AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 22, 1998
REGISTRATION NO. 333-39441
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AMERICAN MEDICAL PROVIDERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 8099 76-0530185
(STATE OR OTHER (PRIMARY STANDARD
JURISDICTION OF INDUSTRIAL
INCORPORATION OR CLASSIFICATION CODE (I.R.S. EMPLOYER
ORGANIZATION) NUMBER) IDENTIFICATION NUMBER)
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
TELEPHONE NUMBER, CODE, AND TELEPHONE
INCLUDING AREA CODE, OF REGISTRANT'S NUMBER, INCLUDING AREA CODE, OF AGENT
PRINCIPAL EXECUTIVE OFFICES) FOR SERVICE)
------------------------
COPIES TO:
IVAN WOOD DAVID J. RINGELMAN MICHAEL L. BOYKINS
BAKER & HOSTETLER LLP BAKER & HOSTETLER LLP BERNARD L. KRAMER
1000 LOUISIANA, SUITE 303 EAST 17TH AVENUE, MCDERMOTT, WILL & EMERY
2000 SUITE 1100 227 WEST MONROE STREET,
HOUSTON, TEXAS 77002 DENVER, COLORADO 80203 SUITE 3100
(713) 751-1600 (303) 861-0600 CHICAGO, ILLINOIS
60606-5096
(312) 372-2000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
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>
CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
FORM S-1 ITEM
NUMBER AND CAPTION LOCATION IN PROSPECTUS
------------------ ----------------------
1. Forepart of the Registration
Statement and Outside
Front Cover Page of
Prospectus.................... Outside Front Cover Page
2. Inside Front and Outside Back
Cover Pages
of Prospectus................. Inside and Outside Back Cover Pages
3. Summary Information, Risk
Factors and Ratio of
Earnings to Fixed
Charges....................... Prospectus Summary; Risk Factors
4. Use of Proceeds................. Use of Proceeds
5. Determination of Offering
Price......................... Underwriting
6. Dilution........................ Dilution
7. Selling Security Holders........ *
8. Plan of Distribution............ Underwriting
9. Description of Securities to be
Registered.................... Description of Capital Stock
10. Interests of Named Experts and
Counsel....................... Legal Matters
11. Information with Respect to the
Registrant.................... Outside and Inside Front Cover Pages;
Prospectus Summary; Risk Factors; Use of
Proceeds; Capitalization; Selected
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Transactions;
Principal Stockholders; Description of
Capital Stock; Financial Statements
12. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... *
- ------------
* 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. THESE SECURITIES 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 THESE SECURITIES 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 JANUARY 22, 1998
SHARES
AMERICAN MEDICAL PROVIDERS, INC.
CLASS A COMMON STOCK
------------------------
All of the shares of class A common stock, par value $.001 per share,
offered hereby are being sold by American Medical Providers, Inc. (the
"Company" or "AMP"). Prior to the offering made hereby (the "Offering"),
there has been no public market for the class A common stock. The Company has
authorized two classes of common stock: the class A common stock (the "Common
Stock") and class B common stock, par value $.001 per share (the "Class B
Common Stock"). Each holder of Common Stock is entitled to one vote per share
and each holder of Class B Common Stock is entitled to of a vote per
share on all matters submitted to a vote of stockholders. 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. Except in the election of the Board of Directors and as
required by law, holders of the Common Stock and the Class B Common Stock vote
together as a single class. Each share of Common Stock and Class B Common Stock
will share ratably in any dividends, or other distributions, including upon the
liquidation, dissolution or winding up of the Company. See "Description of
Capital Stock." It is currently estimated that the initial public offering
price will be between $ and $ per share. See "Underwriting"
for a discussion of the factors to be considered in determining the initial
public offering price. The Company has applied to have the shares of Common
Stock approved for quotation on the Nasdaq Stock Market under the symbol
"AMPZ."
The Company will file a shelf registration statement with the Securities
and Exchange Commission relating to the separate offering of up to
shares of Common Stock to be used in connection with future affiliations with
Affiliated Practices (as defined herein) and providers of ancillary services and
facilities and resales of the shares issued thereunder by the recipients of such
shares.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 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 COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- --------------------------------------------------------------------------------
Per Share........... $ $ $
- --------------------------------------------------------------------------------
Total(3)............ $ $ $
================================================================================
(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting estimated expenses of $ payable by the
Company.
(3) The Company has granted the Underwriters a 45-day option to purchase up to
additional shares of Common Stock on the same terms and
conditions as set forth above solely to cover over-allotments, if any. If
such option is exercised in full, the total Price to Public, Underwriting
Discount and Proceeds to Company will be $ , $ , and
$ , respectively. See "Underwriting."
------------------------
The Common Stock is offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by them and subject to certain
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer or to reject any orders in whole or in part without notice. It is
expected that delivery of the shares of Common Stock will be made on or about
, 1998.
A.G. EDWARDS & SONS, INC. J.C. BRADFORD & CO.
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 Offering. 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. 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 Acquisition"), an anesthesiology
management services organization currently servicing 15 locations in
metropolitan Atlanta, Georgia ("AnestheCare").
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
3
<PAGE>
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 ("Dr. Kramer"), 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 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
approximately $22.4 million payable in shares of Common Stock at the initial
public offering price attributed to the net non-monetary assets, approximately
$5.3 million in cash and $656,000 of assumed indebtedness attributed to the net
non-monetary assets of the SAB 48 Transfers, $4.7 million in cash attributed to
the net monetary assets of the SAB 48 Transfers, and $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 Offering 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.
PENDING TRANSFERS
The Company plans to use shares subject to its shelf registration statement
to be filed with the Securities and Exchange Commission (the "Commission")
relating to the separate offering of up to shares of Common Stock (the
"Shelf Registration") to acquire certain operating assets of, or the stock of
entities holding certain operating assets of additional podiatric practices and
enter into management services agreements with these entities. The Company has
entered into negotiations with eight podiatric practices (collectively, the
"Pending Transfers"). The aggregate consideration to be paid by the Company
with respect to the Pending Transfers, if consummated, will be approximately
$3.0 million. Unlike the initial Affiliated Practices, except for the Kramer
Transfer, which will be accounted for in accordance with SAB 48, the Pending
Transfers will be accounted for as asset acquisitions at fair market value and
will result in subsequent annual noncash amortization charges for intangible
assets in the Company's statements of operations. Each of the Pending Transfers
is subject to, among other conditions, execution of definitive agreements, the
completion of the Offering, the effectiveness of the Shelf Registration and
satisfactory due diligence review of each practice by the Company.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company..... shares
Common Stock to be outstanding after the
Offering.............................. shares(1)
Class B Common Stock to be outstanding
after the Offering.................... 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 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. 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 Each share of Class B Common Stock will automatically
Stock................................. convert to Common Stock on a share-for-share basis (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.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Use of proceeds......................... To fund the cash portion of the consideration to be paid
in the Transactions; to repay certain indebtedness and
deferred expenses of the Company; to complete the
purchase of the Company's management information system;
and for general corporate purposes, which are expected
to include (among other things) future transfers of DPM
practices and certain development costs of ancillary
services. See "Use of Proceeds."
Proposed Nasdaq National Market
symbol................................ "AMPZ"
</TABLE>
- ------------
(1) Excludes shares of Common Stock issuable upon exercise of
outstanding options to purchase Common Stock, at the initial public offering
price, and shares of Common Stock issuable upon exercise of the
Underwriters' over-allotment option.
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.
6
<PAGE>
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 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 FOR THE NINE
AUGUST 9, 1996 TO MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- -------------------
(UNAUDITED)
STATEMENT OF OPERATIONS DATA(1):
Revenues......................... $-- $ --
Expenses......................... 514,141 1,397,178
----------------- -------------------
Net loss......................... $(514,141) $(1,397,178)
================= ===================
SEPTEMBER 30, 1997
----------------------------
AS
HISTORICAL ADJUSTED(2)
-------------- ------------
(UNAUDITED)
BALANCE SHEET DATA:
Cash and cash equivalents............... $ -- $
Working capital deficit(3).............. (2,120,333)
Total assets(4)......................... 2,026,316
Long-term debt.......................... --
Stockholders' deficit................... (1,911,119)
- ------------
(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 Offering are completed. Pursuant to a reimbursement
agreement (the "Reimbursement Agreement") dated December , 1997 between
the Company and Ankle & Foot Centers of America, LLC ("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 audit expenses. AFC currently holds 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 million shares
of Common Stock offered by the Company, and the application of the estimated
net proceeds therefrom. See "Use of Proceeds."
