGP's Affiliated Physicians (as
defined hereinabove), on the terms and conditions set forth in this Agreement,
and Owner desires to allow such use.
AGREEMENTS:
NOW, THEREFORE, in consideration of the premises and the terms and
conditions contained in this Agreement, the mutuality and adequacy of which are
forever acknowledged, the parties do agree as follows, intending to be legally
bound:
1. LEASE OF PREMISES. Owner hereby leases and lets to Lessee, for use by
RGP, Affiliated Physicians and Lessee, and Lessee hereby leases and takes from
Owner, the Surgery Area, or so much thereof as is needed by Lessee (the
"Premises"), located in Owner's Facility located in Houston, Texas which
Facility is situated on that certain tract or parcel of real property (the
"Land"), situated in the state of Texas and being more fully described on
Exhibit A attached hereto and made a part hereof for all purposes, during the
following times:
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(a) Forty Eight (48) hours per quarter (the "Base Hours"), which shall
be (be at such times and such increments as is mutually agreed to by the
parties) on weekdays other than holidays,( unless mutually agreed
otherwise, and which shall be scheduled by Lessee in advance in
accordance with Owner's scheduling procedure but in not less than 4 hour
blocks unless otherwise agreed to by Lessee.
(b) Additional time, which shall be scheduled by Lessee in advance in
accordance with Owner's scheduling procedure, and hold-over time
(collectively, "Additional Time") as needed by Lessee.
A floor plan depicting the design of the Premises is attached hereto as Exhibit
B and made a part hereof for all purposes. Owner hereby grants Lessee, RGP,
Affiliated Physicians, and their respective assignees, subtenants, agents,
employees, invitees, and other visitors, a nonexclusive license for the term of
this Lease to use the Surgery Area and the common areas of the Facility and the
Land.
2. TERM AND TERMINATION.
(a) TERM. This Agreement shall be in force for an initial term of
one year commencing on the Commencement Date and, upon notice by Lessee
or Owner at least thirty (30) days before the end of the initial term or
any renewal term, may be renewed for successive renewal terms of one
year each, unless sooner terminated in accordance with the terms and
conditions of this Agreement.
(b) TERMINATION. Agreement may be sooner terminated only on the
occurrence of one of the following:
(i) TERMINATION BY AGREEMENT. If Owner and Lessee mutually
agree in writing, this Agreement may be terminated on the terms
and date stipulated.
(ii) TERMINATION FOR DEFAULT. If either party shall give
written notice to the other that the other party has
substantially defaulted in the performance of any obligation
under this Agreement, and such default shall not have been cured
within fifteen (15) days following the giving of such notice, the
party giving the notice shall have the right to immediately
terminate this Agreement by written notice.
(iii) LEGISLATIVE, REGULATORY OR ADMINISTRATIVE CHANGE. In
the event of a change in the Medicare or Medicaid laws,
regulations or general instructions or interpretations, the
adoption of new state or federal legislation, or a change in any
third party reimbursement system, any of which materially affects
the manner in which either party may perform or be compensated
for its services under this Agreement, the parties may either
immediately terminate this Agreement or propose a new service
arrangement or basis for compensation for the services furnished
pursuant to this Agreement. If such notice of new service
arrangement or basis for compensation is given and if the parties
are unable within ninety (90) days thereafter to agree upon a new
service arrangement or basis for compensation, either party may
terminate this Agreement by ninety (90) days notice to the other
on any future date specified in such notice.
<PAGE>
(c) For purposes of this Agreement "Commencement Date" shall mean
the date which is the latter of the following events to have occurred: (a) the
Initial Public Offering date for American Medical Providers, Inc in its sale of
stock to the public as contemplated in its registration statement filed with the
Securities Exchange Commission; (b) the date this Agreement is approved by
Lessee's board of directors, or the date the board of managers for the RGP has
approved this Agreement.
3. USE. The Surgery Area shall be used by Lessee, RGP, or Affiliated
Physicians for the sole purpose of providing ambulatory surgical services and
related services for the benefit of RGP's or Affiliated Physicians' patients.
4. RENT. Lessee agrees to pay Owner (a) an annual base rental beginning
on the Commencement Date of One Hundred Five Thousand Six Hundred Dollars
($105,600.) payable in equal monthly installments of Eight Thousand Eight
Hundred Dollars ($8,800), which amounts are subject to adjustment as provided in
this Section, with the first installment to be paid on the Commencement Date and
subsequent installments each succeeding month, and (b) an additional rental
charge of One Hundred Thirty Seven Dollars ($137.00) for each quarter hour (or
part thereof) of Additional Time, payable monthly, with the first payment to be
paid forty-five (45) days after the month containing the Commencement Date and
subsequent installments after each succeeding month. The Base Rental shall be
adjusted for the following:
(a) If an Affiliated Physician (as of the Effective Date) of
Lessee dies, becomes permanently disabled, or moves away from the
Houston metropolitan area, the Lessee shall have the option, upon 10
days notice to Owner, to reduce the number of Base Hours, (and
correspondingly the Base Rental) in proportion to the collections of
such Affiliated Physician to the collections of the RGP over the prior
two months relating to services rendered to their respective patients.
For purposes of this Agreement, a disability is a documented illness or
incapacity that keeps or is expected to keep an individual from resuming
his full-time professional practice for at least ninety (90) days;
provided, however, that such ninety (90) day period shall not be deemed
to be broken if the individual returns to work for no more than three
consecutive working days during any given attempt to resume his or her
regular work schedule.
(b) If an Affiliated Physician discharges his obligations to RGP
or Lessee through bankruptcy, the Lessee shall have the option, upon 10
days notice to Owner, to reduce the number of Base Hours, (and
correspondingly the Base Rental) in proportion to the collections of
such Affiliated Physician to the collections of the RGP over the prior
two months relating to services rendered to their respective patients.
<PAGE>
(c) If the Premises are not available for Lessee at scheduled
times, the base rental shall be reduced by $140.00 for each quarter hour
(or part thereof). During any block of time scheduled by Lessee if the
turn around time (defined to be the time between surgeries required by
Owner to clean and make the Surgery space available for the next
surgery) is in excess of twenty minutes, then Lessee shall be given
credit against the Base Rental for such period by $140.00 for each
quarter hour (or part thereof) in excess of 20 minutes, and such
turn-around time shall not reduce the numbers of Base Hours available to
Lessee.
(d) If Lessee attempts to schedule at least the number of hours
set forth in Section l (a) in accordance with Owner's scheduling
procedure and the Premises are not available for that number of hours,
the base rental shall be reduced by $140. for each quarter hour (or part
thereof) of the shortfall.
All rent shall be payable by Lessee to Owner at the Facility. All rent shall be
prorated for the number of days Lessee is actually in possession of the Surgery
Area during the first and last months of the term of this Agreement.
5. OPERATION OF SURGERY AREA. Owner shall provide the facilities
reasonably necessary and appropriate for the provision of ambulatory surgical
services at the Surgery Area, including but not limited to all personnel
staffing, supplies and disposable supplies and equipment, including surgery
trays, operating room equipment, as well as pre-operating and recovery
equipment, personnel and space. Owner (or the landlord from which Owner leases
the Facility) shall be responsible for all costs of repairs, maintenance and
improvements, utility expenses, normal janitorial services, refuse disposal, and
all other costs and expenses reasonably incurred in conducting business at the
Facility during the term of this Agreement, including but not limited to related
real or personal property lease cost payments and expenses, taxes, utilities and
insurance.
6. EQUIPMENT. Owner shall at Owner's expense provide all equipment
reasonably necessary and appropriate for the provision of ambulatory surgical
services at the Surgery Area. Owner shall not be required to purchase any
additional equipment which is not already present in the Facility. Lessee, RGP
and Affiliated Physicians shall have access to and use of any medical equipment
located in the Surgery Area throughout the term; provided, however, that title
to the Facility and all equipment other than items placed in the location by
them shall at all times be and remain in Owner or, if applicable, the entity
from which Owner leases the Facility and/or equipment. Should Lessee from time
to time during the term of this Agreement desire Owner to provide additional
patient care other equipment for use at the Surgery Area or to replace used or
obsolete equipment, Lessee shall make such requests or recommendations to Owner,
which shall implement reasonably necessary or appropriate requests. Owner shall
maintain all tangible assets and properties of the Facility in as good a state
of operating condition and repair as they are on the Commencement Date, except
for ordinary depreciation, wear, and tear.
<PAGE>
7. PERSONNEL Owner shall at Owner's expense provide all personnel
traditionally provided and reasonably necessary and appropriate for the
provision of ambulatory surgical services at the Surgery Area.
8. SUPPLIES. Owner shall obtain and provide all supplies traditionally
provided in surgeries, including but not limited to those described in section 5
above, and shall ensure that the Surgery Area is at all times adequately stocked
with supplies. Lessee, RGP or Affiliated Physicians shall have the right to
purchase any unique items of supplies, including but not limited to screws,
prosthesis, and implants from Owner at its cost, or alternatively may purchase
all such items independent of Owner and make them available for their respective
patients. Lessee, RGP and Affiliated Physicians shall have access to and use of
any supplies reasonably necessary and appropriate for the provision of
ambulatory surgery services at the Surgery Area.
9. LICENSES. Owner has and shall maintain possession of all licenses
necessary for the provision of ambulatory surgery services at the Facility, and
all such licenses are and shall remain in full force and effect. To Owner's
knowledge, no material violations are or have been recorded in respect of such
licenses, and no proceeding is pending or, to the knowledge of Owner,
threatened, seeking the revocation or limitation of any of such licenses.
10. MEDICARE/MEDICAID PROGRAMS. Owner is and shall remain a Provider
under existing provider agreements with the applicable Medicare and Medicaid
authorities. Owner shall file timely all reports required to be filed in
connection with an state and federal Medicare and Medicaid programs. Owner shall
have the sole right to bill for facility fees for all Medicare and Medicaid
patients, and no portion of such fee shall be paid to Lessee, RGP, or its
Affiliated Physicians.
11. MANAGED CARE NETWORK. Owner will use its commercially reasonable
best efforts to ensure the continued participation of the Facility in all its
existing managed care programs.
12. PROFESSIONAL SERVICES. Lessee. RGP or Affiliated Physicians shall
provide professional services to patients in compliance at all times with
ethical standards, laws and regulations applying to the medical profession.
Lessee shall ensure that each physician associated with Lessee to provide
services at the Surgery Area is licensed in the State of Texas. Lessee shall
have complete control of and responsibility for the selection and compensation
of its physician members and other health care professional employees and shall
further be responsible for the payment of all payroll taxes, employee benefits,
and ad other taxes or charges now or hereafter applicable to them. Any
Professionals associated with Lessee, RGP, or Affiliated Physicians, including
but not limited to Podiatrists, that perform surgery in the Facility, must be
credentialed in accordance with Owner's medical staff bylaws, rules and
regulations.Owner is hereby granted the first right to supply professional
anesthesia services to the RGP Affiliated Physicians at the Surgery Area
provided it is able to meet the price for such services which Lessee has secured
a proposal from an independent third party for the provision of such services.
Owner will be given ten days to agree to the compensation for such professional
anesthesia services as proposed by Lessee, and failing such agreement by Owner,
Lessee shall be able thereafter to contract for anesthesia professional services
independent of Owner..
<PAGE>
13. BILLING AND COLLECTION FOR PROFESSIONAL SERVICES. Lessee on behalf
of RGP and Affiliated Physicians shall be entitled to bill patients and third
party payers for a professional services furnished by the RGP and its Affiliated
Physicians at the Surgery Area and to collect payments for those billings.
14. BILLING AND COLLECTION FOR FACILITY SERVICES. Lessee recognizes the
expertise and experience of Owner in billing and collecting for all the Facility
Services that shall be provided to patients by Lessee at the Surgery Area. To
that end, Lessee, RGP or Affiliated Physicians shall have the option of
collecting such Facility fees itself or have the Owner bill patients (other than
Medicare and Medicaid patients referred to in section 10 above, which shall be
billed by Owner under all such circumstances) for all Facility Services provided
by RGP or its Affiliated Physicians at the Surgery Area and to collect payments
for those billings. Lessee shall provide Owner with at least 30 days prior
notice should it desire to have Owner bill and collect for such Facility
Services and any compensation to be paid therefore to Owner shall be mutually
acceptable to both parties. If there is a failure to mutually agree on such
compensation the Lessee will be required to bill for all such Facility Services.
In the event Lessee elects to have Owner bill and collect for such Facility
Services.
Owner shall establish and maintain credit, billing, tracking, rebilling,
follow-up, and collection policies and procedures and shall use commercially
reasonable best efforts to bill and collect timely all facility fees for all
billable Facility Services provided under this Agreement; shall be at least as
diligent and timely in billing and collecting facility fees under this Agreement
as Lessee is in billing and collecting facility fees for billable Facility
Services provided by Owner outside this Agreement; and shall not write off any
facility fees for billable Facility Services provided under this Agreement
without the consent of Lessee, which consent shall not be unreasonably withheld.