(3) The historical balance includes $2.4 millon due to AFC which will be repaid
upon consummation of the Offering.
(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.
7
<PAGE>
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 Offering, 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 Offering will not necessarily be similar to
the results of the initial Affiliated Practices after the Offering. 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 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 each 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, the management fee may be adjusted quarterly upon the
mutual agreement of the Regional Group Practice and the Company (without a floor
or ceiling on the adjustment and with a collar of 5%) to reflect the fair
8
<PAGE>
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 its corporate office in Houston at the time of the Offering and to
complete hardware and software deployment of the systems to the 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 enter into management services contracts with the Regional Group
9
<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 this Offering 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 Offering and the current
period's levels of distributions from the practice for the first three months
after the Offering and (iii) the difference between 80% of the average monthly
compensation of such DPM in the year prior to the Offering and the current
period's level of distributions for the second three months after the Offering.
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 Company. See Unaudited Pro Forma
Combined Balance Sheet and the notes
10
<PAGE>
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 regulatory authority to this effect, and many aspects of the
Company's business operations to date have not
11
<PAGE>
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 Regional Group
Practices will be able to compete effectively in the markets they serve. In
addition, there is
12
<PAGE>
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 Offering, 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, although there can be no assurance 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 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."
LIABILITY AND INSURANCE RISKS ASSOCIATED WITH PODIATRY
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 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,
13
<PAGE>
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 this Offering, 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 Offering. 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 this Offering. 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 shares of Common Stock issued and outstanding. Of these
shares, shares ( 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 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 remaining shares 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. Of these shares, shares will be eligible for sale
pursuant to Rule 144 promulgated under the Securities Act in and the
balance of these shares will be eligible for sale at various times from
through . See "Shares Eligible For Future Sale."
In addition, AMP, its officers and directors and certain other stockholders
of the Company 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 or exercisable for any shares of Common Stock,
without the prior written consent of the Representative (as defined herein) for
a period of 180 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 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 of these shares 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
14
<PAGE>
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 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." In addition,
the Company will register up to an additional shares of Common Stock
under a shelf registration, which, when combined with the Company's cash
resources, will be used to fund the Company's planned practice affiliation
program. 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.
SUBSTANTIAL PROCEEDS OF OFFERING PAYABLE TO AFFILIATED PRACTICES AND
AFFILIATES. Approximately $16.0 million of the net proceeds of this Offering
will be used to pay the cash portion of the price of the Transactions.
Approximately $300,000 of the net proceeds of the Offering will be used to pay
the accrued salary of Jack N. McCrary. In addition, approximately $5.3 million
of the net proceeds from the Offering will be used to repay indebtedness and
interest assumed by the Company in connection with the Transactions, including
the reimbursement by AMP of certain expenses and debt incurred by Ankle & Foot
Centers of America, LLC ("AFC") to finance organizational costs and working
capital. See "Use of Proceeds" and "Certain Transactions."
CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS. Following the completion
of the Offering, 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 % of the outstanding shares of the Company's
Common Stock. Although, following the Offering, 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."
IMMEDIATE AND SUBSTANTIAL DILUTION. The purchasers of the shares of Common
Stock offered hereby will experience immediate and substantial dilution in the
net tangible book value of their shares of Common Stock in the amount of
$ per share (after giving effect to underwriting discounts and
commissions and estimated Offering expenses). See "Dilution." If the Company
issues Common Stock in the future, including shares that may be issued in
connection with future practice affiliations, purchasers of Common Stock in the
Offering may experience further dilution in the net tangible book value per
share of the Company's Common 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 Offering 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."
15
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of Common Stock in the
Offering assuming an initial public offering price of $ per share (after
deducting the underwriting discount and estimated Offering expenses), are
estimated to be approximately $ ($ if the Underwriters'
over-allotment option is exercised in full).
The Company intends to use the net proceeds from the Offering as follows:
(i) approximately $17.5 million is expected to be used to consummate the
Transactions, $1.5 million of which will be placed in escrow in connection with
the AnestheCare Acquisition, (ii) approximately $5.3 million is expected to be
paid to AFC, which prior to the Offering owned 56.3% of the Company's
outstanding voting securities, to repay certain indebtedness and interest of
AFC, $500,000 of which bears interest at 18% per annum and matures on the fifth
day following the initial public offering and the remainder of which bears no
interest and has no maturity date (including the reimbursement by the Company of
expenses, debt and interest incurred by AFC to finance the Company's
organizational and affiliation costs and initial working capital), (iii)
approximately $2.7 million is expected to be used to pay certain deferred
expenses, (iv) approximately $1.0 million is expected to be used to complete the
purchase of the Company's management information system, and (v) the balance is
expected to be used for general corporate purposes, including, among other
things, making short-term loans of up to $950,000 aggregate principal amount to
DPM owners of Affiliated Practices as discussed herein and executing the
Company's business plan set forth herein. See "Business -- Practice
Affilations," "-- Services and Operations -- Management Information Systems,"
"-- Operative Agreements -- Physician Engagement Agreements" and "Certain
Transactions -- Organization of the Company." Pending such uses, the net
proceeds will be invested in United States government securities and in
short-term, interest-bearing investment grade securities. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
As mentioned above, the Company may use up to $950,000 of the net proceeds
of the Offering to advance funds to the Regional Group Practices to make
short-term loans to their DPMs. Pursuant to the Physician Engagement Agreements,
an owner DPM may elect to receive an advance on his or her first monthly draw in
the form of a loan from the Regional Group Practice. Loans will be offered to
DPMs to provide short-term liquidity to such DPMs in the initial stages of the
Company's operations. Loans 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 Offering and
the current period's level of distributions from the practice for the first
three months after the Offering and (iii) the difference between 80% of the
average monthly compensation of such DPM in the year prior to the Offering and
the current period's level of distribution for the second three months after the
Offering. Loans, if drawn, will be repayable over two years plus interest at an
annual rate equal to the prime rate, and installments will be withheld from the
DPMs monthly draw. Management will not be able to determine to whom loans will
be made until after the Transfers have been completed, DPMs begin receiving
distributions from the Regional Group Practices and DPMs decide whether or not
to enter into such loans. Management has not evaluated the DPMs' ability to
repay these obligations, if they arise, but believes the DPMs' financial status
after the completion of the Offering and the expected aggregate amount of such
loans will prevent the loan program from having a materially adverse effect on
the Company.
Although the estimates set forth above represent the Company's best
estimate of the intended use of proceeds from the Offering, the timing and
amount of funds required for specific uses by the Company cannot be precisely
determined. The use of proceeds from the Offering is subject to change based on
competitive conditions, unanticipated costs of expansion and unexpected
requirements in developing and operating the Company's business. The rate of the
Company's progress in developing its business, the availability of alternate
methods of financing and other factors will affect the allocation and timing of
the Company's use of proceeds from the Offering.
DIVIDEND POLICY
The Company does not anticipate paying any cash dividends after completion
of the Offering 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."
16
<PAGE>
DILUTION
The pro forma net tangible book value of the Company at September 30, 1997,
after giving effect to the Transactions as if they had occurred on that date,
would have been $ , or $ per share. Pro forma net tangible book
value per share represents the amount of pro forma total tangible assets of the
Company less pro forma total liabilities divided by the number of shares of
Common Stock and Class B Common Stock outstanding. After giving effect to the
sale by the Company of the shares of Common Stock offered hereby
(after deducting the underwriting discounts and commissions and estimated
Offering expenses payable by the Company) and the application of the net
proceeds therefrom as discussed under "Use of Proceeds," the pro forma as
adjusted net tangible book value of the Company as of September 30, 1997 would
have been approximately , or $ per share. This represents an
immediate increase in adjusted pro forma net tangible book value of
approximately $ per share to existing stockholders and an immediate dilution
of approximately $ per share to new investors purchasing Common Stock in this
Offering. The following table illustrates this per share dilution:
Assumed initial public offering price
per share............................. $
Pro forma net tangible book value
per share as of September 30,
1997............................. $
Increase per share attributable to
new investors....................