In the event Lessee elects to have Owner bill and collect for such
Facility Services, Lessee will furnish Owner with all information necessary to
enable Owner to perform the services set forth in this Section and Lessee shall
cooperate, and shall cause its employees to cooperate, with Owner in every
reasonable respect to allow Owner to perform its duties under this Section.
Should Lessee Elect to have Owner bill and collect for such Facility
Services, within fifteen (15) days after each calendar month Owner shall pay
Lessee (i) the full amount of all facility fees collected during the month for
all billable Facility Services provided under this Agreement, less (ii) the
amount, if any, of rent remaining unpaid for that month and, if applicable, for
prior months. Owner shall submit regular reports to Lessee as agreed upon by the
parties that set forth the total revenues for Facility Services billed and
collected by Owner on behalf of Lessee during the reporting period. Owner shall
make available to Lessee and its authorized agents and accountants for
inspection at reasonable times and under reasonable circumstances the following
items with respect to Owner's business and financial records, tax returns,
working papers, files, and memoranda of its public accountants and outside legal
counsel for the purpose of making an accounting review; and the results of any
legal or financial audit. This Section shall survive the termination of this
Agreement until all facility fees for billable Facility Services provided under
this Agreement have been either collected and paid to Lessee or, with the
consent of Lessee, written off.
<PAGE>
15. TAXES. Owner shall be liable for all taxes levied against the
Surgery Area (including personal property and trade fixtures in the Surgery
Area) during the term of this Agreement, including any special assessments
imposed on or against the property for the construction or improvements thereof.
16. REPAIRS. Owner shall be responsible for the maintenance of the
Surgery Area and shall keep the Surgery Area in good repair. Lessee shall
promptly give Owner notice of any conditions that might require repair or
maintenance by Owner and may confer with Owner regarding how and by whom such
repairs and maintenance will be performed. Owner and Lessee shall keep the
Surgery Area clean and orderly.
17. INSURANCE. Lessee shall at all times during the term of this
Agreement maintain and keep in force professional liability insurance of the
type and in the amount customarily carried by similar professional parties to
RGP and Affiliated Physicians with respect to their performance of similar
services with Owner being named as an insured as its interests may appear, and
Owner shall at all times during the term of this Agreement maintain and keep in
force general comprehensive liability and all other insurance of the types and
in the amounts customarily carried by similar parties with respect to their
operations. Policies shall be placed with insurance companies authorized and
licensed to issue such policies in the State of Texas and reasonably acceptable
to the parties. Each party shall provide the other with a copy of the insurance
policies upon request.
18. CASUALTY DAMAGE. . If the Facility shall be destroyed or
substantially damaged so as to impair the operating integrity of the Surgery
Area, the rent shall be abated from the date of the destruction or substantial
damage until the damage is completely repaired and the operating integrity of
the Surgery Area is restored. If the damage can not be repaired within a period
of ninety (90) days, Lessee shall have the option to terminate this Agreement.
Notice of Lessee's election must be given within thirty (30) days of the date of
the substantial damage.
19. CONDEMNATION. If the whole Facility shall be taken in any
condemnation or eminent domain proceeding or shall be voluntarily conveyed in
Lieu thereof, this Agreement shall terminate on the date Lessee ceases to
provide services at the Surgery Area. If a part of the Facility shall be taken
by condemnation or eminent domain proceedings or shall be voluntarily conveyed
in lieu thereof so as to materially affect the efficient operation of the
Surgery Center, Lessee shall have the option to terminate this Agreement as of
the date of such taking by giving written notice of termination to Owner.
20. SUPERIOR LEASES OR LIENS. Lessee accepts this Agreement subject and
subordinate to any lease or lien upon Owner or the Facility.
<PAGE>
21. INDEMNIFICATION. To the extent not covered by insurance, each party
agrees to defend, indemnify, and hold the other party harmless from and against
any loss, claim, suit, expense or obligation arising out of or resulting from
the indemnifying party's negligence, errors, omissions, or malfeasance in the
performance of its responsibilities under this Agreement.
22. COMPLIANCE WITH LAWS AND STANDARDS. Lessee agrees that the Surgery
Area shall be used in compliance with all applicable governmental statutes and
regulations and all valid rules and regulations of any federal, state, or local
governmental subdivision or agency and all applicable standards of the
Facility's appropriate accreditation organization.
23. PATIENTS. The parties agree that the benefits to either party
hereunder do not require, are not payment 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 either party to any of the other party's patients in
any facility owned or operated by either party.
24. WAIVER. No waiver by Owner or Lessee of any default or breach of any
term, covenant, condition, agreement, provision or stipulation herein contained
shall be treated as a waiver of any subsequent default or breach of the same or
any other term, condition, covenant, agreement, provision or stipulation hereof.
The rights and remedies of the parties shall be cumulative and in addition to
any other right afforded by law. The exercise of any right or remedy shall not
impair Owner's or Lessee's right to any other remedy.
25. NOTICES. Any notices or other communications to Owner or Lessee
required or permitted to be given under this Agreement must be in writing and
shall be effectively given if delivered to the addressees for Owner and Lessee
set forth below, or if sent by United States certified mail, return receipt
requested, to such addresses:
To Owner Doctor's Hospital 1997 L.P.
d.b.a. Doctor's Hospital Tidwell
Houston, Texas
To Lessee: American Medical Providers, Inc.
or Nominee
C/O American Medical Providers
3555 Timmons Lane, Suite 1550
Houston, Texas. 77027
Any notice mailed shall be deemed to have been given on the second business day
following the date of deposit of such item, postage paid, in a depository of the
United States Postal Service in the continental United States. Notice effected
other than by mail shall be deemed to have been given at the time of actual
delivery. Either party shall have the right to change its address to which
notices shall thereafter be sent to any other address in the continental United
States by giving the other written notice thereof.
<PAGE>
26. ASSIGNMENT. Neither party may assign any of its rights and
obligations under this Agreement without the prior written consent of
the other party, except that Lessee may assign all such of its rights to
a wholly owned subsidiary.
27. MISCELLANEOUS.
(a) The parties intend to act and perform as independent
contractors, and nothing in this Agreement is intended and nothing shall
be construed to create an employer/employee, partnership, joint venture
or other type of relationship, or to allow either to exercise control or
direction over the manner or method by which the other performs the
services that are the subject matter of this Agreement.
(b) The terms, provisions, covenants, and conditions contained in
this Agreement shall apply to, inure to the benefit of, and be binding
upon, the parties, their respective heirs, representatives, successors,
and permitted assigns.
(c) All exhibits, attachments, instruments, and addenda referred to
in this Agreement shall be considered a part of this Agreement for all
purposes with the same force and effect as if copied at full length in
this Agreement. The captions or headings of paragraphs in this Agreement
are inserted for convenience only and shall not be considered in
construing the provisions of this Agreement if any questions of intent
should arise.
(d) If any clause or provision of this Agreement is illegal, invalid,
or unenforceable under present or future laws effective during the term
of this Agreement, then it is the intention of the parties that the
remainder of this Agreement shall not be affected thereby, and it is
also the intention of both parties that in lieu of each clause or
provision that is illegal, invalid, or unenforceable, there shall be
added as part of this Agreement a clause or provision with similar terms
to such illegal, invalid, or unenforceable clause or provision as may be
possible, legal, and enforceable.
(e) This Agreement shall be governed by the laws of the State of
Texas, and any and all actions as may be brought under this Agreement,
or in connection with this Agreement, shall be brought in Harris County,
Texas.
(f) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but which together shall
constitute one and the same instrument.
(g) This Agreement may not be altered, changed or amended except by
an instrument in writing signed by both of the parties hereof, and any
amendment only become effective when such amendment is signed in writing
by both parties.
(h) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all prior
agreements, whether written or oral.
<PAGE>
EXECUTED effective as of the 19th day of January 1998..
Mid-America Equities, L.P, a
Texas limited partnership
By: /s/GLEN MARSHALL
Name: Glen Marshall
Title: VP of Normandy Community
Hospital Management, It
General Partner
American Medical Providers, Inc.
By: /s/JACK McCRAY
Name: Jack McCray
Title:______________________________
EXHIBIT 10.19
LEASE AGREEMENT
This LEASE AGREENMENT (this "Agreement") is made and entered into effective as
of, January 19,1997 (the "Effective Date") by and between MidAmerica Equities,
L.P., a Texas limited partnership doing business as Normandy Community Hospital,
(the "Hospital" or "Owners"), and, American Medical Providers, Inc. or its
nominee ("Lessee").
RECITALS:
A. Owner owns a general acute care hospital located 7840 Natural Bridge Road,
St. Louis, Missouri 63121 (the Facility.) containing operating rooms, surgery
suites, a pre op area, and a recovery room (collectively, the "Surgery Areas").
B. Lessee is a corporation organized under the laws of the State of Texas, and
will be authorized to do business in Missouri at the Commencement Date (as
defined herein) of this Agreement and Lessee has entered into certain Business
Purchase Agreements pursuant to which Lessee is purchasing certain practice
assets from Physicians (the "Affiliated Physicians")who are thereafter entering
into employment agreements with a regional group practice limited liability
corporation ("RGP") which will enter into a management agreement with Lessee or
its wholly owned subsidiary corporation.
C. Lessee desires to use the Surgery Area for the purpose of providing
ambulatory surgical services to patients of the RGP's Affiliated Physicians (as
defined hereinabove), on the terms and conditions set forth in this Agreement,
and Owner desires to allow such use.
AGREEMENTS:
NOW, THEREFORE, in consideration of the premises and the terms and
conditions contained in this Agreement, the mutuality and adequacy of which are
forever acknowledged, the parties do agree as follows, intending to be legally
bound:
1. LEASE OF PREMISES. Owner hereby leases and lets to Lessee, for use by
RGP, Affiliated Physicians and Lessee, and Lessee hereby leases and takes from
Owner, the Surgery Area, or so much thereof as is needed by Lessee (the
"Premises"), located in Owner's Facility located in St. Louis Missouri, which
Facility is situated on that certain tract or parcel of real property (the
"Land"), situated in the state of Missouri and being more fully described on
Exhibit A attached hereto and made a part hereof for all purposes, during the
following times:
<PAGE>
(a) Forty Eight (48) hours per quarter (the "Base Hours"), which shall
be between the hours of 7:30:00 a.m. and 2:00 p.m. on weekdays other
than holidays, unless mutually agreed otherwise, and which shall be
scheduled by Lessee in advance in accordance with Owner's scheduling
procedure but in not less than 4 hour blocks unless otherwise agreed to
by Lessee.
(b) Additional time, which shall be scheduled by Lessee in advance in
accordance with Owner's scheduling procedure, and hold-over time
(collectively, "Additional Time") as needed by Lessee.
A floor plan depicting the design of the Premises is attached hereto as Exhibit
B and made a part hereof for all purposes. Owner hereby grants Lessee, RGP,
Affiliated Physicians, and their respective assignees, subtenants, agents,
employees, invitees, and other visitors, a nonexclusive license for the term of
this Lease to use the Surgery Area and the common areas of the Facility and the
Land.
2. TERM AND TERMINATION.
(a) TERM. This Agreement shall be in force for an initial term of one year
commencing on the Commencement Date and, upon notice by Lessee or Ownerat least
thirty (30) days before the end of the initial term or any renewal term, may be
renewed for successive renewal terms of one year each, unless sooner terminated
in accordance with the terms and conditions of this Agreement.
(b) TERMINATION. Agreement may be sooner terminated only on the occurrence
of one of the following:
(i) TERMINATION BY AGREEMENT. If Owner and Lessee mutually agree
in writing, this Agreement may be terminated on the terms and date
stipulated.
(ii) TERMINATION FOR DEFAULT. If either party shall give written
notice to the other that the other party has substantially defaulted in
the performance of any obligation under this Agreement, and such default
shall not have been cured within fifteen (15) days following the giving
of such notice, the party giving the notice shall have the right to
immediately terminate this Agreement by written notice.
(iii) LEGISLATIVE, REGULATORY OR ADMINISTRATIVE CHANGE. In the
event of a change in the Medicare or Medicaid laws, regulations or
general instructions or interpretations, the adoption of new state or
federal legislation, or a change in any third party reimbursement
system, any of which materially affects the manner in which either party
may perform or be compensated for its services under this Agreement, the
parties may either immediately terminate this Agreement or propose a new
service arrangement or basis for compensation for the services furnished
pursuant to this Agreement. If such notice of new service arrangement or
basis for compensation is given and if the parties are unable within
ninety (90) days thereafter to agree upon a new service arrangement or
basis for compensation, either party may terminate this Agreement by
ninety (90) days notice to the other on any future date specified in
such notice.