---------
Pro forma as adjusted net tangible book
value per share after the Offering....
---------
Dilution per share to new investors of
Common Stock.......................... $
=========
The following table sets forth on a pro forma basis, giving effect to (i)
the Transactions as of September 30, 1997, (ii) the number of shares of Common
Stock held by existing stockholders, the total consideration given for such
shares and the average price per share paid or invested in the Company for such
shares, and (iii) the number of shares of Common Stock to be purchased from the
Company, the total consideration for such shares and the average price per share
to be paid by new investors purchasing such shares in the Offering before
deducting underwriting discounts and commissions and estimated Offering expenses
payable to the Company:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)................ % $ % $
New investors...........................
--------- ------- --------- -------
Total(2)........................... 100% $ 100%
========= ======= ========= =======
</TABLE>
- ------------
(1) Total consideration paid by existing stockholders represents the combined
stockholders' equity of the Company (after giving effect to the
Transactions) before the Offering, adjusted to reflect the payment of $
in cash as partial consideration in connection with the
Transactions. See "Use of Proceeds" and "Capitalization."
(2) Represents the par value of outstanding Common Stock and additional paid in
capital immediately after giving effect to the Transactions. See the
Company's Financial Statements and Notes thereto included elsewhere in this
Prospectus. Does not include shares of Common Stock issuable upon
the exercise of options for the purchase of Common Stock pursuant to the
Company's stock option plans.
17
<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 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 $
Due to stockholder(3)................ 2,426 2,426
Distribution liability(4)............ -- 10,089
Acquisition liability(5)............. -- 5,900
---------- ------------ -----------------
Total short-term
obligations................ $ 2,426 $ 19,071 $
========== ============ =================
Long-term debt, less current
portion............................ $ -- $ -- $
---------- ------------ -----------------
Stockholders' deficit:
Common stock, $.01 par value,
1,000,000 shares authorized,
20,000 shares issued and
outstanding..................... -- 2
Preferred Stock, $.001 par value;
shares authorized; no
shares issued and outstanding,
pro forma or pro forma as
adjusted........................ -- --
Class A Common Stock, $.001 par
value; shares
authorized(6); shares
issued and outstanding, pro
forma or pro forma as
adjusted(7)..................... -- --
Class B Common Stock, $.001 par
value; shares
authorized(6); shares
issued and outstanding, pro
forma or pro forma as
adjusted(7)..................... -- --
Additional paid-in capital......... -- --
Accumulated deficit................ (1,911) (6,378)
---------- ------------ -----------------
Total stockholders'
deficit.................... (1,911) (6,376)
---------- ------------ -----------------
Total capitalization................. $ (1,911) $ (6,376) $
========== ============ =================
</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
million shares of Common Stock offered by the Company at
an assumed initial public offering price of $ per share and the
application of the estimated net proceeds therefrom. See "Use of
Proceeds."
(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 Offering.
(4) Represents the cash distribution to promoters in connection with the
Transfers, including the liability attributed to monetary assets acquired of
$4.7 million.
(5) Includes the $4.5 million payable in connection with the AnestheCare
Acquisition and $1.4 million payable in connection with the Kramer Transfer.
(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 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.
18
<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 FOR THE NINE
AUGUST 9, 1996 TO MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
------------------ ------------------
(UNAUDITED)
STATEMENT OF OPERATIONS DATA(1):
Revenues............................. $ -- $ --
Expenses............................. 514,141 1,397,178
------------------ ------------------
Net loss............................. $ (514,141) $(1,397,178)
================== ==================
SEPTEMBER 30, 1997
HISTORICAL AS ADJUSTED(2)
------------------ ------------------
(UNAUDITED)
Cash and cash equivalents............ $ -- $
Working capital deficit(3)........... (2,120,333)
Total assets(4)...................... 2,026,316
Long-term debt....................... --
Stockholders' deficit................ (1,911,119)
- ------------
(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 Offering are completed. Pursuant to the Reimbursement
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 audit expenses. AFC currently holds
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 million
shares of Common Stock offered by the Company, and the application of the
estimated net proceeds therefrom. See "Use of Proceeds."
(3) The historical balance includes $2.4 million due to AFC which will be repaid
upon consummation of the Offering.
(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.
19
<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 and AnestheCare 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. The service
fee may be adjusted quarterly (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. 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. 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
20
<PAGE>
financial and fee arrangements of AnestheCare with its clients. Currently,
AnestheCare generates revenue 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 Offering are complete.
Consequently, AMP has generated no revenues. For an 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 $1.9 million, reflecting principally salaries of AFC personnel and
office expenses since its inception. The Company has agreed to reimburse AFC for
these expenses upon completion of the Offering.
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. To date, AFC
has received net proceeds from private placements of debt and equity in an
aggregate amount of approximately $3.5 million. AMP has agreed to assume AFC's
obligations under such debt at and after the Offering 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
Offering, 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 Offering
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 Offering 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 $15.1 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 Offering, funds borrowed under the
21
<PAGE>
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
Offering. 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 assurance that sufficient funds will be
available from sources other than the Offering 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, 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,
concurrently with the Offering, registering additional shares of
Common Stock under a shelf registration, 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 and the Kramer
Transfer transactions which are made following the SAB 48 transactions and
initial public offering 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 $22.4 million payable
in shares of Common Stock at the initial public offering price attributed to the
net non-monetary assets, approximately $5.3 million in cash and $656,000 of
assumed indebtedness attributed to the net non-monetary assets of the SAB 48
Transfers, $4.8 million in cash attributed to the net monetary assets of the SAB
48 Transfers, 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 $6.0 million
paid to the Affiliated Practices for the non-monetary assets 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.
22
<PAGE>
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 Offering. 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. 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.
PENDING TRANSFERS
The Company plans to use shares subject to its shelf registration statement
to be filed with the Commission relating to the separate offering of up to
shares of Common Stock (the "Shelf Registration") to acquire certain
operating assets of, or the stock of entities holding certain operating assets
of, additional podiatric practices and enter into management services agreements
with these entities. The Company has entered into negotiations with eight
podiatric practices (collectively, the "Pending Transfers"). The aggregate
consideration to be paid by the Company with respect to the Pending Transfers,
if consummated, will be approximately $3.0 million. Unlike the initial
Affiliated Practices which will be accounted for in accordance with SAB 48, the
Pending Transfers will be accounted for as asset acquisitions at fair market
value and will result in subsequent noncash amortization charges for intangible
assets in the Company's statements of operations. Each of the Pending Transfers
is subject to, among other conditions, execution of definitive agreements, the
completion of the Offering, the effectiveness of the Shelf Registration and
satisfactory due diligence review of each practice by the Company.
23
<PAGE>
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 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 53% 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 footcare patients covered by
managed care to DPMs, as a result of the lower reimbursement rates
anticipated for footcare under managed care programs relative to footcare
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
24
<PAGE>
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:
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
25
<PAGE>
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.
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 $4.8 million
represents payment for accounts receivable) and (ii) $22.4 million payable in
shares of Common Stock at the initial public offering price. The purchase prices
for the initial Affiliated Practices
26
<PAGE>
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 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."
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> <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 Offering, 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
27
<PAGE>
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.
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). Both systems will be operating at the Company's corporate office in
Houston at the time of the Offering. 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 the Company's Affiliated Practices is expected to be completed within
approximately 90 days after the Offering.
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. 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.
28
<PAGE>
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 each Affiliated Practice. In addition, the Company
intends to develop a data repository that will consolidate operational,
clinical, 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 Offering, 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 Dr. Stanley R. Kalish D.P.M., F.A.C.F.S., Chairman, Dr.
Lawrence B. Harkless D.P.M., Vice Chairman, Dr. Bernard J. Hersh, D.P.M., Vice
Chairman, and Dr. 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,
29
<PAGE>
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 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 Offering.