<PAGE>
(c) For purposes of this Agreement "Commencement Date" shall
mean the date which is the latter of the following events to have
occurred: (a) the Initial Public Offering date for American Medical
Providers, Inc in its sale of stock to the public as contemplated in its
registration statement filed with the Securities Exchange Commission;
(b) the date this Agreement is approved by Lessee's board of directors,
or the date the board of managers for the RGP has approved this
Agreement.
3. USE. The Surgery Area shall be used by Lessee, RGP, or Affiliated
Physicians for the sole purpose of providing ambulatory surgical services and
related services for the benefit of RGP's or Affiliated Physicians' patients.
4. RENT. Lessee agrees to pay Owner (a) an annual base rental beginning
on the Commencement Date of One Hundred Five Thousand Six Hundred Dollars
($105,600.) payable in equal monthly installments of Eight Thousand Eight
Hundred Dollars ($8,800), which amounts are subject to adjustment as provided in
this Section, with the first installment to be paid on the Commencement Date and
subsequent installments on the same day of each succeeding month, and (b) an
additional rental charge of One Hundred Thirty Seven Dollars ($137..00) for each
quarter hour of Additional Time, payable monthly with the first payment to be
paid forty five (45) days after the month containing the Commencement Date and
subsequent installments 45 days after the end of each successive month . The
Base Rental shall be adjusted for the following:
(a) If an Affiliated Physician (as of the Effective Date) of Lessee
dies, becomes permanently disabled, or moves away from the St.
Louis metropolitan area, the Lessee shall have the option, upon
10 days notice to Owner, to reduce the number of Base Hours,
(and correspondingly the Base Rental) in proportion to the
collections of such Affiliated Physician to the collections of
the RGP over the prior two months relating to services rendered
to their respective patients. For purposes of this Agreement, a
disability is a documented illness or incapacity that keeps or
is expected to keep an individual from resuming his full time
professional practice for at least ninety (90) days; provided,
however, that such ninety (90) day period shall not be deemed to
be broken if the individual returns to work for no more than
three consecutive working days during any given attempt to
resume his or her regular work schedule.
(b) If an Affiliated Physician discharges his obligations to RGP or
Lessee through bankruptcy, the Lessee shall have the option,
upon 10 days notice to Owner, to reduce the number of Base
Hours, (and correspondingly the Base Rental) in proportion to
the collections of such Affiliated Physician to the collections
of the RGP over the prior two months relating to services
rendered to their respective patients.
<PAGE>
(c) If the Premises are not available for Lessee at scheduled times,
the base rental shall be reduced by $140.00 for each quarter
hour (or part thereof). During any block of time scheduled by
Lessee if the turn around time (defined to be the time between
surgeries required by Owner to clean and make the Surgery space
available for the next surgery) is in excess of twenty minutes,
then Lessee shall be given a credit against the Base Rental for
such period by $140.00 for each quarter hour (or part thereof)
in excess of 20 minutes, and such turn-around time shall not
reduce the numbers of Base Hours available to Lessee.
(d) If Lessee attempts to schedule at least the number of hours set
forth in Section l (a) in accordance with Owner's scheduling
procedure and the Premises are not available for that number of
hours, the base rental shall be reduced by $140. for each
quarter hour (or part thereof) of the shortfall.
All rent shall be payable by Lessee to Owner at the Facility. All rent shall be
prorated for the number of days Lessee is actually in possession of the Surgery
Area during the first and last months of the term of this Agreement.
5. OPERATION OF SURGERY AREA. Owner shall provide the facilities
reasonably necessary and appropriate for the provision of ambulatory surgical
services at the Surgery Area, including but not limited to all personnel
staffing, supplies and disposable supplies and equipment, including surgery
trays, operating room equipment, as well as pre-operating and recovery
equipment, personnel and space. Owner (or the landlord from which Owner leases
the Facility) shall be responsible for all costs of repairs, maintenance and
improvements, utility expenses, normal janitorial services, refuse disposal, and
all other costs and expenses reasonably incurred in conducting business at the
Facility during the term of this Agreement, including but not limited to related
real or personal property lease cost payments and expenses, taxes, utilities and
insurance.
6. EQUIPMENT. Owner shall at Owner's expense provide all equipment
reasonably necessary and appropriate for the provision of ambulatory surgical
services at the Surgery Area. Owner shall not be required to purchase any
additional equipment which is not already present in the Facility. Lessee, RGP
and Affiliated Physicians shall have access to and use of any medical equipment
located in the Surgery Area throughout the term; provided, however, that title
to the Facility and all equipment other than items placed in the location by
them shall at all times be and remain in Owner or, if applicable, the entity
from which Owner leases the Facility and/or equipment. Should Lessee from time
to time during the term of this Agreement desire Owner to provide additional
patient care other equipment for use at the Surgery Area or to replace used or
obsolete equipment, Lessee shall make such requests or recommendations to Owner,
which shall implement reasonably necessary or appropriate requests. Owner shall
maintain all tangible assets and properties of the Facility in as good a state
of operating condition and repair as they are on the Commencement Date, except
for ordinary depreciation, wear, and tear.
<PAGE>
7. PERSONNEL OWNER shall at Owner's expense provide all personnel
traditionally provided and reasonably necessary and appropriate for the
provision of ambulatory surgical services at the Surgery Area.
8. SUPPLIES. Owner shall obtain and provide all supplies traditionally
provided in surgeries, including but not limited to those described in section 5
above, and shall ensure that the Surgery Area is at all times adequately stocked
with supplies. Lessee, RGP or Affiliated Physicians shall have the right to
purchase any unique supplies, including but not limited to, any screws,
implants, or prostheses from Owner at its cost, or alternatively may purchase
all such items independent of Owner and make them available for their respective
patients. Lessee, RGP and Affiliated Physicians shall have access to and use of
any supplies reasonably necessary and appropriate for the provision of
ambulatory surgery services at the Surgery Area.
9. LICENSES. Owner has and shall maintain possession of all licenses
necessary for the provision of ambulatory surgery services at the Facility, and
all such licenses are and shall remain in full force and effect. To Owner's
knowledge, no material violations are or have been recorded in respect of such
licenses, and no proceeding is pending or, to the knowledge of Owner,
threatened, seeking the revocation or limitation of any of such licenses.
10. MEDICARE/MEDICAID PROGRAMS. Owner is and shall remain a Provider
under existing provider agreements with the applicable Medicare and Medicaid
authorities. Owner shall file timely all reports required to be filed in
connection with an state and federal Medicare and Medicaid programs. Owner shall
have the sole right to bill for facility fees for all Medicare and Medicaid
patients, and no portion of such fee shall be paid to Lessee, RGP, or its
Affiliated Physicians.
11. MANAGED CARE NETWORK. Owner will use its commercially reasonable
best efforts to ensure the continued participation of the Facility in all its
existing managed care programs.
12. PROFESSIONAL SERVICES. Lessee. RGP or Affiliated Physicians shall
provide professional services to patients in compliance at all times with
ethical standards, laws and regulations applying to the medical profession.
Lessee shall ensure that each physician associated with Lessee to provide
services at the Surgery Area is licensed in the State of Missouri. Lessee shall
have complete control of and responsibility for the selection and compensation
of its physician members and other health care professional employees and shall
further be responsible for the payment of all payroll taxes, employee benefits,
and ad other taxes or charges now or hereafter applicable to them. Any
Podiatrist associated with Lessee, RGP, or Affiliated Physicians that perform
professional services, including surgery, in the Facility must be credentialed
in accordance with the Owner's medical staff bylaws, rules and regulations.Owner
is hereby granted the first right to supply professional anesthesia services to
the RGP Affiliated Physicians at the Surgery Area provided it is able to meet
the price for such services which Lessee has secured a proposal from an
independent third party providing such services. Owner will be given 10 days to
agree to the compensation for such professional anesthesia services as proposed
by Lessee, and failing such agreement by Owner, Lessee will be able thereafter
to contract for anesthesia professional services independent of Owner.
<PAGE>
13. BILLING AND COLLECTION FOR PROFESSIONAL SERVICES. Lessee on behalf
of RGP and Affiliated Physicians shall be entitled to bill patients and third
party payers for a professional services furnished by the RGP and its Affiliated
Physicians at the Surgery Area and to collect payments for those billings.
14. BILLING AND COLLECTION FOR FACILITY SERVICES. Lessee recognizes the
expertise and experience of Owner in billing and collecting for all the Facility
Services that shall be provided to patients by Lessee at the Surgery Area. To
that end, Lessee, RGP or Affiliated Physicians shall have the option of
collecting such Facility fees itself or have the Owner bill patients (other than
Medicare and Medicaid patients referred to in section 10 above which shall be
billed by Owner under all such circumstances) for all Facility Services provided
by RGP or its Affiliated Physicians at the Surgery Area and to collect payments
for those billings. Lessee shall provide Owner with at least 30 days prior
notice should it desire to have Owner bill and collect for such Facility
Services and any compensation to be paid to Owner shall be mutually acceptable
to both parties. If there is a failure to mutually agree on such compensation,
the Lessee is required to bill for such services. In the event Lessee elects to
have Owner bill and collect for such Facility Services.
Owner shall establish and maintain credit, billing, tracking, rebilling,
follow up, and collection policies and procedures and shall use commercially
reasonable best efforts to bill and collect timely all facility fees for all
billable Facility Services provided under this Agreement; shall be at least as
diligent and timely in billing and collecting facility fees under this Agreement
as Lessee is in billing and collecting facility fees for billable Facility
Services provided by Owner outside this Agreement; and shall not write off any
facility fees for billable Facility Services provided under this Agreement
without the consent of Lessee, which consent shall not be unreasonably withheld.
In the event Lessee elects to have Owner bill and collect for such
Facility Services, Lessee will furnish Owner with all information necessary to
enable Owner to perform the services set forth in this Section and Lessee shall
cooperate, and shall cause its employees to cooperate, with Owner in every
reasonable respect to allow Owner to perform its duties under this Section.
Should Lessee Elect to have Owner bill and collect for such Facility
Services, within fifteen (15) days after each calendar month Owner shall pay
Lessee (i) the full amount of all facility fees collected during the month for
all billable Facility Services provided under this Agreement, less (ii) the
amount, if any, of rent remaining unpaid for that month and, if applicable, for
prior months. Owner shall submit regular reports to Lessee as agreed upon by the
parties that set forth the total revenues for Facility Services billed and
collected by Owner on behalf of Lessee during the reporting period. Owner shall
make available to Lessee and its authorized agents and accountants for
inspection at reasonable
<PAGE>
times and under reasonable circumstances the following items with respect to
Owner's business and financial records, tax returns, working papers, files, and
memoranda of its public accountants and outside legal counsel for the purpose of
making an accounting review; and the results of any legal or financial audit.
This Section shall survive the termination of this Agreement until all facility
fees for billable Facility Services provided under this Agreement have been
either collected and paid to Lessee or, with the consent of Lessee, written off.
15. TAXES. Owner shall be liable for all taxes levied against the
Surgery Area (including personal property and trade fixtures in the Surgery
Area) during the term of this Agreement, including any special assessments
imposed on or against the property for the construction or improvements thereof.
16. REPAIRS. Owner shall be responsible for the maintenance of the
Surgery Area and shall keep the Surgery Area in good repair. Lessee shall
promptly give Owner notice of any conditions that might require repair or
maintenance by Owner and may confer with Owner regarding how and by whom such
repairs and maintenance will be performed. Owner and Lessee shall keep the
Surgery Area clean and orderly.
17. INSURANCE. Lessee shall at all times during the term of this
Agreement maintain and keep in force professional liability insurance of the
type and in the amount customarily carried by similar professional parties to
RGP and Affiliated Physicians with respect to their performance of similar
services with Owner being named as an insured as its interest may appear, and
Owner shall at all times during the term of this Agreement maintain and keep in
force general comprehensive liability and all other insurance of the types and
in the amounts customarily carried by similar parties with respect to their
operations. Policies shall be placed with insurance companies authorized and
licensed to issue such policies in the State of Missouri and reasonably
acceptable to the parties. Each party shall provide the other with a copy of the
insurance policies upon request.
18. CASUALTY DAMAGE. . If the Facility shall be destroyed or
substantially damaged so as to impair the operating integrity of the Surgery
Area, the rent shall be abated from the date of the destruction or substantial
damage until the damage is completely repaired and the operating integrity of
the Surgery Area is restored. If the damage can not be repaired within a period
of ninety (90) days, Lessee shall have the option to terminate this Agreement.
Notice of Lessee's election must be given within thirty (30) days of the date of
the substantial damage.
19. CONDEMNATION. If the whole Facility shall be taken in any
condemnation or eminent domain proceding or shall be voluntarily conveyed in
Lieu thereof, this Agreement shall terminate on the date Lessee ceases to
provide services at the Surgery Area. If a part of the Facility shall be taken
by condemnation or eminent domain proceedings or shall be voluntarily conveyed
in lieu thereof so as to materially affect the efficient operation of the
Surgery Center, Lessee shall have the option to terminate this Agreement as of
the date of such taking by giving written notice of termination to Owner.