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 $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 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.
30
<PAGE>
ACCOUNTING TREATMENT. As a result of the transactions contemplated by the
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 under the Purchase Agreements will
be accounted for as a cash dividend. The monetary assets 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 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 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 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.
31
<PAGE>
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 this Offering.
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 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
32
<PAGE>
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.
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
33
<PAGE>
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-period 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 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
34
<PAGE>
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.
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
35
<PAGE>
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 or 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.
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
36
<PAGE>
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 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.
37
<PAGE>
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 are 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 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.
38
<PAGE>
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 Offering.
See "Risk Factors -- Liability and Insurance Risks Associated with Podiatry
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 7,544 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.
39
<PAGE>
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 Offering, 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 Closing.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------- --- ---------------------------------------------------------------
<S> <C> <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........................ 42 Senior Vice President -- Regional Operations Officer
Kenneth Arrowood........................ 58 Vice President -- Development
Roger Bigham............................ 45 Vice President of the Company and Chief Operating Officer of
AnestheCare
Joseph D. Grau.......................... 42 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....................... 65 Director
Dr. S.F. "Charley" Hartley, D.P.M.,
F.A.C.F.S............................. 53 Director
Dr. Donald S. Huge, M.D................. 67 Director
Dr. 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
40
<PAGE>
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, 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
this provision of practice management
41
<PAGE>
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.
DR. 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.
DR. 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,
42
<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.
DR. 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 three members:
NAME AGE POSITION
- ---------------------------------------- --- ---------------
Dr. Stanley R. Kalish, D.P.M.,
F.A.C.F.S............................. 51 Chairman
Dr. Lawrence B. Harkless, D.P.M......... 46 Vice Chairman
Dr. Bernard J. Hersh, D.P.M............. 62 Vice Chairman
Dr. Robert G. Frykberg, D.P.M.,
M.P.H................................. 46 Vice Chairman
DR. STANLEY R. KALISH, D.P.M., F.A.C.F.S. See "Management -- Directors and
Executive Officers."
DR. 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 Orthopaedics 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.
DR. 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.
DR. 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.
43
<PAGE>
BOARD OF DIRECTORS, MEDICAL POLICY BOARD AND COMMITTEES
DIRECTOR COMPENSATION
Following the closing of the Offering, 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 shares of Common Stock
exercisable at the Offering 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 shares of Common Stock
exercisable at the Offering 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 Offering, 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
Offering are complete. Until the Offering, 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 the fiscal year 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 Agreement. Mr. McCrary's accrued
salary for 1996 and 1997 will be paid with a portion of the proceeds of the
Offering and, in addition, Mr. McCrary has received 52,500 membership interests
of
44
<PAGE>
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 up to ___% 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 options to purchase shares of Common Stock equal to
___% of the shares of Common Stock to be outstanding after consummation of the
Offering at a purchase price equal to the initial public offering price.
Pursuant to their Employment Agreements (as defined below), the Company has
granted options to Messrs. McCrary, Bertsch, and Johnson under the 1997 Plan,
representing the right to purchase ___%, ___%, and ___% of the 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 Offering, 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
45
<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 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 up to 8% of the total number of shares of Common
Stock to be outstanding after consummation of the Offering. Of this total,
pursuant to the Employment Agreements, the Company has granted to Messrs.
McCrary, Bertsch and Johnson options under the 1997 Plan to purchase 1.0%, 0.5%
and 0.5% of the 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, 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 liabilities,
including billed and unbilled receivables and credit
46
<PAGE>
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 and the Kramer Transfer 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:
<TABLE>
<CAPTION>
CONSIDERATION TO BE RECEIVED BY AFFILIATED PRACTICES
------------------------------------------------------
CASH
ASSETS TO BE VALUE OF NUMBER OF DEBT
AFFILIATED PRACTICES(1) CONTRIBUTED SHARES SHARES CASH PAID(2) ASSUMED(2)
- ------------------------------------- ------------- ----------- --------- ------------ ----------
<S> <C> <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 --
Douglas M. Beek, D.P.M............... 21,600 299,735 141,716 --
David L. Blumfield, D.P.M............ 465,992 1,003,493 380,847 62,500
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 --
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 --
Anthony Halinski, D.P.M.............. 323,870 982,655 395,183 --
Todd Harrison, D.P.M................. 117,646 482,946 204,537 --
S.F. Hartley, D.P.M.................. 65,263 675,226 311,343 --
Dale S. Herman, D.P.M................ 227,228 309,197 150,429 --
Bernard J. Hersh, D.P.M.............. 225,605 501,275 224,125 --
Richard Hochman, D.P.M............... 22,717 98,095 52,906 --
Stanley R. Kalish, D.P.M............. 479,735 945,261 443,888 --
Michael W. Kendall, D.P.M............ 193,804 551,148 351,094 --
Kirk Koepsel, D.P.M.................. 66,872 413,185 185,588 --
Jerald N. Kramer, D.P.M.(3).......... 63,365 -- 1,404,000 --
Paul D. Leon, D.P.M.................. 21,465 250,558 106,806 --
Gregory L. Mangum, D.P.M............. 409,256 770,725 278,195 62,500
Bruce Miller, D.P.M.................. 440,305 912,301 320,162 62,600
James E. Miller, D.P.M............... 74,770 93,260 53,940 --
Michael Mineo, D.P.M................. 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................ 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 --
Donald E. Robinson, D.P.M............ 75,207 275,064 143,108 --
Mark R. Sands, D.P.M................. 163,897 822,300 367,588 --
Charles P. Sanicola, D.P.M........... 45,066 278,863 136,204 --
Jerry S. Silverman, D.P.M............ 180,865 394,267 106,422 100,000
Donald C. Stran, D.P.M............... 108,420 760,575 330,922 --
Barry M. Tuvel, D.P.M................ 62,037 471,119 211,706 --
George R. Vito, D.P.M................ 268,885 1,734,362 1,278,121 --
Richard A. Weissman, D.P.M........... 21,600 299,735 141,716 --
------------- ----------- ------------ ----------
Total........................... $ 7,495,245 $22,361,539 $ 11,493,060 $656,000
============= =========== ============ ==========
</TABLE>
47
<PAGE>
- ------------
(1) The DPMs who own the initial Affiliated Practices are considered
"promoters" for purposes of the Rule 405 promulgated under the Securities
Act of 1933, as amended.
(2) Total Cash includes consideration attributable to $4.8 million of monetary
assets acquired. Under SAB 48 the cash portion of the purchase price
attributable to the non-monetary assets of $6.0 million will be treated as a
cash dividend to the DPM owners of the Affiliated Practices.
(3) 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
Offering, 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 Offering, 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 (prior to
the Stock Split) distributable to these promoters:
DISTRIBUTABLE SHARES
OF
PROMOTERS CLASS B COMMON STOCK
- ------------------------- ---------------------
Jack N. McCrary.......... 1,395
John S. Bace (1)......... 368
Wayne A. Bertsch......... 92
S. F. Hartley D.P.M...... 475
Randy Johnson............ 18
Stanley R. Kalish
D.P.M.................... 659
David LaGuardia.......... 920
Sherman Nagler, D.P.M.... 184
Robert G. Parker,
D.P.M.................... 368
Steven P. Richman,
D.P.M.................... 184
Jerry S. Silverman,
D.P.M.................... 184
Texas Podiatry
Group-Houston (2)........ 368
George R. Vito, D.P.M.... 184
Bellaire Surgicare, IPA
(3)...................... 368
Bay Area Podiatry (4).... 276
Thomas S. Garrison....... 92
- ------------
(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.
48
<PAGE>
SEED CAPITAL FINANCING TRANSACTION WITH PROMOTERS
Of the promoters discussed above under the option "-- 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 Offering, AFC will
distribute shares of Class B Common Stock it currently holds to its members,
including such promoters.
Prior 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 4,894 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...................... 1,104 (1)
John S. Bace (2)..................... 368 $ 95,000
David LaGuardia...................... 920 237,500
Randy Johnson........................ 18 4,750
Wayne A. Bertsch..................... 92 23,750
Stanley R. Kalish, D.P.M............. 368 95,000
S. F. Hartley, D.P.M................. 184 47,500
Sherman Nagler, D.P.M................ 184 47,500
Robert G. Parker, D.P.M.............. 368 95,000
Steven P. Richman, D.P.M............. 184 47,500
Jerry S. Silverman, D.P.M............ 184 47,500
Texas Podiatry Group-Houston (3)..... 368 95,000
George R. Vito, D.P.M................ 184 47,500
Bellaire Surgicare, IPA (4).......... 368 95,000
Bay Area Podiatry (5)................ 276 71,250
Thomas S. Garrison, D.P.M............ 92 23,750
- ------------
(1) Mr. Crary'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 Offering. 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.
(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.
49
<PAGE>
PROMOTER MANAGEMENT AND DIRECTOR PARTICIPATION IN BRIDGE FINANCING
During January 1998, AFC intends to complete a financing of $1,500,000,
representing $1,425,000 in non-interest bearing loans and $75,000 representing
15 membership interests in AFC to fund certain expenses on behalf of AMP, in
connection with the Offering. The financing provides for the loans to be repaid
by AFC from funds it will receive from the Offering. Additionally, at the
investor's option prior to the Offering, AFC is required to repurchase each of
the 15 membership units in AFC in exchange for either (i) $71,667 in cash or
(ii) $71,667 worth of 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.
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 Agreement between AFC and the Company, the
Company has agreed to reimburse AFC approximately $5.3 million relating to AMP's
organizational costs and working capital in connection with the Transfers and
the Offering. AFC owns, prior to the Offering, 56.3% of the outstanding voting
securities of the Company. These amounts will be paid out of the proceeds of the
Offering. See "Use of Proceeds."
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 Offering. The Company will acquire the assets and stock of
the practices of Dr. S.F. Hartley, D.P.M. and Dr. 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 AnestheCare
Acquisition will not be accounted for under SAB No. 48. Instead, this
affiliation 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 7,544 square
feet of office space located at 3555 Timmons Lane, Houston, Texas. The original
lease for 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
50
<PAGE>
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 Offering. 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
Offering. In exchange for Mr. McCrary agreeing to defer his compensation earned
prior to the Offering, 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 December 15, 1997
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 PERCENT OF
CLASS B COMMON STOCK
SHARES OF COMMON STOCK BENEFICIALLY
CLASS B BENEFICIALLY OWNED SHARES OF OWNED
COMMON STOCK ----------------------- COMMON STOCK --------------------
BENEFICIALLY PRIOR TO AFTER BENEFICIALLY PRIOR TO AFTER
NAME OF BENEFICIAL OWNER OWNED(1)(2) OFFERING(2) OFFERING OWNED OFFERING OFFERING
- ---------------------------------------- ------------ ----------- -------- ------------ -------- --------
<S> <C> <C>
Ankle & Foot Centers of America,
LLC(3)................................ 11,250 56.3%
John S. Bace, CFA(4).................... 368 1.8
Wayne A. Bertsch........................ 647 3.2
Dr. S. F. Hartley, D.P.M.,
F.A.C.F.S.(5)......................... 475 2.4
Donald S. Huge, M.D.(6)................. 0 *
Randy Johnson........................... 573 2.9
Dr. Stanley Kalish, D.P.M.,
F.A.C.F.S.(7)......................... 659 3.3
Jack N. McCrary......................... 7,895 39.5
All Directors and Executive Officers as
a Group............................... 11,739 58.7
</TABLE>
- ------------
* Less than one percent.
(1) The shares of Class B Common Stock listed as beneficially owned by each
stockholder assumes the consummation of the Share Conversion pursuant to
which the shares of AMP's existing common stock, without class, will be
converted into shares of Class B Common Stock. Unless otherwise indicated,
each of the individual stockholders listed above has, through the Offering
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, prior 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.................... 368 1.8%
Wayne A. Bertsch..................... 92 0.5%
Dr. S.F. Hartley, D.P.M.,
F.A.C.F.S............................ 475 2.4%
Donald S. Huge, M.D.................. -- --
Randy Johnson........................ 18 0.1%
Dr. Stanley Kalish, D.P.M.,
F.A.C.F.S............................ 659 3.3%
Jack N. McCrary...................... 1,395 7.0%
All Directors and Executive Officers
as a Group......................... 3,929 19.6%
(3) 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.
(4) The business address of Mr. Bace is 3730 Del Monte, Houston, Texas 77019.
(5) 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 $ valued at the Offering price.
(6) Dr. Huge's business address is 1177 W. Loop South, Suite 700, Houston, Texas
77027.
(7) 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 Offering
price.
52
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company has authorized shares of Class A Common Stock, $.001
par value per share ("Common Stock"), shares of Class B Common Stock,
par value $.001 per share ("Class B Common Stock") and shares of
preferred stock, $.001 par value per share. As of December , 1997, 20,000
shares of Common Stock were issued and outstanding and held of record by
stockholders. No shares of Class B Common Stock or Preferred Stock were
outstanding.
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 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.
Each share of Class B Common Stock will automatically convert into shares
of Common Stock (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 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
53
<PAGE>
"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.
CERTAIN ANTI-TAKEOVER AND OTHER PROVISIONS OF DELAWARE LAW AND THE COMPANY'S
CERTIFICATE OF INCORPORATION AND BYLAWS
On , 1997, the Company declared 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 $ , 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
held of record on , 1997 (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 , as 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 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
54
<PAGE>
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 75% 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 .
55
<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 Offering. After giving effect to the sale of the shares of
Common Stock offered hereby, the Company will have shares of Common
Stock issued and outstanding. Of these shares, the shares (
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 purchased by affiliates of the
Company. None of the remaining shares 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. Of these shares, shares will be eligible for sale
pursuant to Rule 144 in and the balance of these
shares will be eligible for sale at various times from
through .
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
of these shares 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
shares of Common Stock reserved for issuance under the 1997 Plan as soon as
practicable after expiration of the lock-up period. In addition, the Company
will register up to an additional ________ shares of Common Stock under a shelf
registration, which, when combined with the Company's cash resources, will be
used to fund the Company's planned practice affiliation program. 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 "Underwriting."
56
<PAGE>
UNDERWRITING
The Underwriters named below have severally agreed with the Company,
subject to the terms and conditions of the Underwriting Agreement, to purchase
the respective number of shares of Common Stock set forth opposite their names
below:
UNDERWRITER NUMBER OF SHARES
- ------------------------------------- -----------------
A.G. Edwards & Sons, Inc.............
J.C. Bradford & Co. .................
-----------------
Total.........................
=================
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the shares of Common
Stock offered hereby, if any of such shares are purchased.
The Company has been advised by the Underwriters that the Underwriters
propose to offer the shares of Common Stock to the public at the offering price
set forth on the cover page of this Prospectus and to certain dealers at such
price less a concession not in excess of $ per share. The Underwriters and
such dealers may reallow a discount of not in excess of $.10 per share to
certain other dealers. The public offering price and the concession and discount
to dealers may be changed by the Underwriters after the Offering.
The Offering of the shares of Common Stock is made for delivery when, as
and if accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any offer for the purchase of shares.
The Company has granted the Underwriters an option, expiring at the close
of business on the 45th day subsequent to the date of the Underwriting
Agreement, to purchase up to additional shares of Common Stock at the
public offering price, less the underwriting discount set forth on the cover
page of this Prospectus. The Underwriters may exercise such option solely to
cover over-allotments, if any, in the sale of the shares. To the extent the
Underwriters exercise such option, each of them will have a firm commitment,
subject to certain conditions, to purchase approximately the same percentage of
the option shares as the number of shares set forth opposite each Underwriter's
name in the preceding table bears to , and the Company will
be obligated to sell such shares to the Underwriters.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or will contribute to payments that the Underwriters may be
required to make in respect thereof.
The Company, all Directors and Executive Officers of the Company and all
holders of more than 5.0% of the Common Stock prior to the Offering other than
have agreed that they will not, directly or
indirectly, offer, sell or otherwise dispose of any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for, or any
rights to purchase or acquire, Common Stock for a period of 180 days after the
date of this Prospectus without the prior written consent of A.G. Edwards &
Sons, Inc. other than the exercise of options previously granted under the
Company's director and employee benefit plans and agreements. See "Shares
Eligible for Future Sale."