<PAGE>
20. Superior Leases or Liens. Lessee accepts this Agreement subject and
subordinate to any lease or lien upon Owner or the Facility.
21. INDEMNIFICATION. To the extent not covered by insurance, each party
agrees to defend, indemnify, and hold the other party harmless from and against
any loss, claim, suit, expense or obligation arising out of or resulting from
the indemnifying party's negligence, errors, omissions, or malfeasance in the
performance of its responsibilities under this Agreement.
22. COMPLIANCE WITH LAWS AND STANDARDS. Lessee agrees that the Surgery
Area shall be used in compliance with all applicable governmental statutes and
regulations and all valid rules and regulations of any federal, state, or local
governmental subdivision or agency and all applicable standards of the
Facility's appropriate accreditation organization.
23. PATIENTS. The parties agree that the benefits to either party
hereunder do not require, are not payment 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 either party to any of the other party's patients in
any facility owned or operated by either party.
24. WAIVER. No waiver by Owner or Lessee of any default or breach of any
term, covenant, condition, agreement, provision or stipulation herein contained
shall be treated as a waiver of any subsequent default or breach of the same or
any other term, condition, covenant, agreement, provision or stipulation hereof.
The rights and remedies of the parties shall be cumulative and in addition to
any other right afforded by law. The exercise of any right or remedy shall not
impair Owner's or Lessee's right to any other remedy.
25. NOTICES. Any notices or other communications to Owner or Lessee
required or permitted to be given under this Agreement must be in writing and
shall be effectively given if delivered to the addressees for Owner and Lessee
set forth below, or if sent by United States certified mail, return receipt
requested, to such addresses:
To Owner Mid-American Equities, L.P.
d.b.a. Normandy Community Hospital
7840 Natural Bridge Road
St. Louis, Mo. 63121
To Lessee: American Medical Providers, Inc. or Nominee
C/O American Medical Providers
3555 Timmons Lane, Suite 1550
Houston, Texas. 77027
Any notice mailed shall be deemed to have been given on the second business day
following the date of deposit of such item, postage paid, in a depository of the
United States Postal Service in the continental United States. Notice effected
other than by mail shall be deemed to have been given at the time of actual
delivery. Either party shall have the right to change its address to which
notices shall thereafter be sent to any other address in the continental United
States by giving the other written notice thereof.
<PAGE>
26. ASSIGNMENT. Neither party may assign any of its rights and
obligations under this Agreement without the prior written consent of the other
party, except that Lessee may assign this Agreement to a wholly owned
subsidiary..
27. MISCELLANEOUS.
(a) The parties intend to act and perform as independent contractors,
and nothing in this Agreement is intended and nothing shall be construed to
create an employer/employee, partnership, joint venture or other type of
relationship, or to allow either to exercise control or direction over the
manner or method by which the other performs the services that are the subject
matter of this Agreement.
(b) The terms, provisions, covenants, and conditions contained in this
Agreement shall apply to, inure to the benefit of, and be binding upon, the
parties, their respective heirs, representatives, successors, and permitted
assigns.
(c) All exhibits, attachments, instruments, and addenda referred to in
this Agreement shall be considered a part of this Agreement for all purposes
with the same force and effect as if copied at full length in this Agreement.
The captions or headings of paragraphs in this Agreement are inserted for
convenience only and shall not be considered in construing the provisions of
this Agreement if any questions of intent should arise.
(d) If any clause or provision of this Agreement is illegal, invalid, or
unenforceable under present or future laws effective during the term of this
Agreement, then it is the intention of the parties that the remainder of this
Agreement shall not be affected thereby, and it is also the intention of both
parties that in lieu of each clause or provision that is illegal, invalid, or
unenforceable, there shall be added as part of this Agreement a clause or
provision with similar terms to such illegal, invalid, or unenforceable clause
or provision as may be possible, legal, and enforceable.
(e) This Agreement shall be governed by the laws of the State of Texas,
and any and all actions as may be brought under this Agreement, or in connection
with this Agreement, shall be brought in Harris County, Texas.
(f) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but which together shall constitute one and
the same instrument.
(g) This Agreement may not be altered, changed or amended except by an
instrument in writing signed by both of the parties hereof, and any amendment
only become effective when such amendment is signed in writing by both parties.
<PAGE>
(h) This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all prior agreements,
whether written or oral.
<PAGE>
EXECUTED effective as of the 19th day of January 1998..
Doctors Hospital 1997, L.P., a
Texas limited partnership
By: /s/WILTON M. BURT
Name: Wilton M. Burt
Title: Senior Vice President
American Medical Providers, Inc.
By: JACK McCRAY
Name: Jack McCray
Title:___________________________________
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and all references to our Firm included in this registration statement
on Form S-4 filed by American Medical Providers, Inc.
ARTHUR ANDERSEN LLP
Houston, Texas
February 16, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM AMERICAN MEDICAL PROVIDERS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1996 SEP-30-1997
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 416,714 1,817,102
<PP&E> 116,648 234,314
<DEPRECIATION> 5,258 25,100
<TOTAL-ASSETS> 528,104 2,026,316
<CURRENT-LIABILITIES> 1,042,045 3,937,435
<BONDS> 0 0
0 0
0 0
<COMMON> 200 200
<OTHER-SE> (514,141) (1,911,319)
<TOTAL-LIABILITY-AND-EQUITY> (528,104) 2,026,316
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 514,141 1,397,178
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (514,141) (1,397,178)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (514,141) (1,397,178)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (514,141) (1,397,178)
<EPS-PRIMARY> 0.00 0.00
<EPS-DILUTED> 0.00 0.00
</TABLE>
EXHIBIT 99.1
June 16, 1997
Stanley R. Kalish, D.P.M.
6911 Tara Blvd.
Jonesboro, Ga 30326
Dear Stan,
It is with great pleasure that I extend this personal invitation to you to
join the Board of Directors of American Medical Providers, Inc. (the
"Company"). As I am sure you are aware, the Company is planning an initial
public offering ("IPO") in September of this year. A critical part of the
success of the Company involves the selection of a Board of Directors who are
knowledgeable in the Company's business and who can be responsive to the
Company's needs. Stan, I strongly believe that with the merger of your practice
into the Company you will be an asset to our Board of Directors. I have taken
the liberty of enclosing an informational package about the Company, which
includes:
o An Organizational Chart dated June 6, 1997.
o A brief biographical description for each of the members of the
Company's management team.
o A copy of the corporate bylaws of Podiatry Newco, Inc., (whose name
will be changed to American Medical Providers, Inc.) These bylaws are
in the process of being modified, and as soon as they are completed,
we will see that you receive a copy promptly.
o A copy of the Directors and Officers liability insurance policy
currently in effect.
o A copy of the Company's policy to compensate the members of its Board
of Directors.