The Underwriters have advised the Company that they do not intend to
confirm sales to any account over which they exercise discretionary authority.
In connection with this Offering, certain Underwriters and selling group
members (if any) who in the past have acted as market makers in the Common Stock
may engage in passive market making activities in
57
<PAGE>
the Common Stock on the Nasdaq National Market in accordance with Rule 103 of
Regulation M under the Exchange Act. Underwriters and other participants in the
distribution of the Common Stock generally are prohibited during a specified
time period (the "qualifying period"), determined in light of the timing of
the Offering, from bidding for or purchasing the Common Stock or a related
security except to the extent permitted under the applicable rules of Regulation
M. Rule 103 allows, among other things, an Underwriter or member of the selling
group (if any) for the Common Stock to effect "passive market making"
transactions on the Nasdaq National Market in the Common Stock during the
qualifying period at a price that does not exceed the highest independent bid
for that security at the time of the transaction. Such a passive market maker
must not display a bid for the subject security at a price in excess of the
highest independent bid, and generally must lower its bid if all independent
bids are lowered. Moreover, the passive market maker's net purchases of such
security on each day of the qualifying period shall not exceed 30.0% of its
average daily trading volume during a reference period preceding the
distribution.
In connection with the Offering, the Underwriters and other persons
participating in the Offering may engage in transactions that stabilize,
maintain or otherwise affect the price of the Common Stock. Specifically, the
Underwriters may over-allot in connection with the Offering, creating a short
position in the Common Stock for their own account. To cover over-allotments or
to stabilize the price of the Common Stock, the Underwriters may bid for, and
purchase, shares of the Common Stock in the open market. The Underwriters may
also impose a penalty bid whereby they may reclaim selling concessions allowed
to an underwriter or dealer for distributing the Common Stock in the Offering,
if the Underwriters repurchase previously distributed Common Stock in
transactions to cover their short position, in stabilization transaction or
otherwise. Finally, the Underwriters may bid for, and purchase, shares of the
Common Stock in market making transactions. These activities may stabilize or
maintain the market price of the Common Stock above market levels that may
otherwise prevail. The Underwriters are not required to engage in these
activities and may end any of these activities at any time. See "Principal
Stockholders."
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Baker & Hostetler LLP. A partner of Baker & Hostetler LLP holds
shares of Class B Common Stock and one of counsel attorney at Baker &
Hostetler LLP holds shares of Class B Common Stock. Certain legal matters
in connection with the Offering made hereby will be passed upon for the
Underwriters by McDermott, Will & Emery, Chicago, Illinois.
EXPERTS
The financial statements of American Medical Providers, Inc., and Pyramid
Anesthesiology Group, 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-1 under the Securities Act (the "Registration Statement") with respect to
the shares of Common Stock offered hereby. This Prospectus, which constitutes a
part of the Registration Statement, does not contain all of the information set
forth in the Registration Statement, including the exhibits and schedules
thereto. For further information with respect to the Company and the shares of
Common Stock, reference is made to the Registration Statement. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. The Registration Statement, including the exhibits and schedules
thereto, may be inspected without charge at the principal office of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and the Commission's Regional Offices at Seven World Trade Center, Suite 1300,
New York, New York 10048, and Northwest Atrium Center, 500 West Madison Street,
58
<PAGE>
Suite 1400, Chicago, Illinois 60661, and copies may be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. In addition, the Registration Statement and
certain other filings made with the Commission through its Electronic Data
Gathering Analysis and Retrieval ("EDGAR") system are publicly available
through the Commission's site on the Internet's World Wide Web, located at
http://www.sec.gov. The Registration Statement, including all exhibits thereto
and amendments thereof, has been filed with the Commission through EDGAR.
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-17
Balance Sheets..................... F-18
Statements of Operations........... F-19
Statements of Stockholders'
Equity............................ F-20
Statements of Cash Flows........... F-21
Notes to Financial Statements...... F-22
BELLAIRE SURGICARE, INC.
Report of Independent Public
Accountants....................... F-25
Balance Sheets..................... F-26
Statements of Operations........... F-27
Statements of Shareholders'
Equity............................ F-28
Statements of Cash Flows........... F-29
Notes to Financial Statements...... F-30
UNAUDITED PRO FORMA COMBINED BALANCE
SHEET
Unaudited Pro Forma Combined
Balance Sheet..................... F-35
Notes to Unaudited Pro Forma
Combined Balance Sheet............ F-36
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:
Common stock, $.01 par value;
1,000,000 shares authorized,
20,000 shares issued and
outstanding.................... 200 200
Deficit accumulated during the
development stage.............. (514,141) (1,911,319)
------------ -------------
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.... 401,318 755,769
General and administrative...... 112,823 641,409
--------------- -------------
Total expenses........ 514,141 1,397,178
--------------- -------------
LOSS BEFORE INCOME TAXES............. (514,141) (1,397,178)
INCOME TAX BENEFIT................... -- --
--------------- -------------
NET LOSS............................. $(514,141) $ (1,397,178)
=============== =============
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
ACCUMULATED
COMMON STOCK DURING THE
--------------- DEVELOPMENT STOCKHOLDERS'
SHARES AMOUNT STAGE DEFICIT
------ ------ ----------- -------------
<S> <C> <C> <C> <C>
INITIAL CAPITALIZATION AUGUST 9, 1996
(Inception)........................ 20,000 $ 200 $ -- $ 200
Net loss........................ -- -- (514,141) (514,141)
------ ------ ----------- -------------
BALANCE AT DECEMBER 31, 1996......... 20,000 200 (514,141) (513,941)
Net loss (Unaudited)............ -- -- (1,397,178) (1,397,178)
------ ------ ----------- -------------
BALANCE AT SEPTEMBER 30, 1997
(Unaudited)........................ 20,000 $ 200 $(1,911,319) $ (1,911,119)
====== ====== =========== =============
</TABLE>
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........................... $ (514,141) $ (1,397,178)
Adjustments to reconcile net loss
to net cash used in operating
activities --
Depreciation.................... 5,258 19,842
Changes in assets and
liabilities --
Deferred issuance costs....... (404,622) (1,387,280)
Other current assets.......... (11,892) (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 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. 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. 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. In addition, management plans to distribute the
amounts payable to AFC by AMP at closing. 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.
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 "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 Kramer Transfer, will be accounted for
by the Company under Securities and Exchange Commission
F-7
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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
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 $22.4 million payable in shares of Common
Stock at the initial public offering price attributed to the net non-monetary
assets, approximately $5.3 million in cash and $656,000 of assumed indebtedness
attributed to the net non-monetary assets of the SAB 48 Transfers, $4.7 million
in cash attributed to the net monetary assets of the SAB 48 Transfers, 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 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 $6.0 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.
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
F-8
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 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-
F-9
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 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
F-10
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
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.
F-11
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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
ENDED
YEAR ENDED SEPTEMBER
DECEMBER 31, 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.
F-13
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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
============ =============
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)
As of December 29, 1997, 1,000,000 shares of Common Stock were authorized,
20,000 shares of Common Stock were issued and outstanding.
In connection with the Offering, it is anticipated that existing shares of
the Company's Common Stock will be converted into shares of Class B Common
Stock. In addition, it is anticipated that following such conversion and prior
to the closing of the Offering, the Company will effect a stock split of the
Company's 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 of a vote per share. The
F-14
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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.
Each share of Class B Common Stock will automatically convert into shares
of Common Stock (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 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.
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 8% 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. Subsequent to September 30,
1997, options to purchase 3.34% of the shares of Common Stock were granted, and
options to purchase 0.37% of the shares of Common Stock were authorized, but not
granted, all at an exercise price equal to the initial public offering price.
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
F-15
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 January 1998, AFC intends to complete a financing of $1,500,000,
representing $1,425,000 in non-interest bearing loans and $75,000 representing
15 membership interests 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, at the investor's option prior to the Offering,
AFC is required to repurchase each of the 15 membership units in AFC in exchange
for either (i) $71,667 in cash or (ii) $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.
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.
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-16
<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-17
<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-18
<PAGE>
PYRAMID ANESTHESIOLOGY GROUP, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED NINE MONTHS
DECEMBER 31, ENDED
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ------------ -------------
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.................. 300,000 300,000 225,000
Pro Forma Income Taxes.......... 93,386 405,447 313,420
------------ ------------ -------------
Pro Forma Net Income....... $ 140,080 $ 608,171 $ 470,130
============ ============ =============
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE>
PYRAMID ANESTHESIOLOGY GROUP, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------- RETAINED
SHARES AMOUNT EARNINGS TOTAL
------- ------- ----------- --------------
<S> <C> <C> <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-20
<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
============ ============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<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-22
<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 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 CONPENSATION
The shareholders have not historically received a salary for their
services, but have 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.
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.
F-23
<PAGE>
PYRAMID ANESTHESIOLOGY GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 the Company will be
significantly reduced as a result of the sale.
F-24
<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-25
<PAGE>
BELLAIRE SURGICARE, INC.
BALANCE SHEETS
DECEMBER 31,
-------------------------- SEPTEMBER 30,
1995 1996 1997
------------ ----------- -------------
(UNAUDITED)
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
============ =========== =============
The accompanying notes are an integral part of these financial statements.
F-26
<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-27
<PAGE>
BELLAIRE SURGICARE, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
COMMON STOCK
------------------- RETAINED
SHARES AMOUNT EARNINGS
--------- ------- ---------
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
========= ======= =========
The accompanying notes are an integral part of these financial statements.
F-28
<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........ 133,537 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-29
<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.
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.
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
F-30
<PAGE>
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:
ESTIMATED DECEMBER 31,
USEFUL LIVES ----------------------
(YEARS) 1995 1996
------------ ---------- ----------
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
========== ==========
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-31
<PAGE>
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
=========
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.
F-32
<PAGE>
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-33
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
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 34.5 million including the
Kramer Transfer. 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 Transfers, except for 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 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-34
<PAGE>
AMERICAN MEDICAL PROVIDERS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
AMERICAN COMBINED PRO POST
MEDICAL AFFILIATED PRO FORMA FORMA OFFERING
PROVIDERS, INC. PRACTICES ANESTHECARE ADJUSTMENTS COMBINED ADJUSTMENTS
--------------- -------- ----------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........... $-- $ 1,091 $ 37 $ (912)(1) $ 37
(179)(3)
Patient receivables, net............ -- 4,160 -- -- 4,160
Affiliate receivables............... -- -- 217 -- 217
Deferred issuance costs............. 1,792 -- -- -- 1,792
Other current assets................ 25 334 -- (131)(1) 228
--------------- -------- ----------- ----------- -------- -----------
Total current assets............ 1,817 5,585 254 (1,222) 6,434
Equipment, net...................... 209 1,154 149 500(3) 2,012
Other assets........................ -- 389 7 (389)(1) 1,207
1,200(2)
Goodwill............................ -- -- -- 2,890(2) 5,519
651(3)
1,978(5)
--------------- -------- ----------- ----------- -------- -----------
Total assets.................... $ 2,026 $ 7,128 $ 410 $ 5,608 $15,172 $
=============== ======== =========== =========== ======== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Accounts payable and other current
liabilities....................... $ 1,511 $ 1,310 $ 205 $ (3,283)(1) $ 1,511
(205)(2)
(5)(3)
1,978(5)
Due to stockholders................. 2,426 -- -- -- 2,426
Payable to Affiliated Practices..... -- -- -- 10,089(1) 10,089
Payable to AnestheCare.............. -- -- -- 4,500(2) 4,500
Payable to Kramer................... -- -- -- 1,400(3) 1,400
Deferred income taxes............... -- -- -- 966(4) 966
Current portion of long-term debt... -- 896 -- (240)(1) 656
--------------- -------- ----------- ----------- -------- -----------
Total current liabilities....... 3,937 2,206 205 15,200 21,548
--------------- -------- ----------- ----------- -------- -----------
Long-term debt, less current
portion........................... -- 1,116 -- (1,116)(1) --
--------------- -------- ----------- ----------- -------- -----------
Total liabilities............... 3,937 3,322 205 14,084 21,548
--------------- -------- ----------- ----------- -------- -----------
STOCKHOLDERS' EQUITY (DEFICIT):
American Medical Providers, Inc.
Class A Common Stock............ -- -- -- 2(1) 2
Class B Common Stock............ -- -- -- -- --
Accumulated deficit............. (1,911) -- -- (3,326)(1) (6,378 )
(175)(3)
(966)(4)
Additional paid-in capital...... -- -- -- -- --
AnestheCare
Common Stock.................... -- -- 2 (2)(2) --
Retained earnings............... -- -- 203 (203)(2) --
Affiliated Practices' combined
equity............................ -- 3,806 -- (3,558)(1) --
(248)(3)
--------------- -------- ----------- ----------- -------- -----------
Total stockholders' equity
(deficit)..................... (1,911) 3,806 205 (8,476) (6,376 )
--------------- -------- ----------- ----------- -------- -----------
Total liablities and
stockholders' equity.......... $ 2,026 $ 7,128 $ 410 $ 5,608 $15,172 $
=============== ======== =========== =========== ======== ===========
PRO FORMA
AS ADJUSTED
-----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........... $
Patient receivables, net............
Affiliate receivables...............
Deferred issuance costs.............
Other current assets................
-----------
Total current assets............
Equipment, net......................
Other assets........................
Goodwill............................
-----------
Total assets.................... $
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES:
Accounts payable and other current
liabilities....................... $
Due to stockholders.................
Payable to Affiliated Practices.....
Payable to AnestheCare..............
Payable to Kramer...................
Deferred income taxes...............
Current portion of long-term debt...
-----------
Total current liabilities.......
-----------
Long-term debt, less current
portion...........................
-----------
Total liabilities...............
-----------
STOCKHOLDERS' EQUITY (DEFICIT):
American Medical Providers, Inc.
Class A Common Stock............
Class B Common Stock............
Accumulated deficit.............
Additional paid-in capital......
AnestheCare
Common Stock....................
Retained earnings...............
Affiliated Practices' combined
equity............................
-----------
Total stockholders' equity
(deficit).....................
-----------
Total liablities and
stockholders' equity.......... $
===========
</TABLE>
The accompanying notes to the unaudited pro forma combined balance sheet
are an integral part of this financial statement.
F-35
<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 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. 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
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 the interest in
Bellaire Surgicare, Inc. ("Bellaire") to be purchased by the owner
DPMs to acquire the remaining ownership interest held by non-promoter
DPMs.
F-36
<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............................ 8
Use of Proceeds......................... 16
Dividend Policy......................... 16
Dilution................................ 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.................. 50
Description of Capital Stock............ 51
Shares Eligible for Future Sale......... 54
Underwriting............................ 55
Legal Matters........................... 56
Experts................................. 56
Additional Information.................. 56
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.
SHARES
AMERICAN MEDICAL
PROVIDERS, INC.
CLASS A COMMON STOCK
------------------------
PROSPECTUS
------------------------
A.G. EDWARDS & SONS, INC.
J.C. BRADFORD & CO.
, 1998
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses to be paid by the Company
(other than underwriting compensation expected to be incurred) in connection
with the offering described in this Registration Statement. All amounts are
estimates, except the Securities and Exchange Commission registration fee, the
NASD filing fee and the Nasdaq National Market listing fee.
Securities and Exchange Commission
registration fee...................... $ 9,091
NASD filing fee.........................
Nasdaq National Market listing fee...... *
Blue sky fees and expenses.............. *
Printing and engraving fees and
expenses.............................. *
Legal fees and expenses................. *
Accounting fees and expenses............ *
Transfer agent and registrar fees and
expenses.............................. *
Premiums for D&O insurance.............. *
----------
Miscellaneous expenses.................. *
----------
Total.............................. $
==========
- ------------
* To be provided by amendment.
ITEM 14. 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 . . . ."
II-1
<PAGE>
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 the 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
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.