Because of the need to include the Board of Directors names in our upcoming
filings with the Securities and Exchange Commission, I would very much
appreciate your acknowledging that you would be willing to serve on the
Company's Board by executing a copy of this letter and returning it to us for
our files. I look forward to working with you and the other Board members in
making this Company into a powerhouse of practice management companies.
Sincerely,
/s/ JACK N. McCRARY
Jack N. McCrary
Chairman
I will be most pleased to serve on the Board of Directors for American
Medical Providers, Inc., and look forward to contributing to the successes of
the Company.
Dated: , 1997 /s/ STANLEY R. KALISH
STANLEY R. KALISH, DPM
EXHIBIT 99.2
June 16, 1997
John S. Bace
J.M. Partners, Ltd.
3730 Del Monte
Houston, Texas 77019
Dear Jack,
It is with great pleasure that I extend this personal invitation to you to
join the Board of Directors of American Medical Providers, Inc. (the
"Company"). As I am sure you are aware, the Company is planning an initial
public offering ("IPO") in September of this year. A critical part of the
success of the Company involves the selection of a Board of Directors who are
knowledgeable in the Company's business and who can be responsive to the
Company's needs. Jack, I strongly believe that you will be an asset to our Board
of Directors. I have taken the liberty of enclosing an informational package
about the Company, which includes:
o An Organizational Chart dated June 6, 1997.
o A brief biographical description for each of the members of the
Company's management team.
o A copy of the corporate bylaws of Podiatry Newco, Inc., (whose name
will be changed to American Medical Providers, Inc.) These bylaws are
in the process of being modified, and as soon as they are completed,
we will see that you receive a copy promptly.
o A copy of the Directors and Officers liability insurance policy
currently in effect.
o A copy of the Company's policy to compensate the members of its Board
of Directors.
Because of the need to include the Board of Directors names in our upcoming
filings with the Securities and Exchange Commission, I would very much
appreciate your acknowledging that you would be willing to serve on the
Company's Board by executing a copy of this letter and returning it to us for
our files. I look forward to working with you and the other Board members in
making this Company into a powerhouse of practice management companies.
Sincerely,
/s/ JACK N. McCRARY
Jack N. McCrary
Chairman
I will be most pleased to serve on the Board of Directors for American
Medical Providers, Inc., and look forward to contributing to the successes of
the Company.
Dated: July 2, 1997 /s/ JOHN S. BACE
JOHN S. BACE
EXHIBIT 99.3
June 16, 1997
S.F. "Charlie" Hartley, D.P.M.
2201 Juanita Lane
Deer Park, Texas 77536
Dear Charlie,
It is with great pleasure that I extend this personal invitation to you to
join the Board of Directors of American Medical Providers, Inc. (the
"Company"). As I am sure you are aware, the Company is planning an initial
public offering ("IPO") in September of this year. A critical part of the
success of the Company involves the selection of a Board of Directors who are
knowledgeable in the Company's business and who can be responsive to the
Company's needs. Charlie, I strongly believe that with the merger of your
practice into the Company you will be an asset to our Board of Directors. I have
taken the liberty of enclosing an informational package about the Company, which
includes:
o An Organizational Chart dated June 6, 1997.
o A brief biographical description for each of the members of the
Company's management team.
o A copy of the corporate bylaws of Podiatry Newco, Inc., (whose name
will be changed to American Medical Providers, Inc.) These bylaws are
in the process of being modified, and as soon as they are completed,
we will see that you receive a copy promptly.
o A copy of the Directors and Officers liability insurance policy
currently in effect.
o A copy of the Company's policy to compensate the members of its Board
of Directors.
Because of the need to include the Board of Directors names in our upcoming
filings with the Securities and Exchange Commission, I would very much
appreciate your acknowledging that you would be willing to serve on the
Company's Board by executing a copy of this letter and returning it to us for
our files. I look forward to working with you and the other Board members in
making this Company into a powerhouse of practice management companies.
Sincerely,
/s/ JACK N. McCRARY
Jack N. McCrary
Chairman
I will be most pleased to serve on the Board of Directors for American
Medical Providers, Inc., and look forward to contributing to the successes of
the Company.
Dated: June 18, 1997 /s/ S.F. "CHARLIE" HARTLEY
S.F. "CHARLIE" HARTLEY, DPM
EXHIBIT 99.4
July 15, 1997
Donald S. Huge, MD
1177 W. Loop South, Suite 700
Houston, TX 77027
Dear Donald,
It is with great pleasure that I extend this personal invitation to you to
join the Board of Directors of American Medical Providers, Inc. (the
"Company"). As I am sure you are aware, the Company is planning an initial
public offering ("IPO") in September of this year. A critical part of the
success of the Company involves the selection of a Board of Directors who are
knowledgeable in the Company's business and who can be responsive to the
Company's needs. Donald, I strongly believe you will be an asset to our Board of
Directors. I have taken the liberty of enclosing an informational package about
the Company, which includes:
o An Organizational Chart dated July 9, 1997.
o A brief biographical description for each of the members of the
Company's management team.
o A copy of the corporate bylaws of Podiatry Newco, Inc., (whose name
will be changed to American Medical Providers, Inc.) These bylaws are
in the process of being modified, and as soon as they are completed,
we will see that you receive a copy promptly.
o A copy of the Directors and Officers liability insurance policy
currently in effect.
o A copy of the Company's policy to compensate the members of its Board
of Directors.
Because of the need to include the Board of Directors names in our upcoming
filings with the Securities and Exchange Commission, I would very much
appreciate your acknowledging that you would be willing to serve on the
Company's Board by executing a copy of this letter and returning it to us for
our files. I have enclosed a biography for you, which will be included in our
S-1 filings. If you desire any changes to the biography, please let me know. I
look forward to working with you and the other Board members in making this
Company into a powerhouse of practice management companies.
Sincerely,
/s/ JACK N. McCRARY
Jack N. McCrary
Chairman
I will be most pleased to serve on the Board of Directors for American
Medical Providers, Inc., and look forward to contributing to the successes of
the Company.
Dated: July 7, 1997 /s/ DONALD S. HUGE MD
DONALD S. HUGE, MD