II-2
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following information relates to securities of the Company issued or
sold within the past three years which were not registered under the Securities
Act:
The Company issued the shares of its existing common stock, without class,
par value $.01 per share as follows:
HOLDER NUMBER OF SHARES(1) DATE
- -------------------- -------------------- --------
Jack N. McCrary..... 3,500 8/22/96
Jack N. McCrary..... 3,000 8/22/96
Ankle and Foot
Centers of
America, LLC...... 11,250 8/22/96
Kevin C. Graham..... 20 8/22/96
Wayne A. Bertsch.... 552.5 10/14/96
Wayne A. Bertsch.... 2.5 6/16/97
Randy Johnson....... 552.5 10/14/96
Randy Johnson....... 2.5 6/16/97
Cherie J. Partain... 10 10/14/96
Cherie J. Partain... 15 6/16/97
Robert C. Joyner.... 320 6/16/97
Robert C. Joyner.... 235 9/09/97
Amanda Walker....... 5 6/16/97
Gary Hubschman...... 200 6/16/97
Karen Boyle......... 15 6/16/97
Kenneth Arrowood.... 100 9/09/97
Cecil Pickens....... 50 10/14/97
Joseph Grau......... 50 10/14/97
Robert C. Joyner, as
Escrow Agent...... 120 9/9/97
- ------------
(1) The Company received $200.00 in connection with the issuance of its original
20,000 shares to AFC and Jack McCrary. All other shares of the Company's
existing common stock were issued for par value.
On January __, 1998 the Company converted each share of such common stock
into one share of the Company's Class B Common Stock, par value $.001 per share.
The foregoing securities were issued pursuant to the exemption from
registration under Section 4(2) of the Act since no public offering was involved
and the securities were acquired for investment and not with a view to
distribution.
ITEM 16. 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>
1.1* -- Form of Underwriting Agreement
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
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
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------------------------ ------------------------------------------------------------------------------------------
<C> <S>
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 , 1997 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.
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
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>
- ------------
+ Previously filed.
* To be filed by amendment.
(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 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes as follows:
(1) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt delivery to
each purchaser.
(2) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
in Item 14, or otherwise, the registrant has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Act and is, therefore,
II-4
<PAGE>
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payments 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 Act and
will be governed by the final adjudication of such issue.
(3) That, for the 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 a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(4) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.
II-5
<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 January 22, 1998.
AMERICAN MEDICAL PROVIDERS, INC.
By: /s/ JACK N. McCRARY
JACK N. MCCRARY
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
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.
SIGNATURE TITLE DATE
--------- ----- ----
/s/JACK N. McCRARY Chairman, President, Chief January 22, 1998
JACK N. MCCRARY Executive Officer and Director
(Principal Executive Officer)
/s/WAYNE A. BERTSCH Senior Vice President, Chief January 22, 1998
WAYNE A. BERTSCH Financial Officer and Director
(Principal Financial and
Accounting Officer)
/s/CECIL R. PICKENS Vice President and Chief January 22, 1998
CECIL R. PICKENS Accounting Officer (Principal
Accounting Officer)
II-6
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.
2
<PAGE>
"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).
3
<PAGE>
"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.
4
<PAGE>
"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.
5
<PAGE>
"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.
6
<PAGE>
"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.
7
<PAGE>
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
8
<PAGE>
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.
9
<PAGE>
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
10
<PAGE>
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
11
<PAGE>
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.
12
<PAGE>
(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
13
<PAGE>
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;
14
<PAGE>
(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
15
<PAGE>
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
16
<PAGE>
(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
17
<PAGE>
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
18
<PAGE>
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.
19
<PAGE>
(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
20
<PAGE>
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.
21
<PAGE>
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
22
<PAGE>
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
23
<PAGE>
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.
24
<PAGE>
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.
25
<PAGE>
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
26
<PAGE>
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").
27
<PAGE>
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.
28
<PAGE>
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.
29
<PAGE>
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;
30
<PAGE>
(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
31
<PAGE>
"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
32
<PAGE>
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.
33
<PAGE>
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
34
<PAGE>
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.
35
<PAGE>
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
36
<PAGE>
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;
37
<PAGE>
(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");
38
<PAGE>
(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;
39
<PAGE>
(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.
40
<PAGE>
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
41
<PAGE>
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.
42
<PAGE>
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.
43
<PAGE>
(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.
44
<PAGE>
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):
45
<PAGE>
(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.
46
<PAGE>
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
47
<PAGE>
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:
48
<PAGE>
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.
1
<PAGE>
"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.
2
<PAGE>
"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.
3
<PAGE>
"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.
4
<PAGE>
"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.
5
<PAGE>
"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.
6
<PAGE>
"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."
7
<PAGE>
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.
8
<PAGE>
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.
9
<PAGE>
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.
10
<PAGE>
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
11
<PAGE>
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.
12
<PAGE>
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)
13
<PAGE>
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.
14
<PAGE>
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;
15
<PAGE>
(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
16
<PAGE>
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.
17
<PAGE>
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
18
<PAGE>
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.
19
<PAGE>
(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.
20
<PAGE>
(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
21
<PAGE>
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.
22
<PAGE>
(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
23
<PAGE>
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
24
<PAGE>
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.
25
<PAGE>
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.
26
<PAGE>
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
27
<PAGE>
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").
28
<PAGE>
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.
29
<PAGE>
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.
30
<PAGE>
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;
31
<PAGE>
(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
32
<PAGE>
"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
33
<PAGE>
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.
34
<PAGE>
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
35
<PAGE>
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.
36
<PAGE>
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
37
<PAGE>
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;
38
<PAGE>
(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");
39
<PAGE>
(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;
40
<PAGE>
(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.
41
<PAGE>
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
42
<PAGE>
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")
43
<PAGE>
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
44
<PAGE>
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:
45
<PAGE>
(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
46
<PAGE>
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.
47
<PAGE>
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.
48
<PAGE>
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
<PAGE>
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 10.13
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
2
<PAGE>
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
3
<PAGE>
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
4
<PAGE>
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.
1
<PAGE>
"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.
2
<PAGE>
"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.
3
<PAGE>
"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.
4
<PAGE>
"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.
5
<PAGE>
"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
6
<PAGE>
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.
7
<PAGE>
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
8
<PAGE>
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
9
<PAGE>
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
10
<PAGE>
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
11
<PAGE>
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
12
<PAGE>
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;
13
<PAGE>
(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.
14
<PAGE>
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;
15
<PAGE>
(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
16
<PAGE>
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.
17
<PAGE>
(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
18
<PAGE>
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.
19
<PAGE>
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
20
<PAGE>
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;
21
<PAGE>
(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
22
<PAGE>
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
23
<PAGE>
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
24
<PAGE>
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
25
<PAGE>
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
26
<PAGE>
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
27
<PAGE>
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
28
<PAGE>
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.
29
<PAGE>
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
30
<PAGE>
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.
31
<PAGE>
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
32
<PAGE>
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
33
<PAGE>
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
34
<PAGE>
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
35
<PAGE>
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
36
<PAGE>
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.
37
<PAGE>
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.
38
<PAGE>
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
39
<PAGE>
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
40
<PAGE>
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.
41
<PAGE>
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.
42
<PAGE>
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
43
<PAGE>
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
44
<PAGE>
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
45
<PAGE>
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
46
<PAGE>
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
47
<PAGE>
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.
48
<PAGE>
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
1
<PAGE>
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
2
<PAGE>
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
3
<PAGE>
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.
4
<PAGE>
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
5
<PAGE>
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
6
<PAGE>
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
7
<PAGE>
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
8
<PAGE>
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.
9
<PAGE>
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.
10
<PAGE>
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
11
<PAGE>
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)
12
<PAGE>
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.
13
<PAGE>
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.
1
<PAGE>
(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)
2
<PAGE>
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
3
<PAGE>
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,
4
<PAGE>
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
5
<PAGE>
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
6
<PAGE>
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.
7
<PAGE>
(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
8
<PAGE>
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
9
<PAGE>
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.
10
<PAGE>
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
11
<PAGE>
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)
12
<PAGE>
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.
13
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-1 filed by American Medical Providers, Inc.
ARTHUR ANDERSEN LLP
Houston, Texas
January 21, 1998
