ASSET PURCHASE AGREEMENT
AMONG
CMSF, INC., AS THE BUYER,
AND
ALLIED HEALTH GROUP, INC.,
GUT MANAGEMENT, INC.,
SKY MANAGEMENT CO.,
FLORIDA SPECIALTY NETWORK, LTD.,
SURGICAL ASSOCIATES OF SOUTH FLORIDA, INC.,
SURGINET, INC., AS SELLERS,
AND
▇▇▇▇▇ ▇▇▇▇▇, M.D., ▇▇▇▇▇ ▇▇▇▇▇▇, M.D. AND ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.
AND
MAGELLAN HEALTH SERVICES, INC., AS PARENT
Dated as of October 16, 1997
TABLE OF CONTENTS
PAGE
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SECTION 1. DEFINITIONS.
Section 1.1 Definitions
Section 1.2 Principles of Construction
SECTION 2. PURCHASE AND SALE OF THE PURCHASED PROPERTY
Section 2.1 Transfer of Assets
Section 2.2 Sale at Closing Date
Section 2.3 Subsequent Documentation
Section 2.4 Assumption of Liabilities
Section 2.5 Excluded Liabilities
Section 2.6 Breach of Representations
Section 2.7 Right of Enforcement
SECTION 3. PURCHASE PRICE: EARN-OUT
Section 3.1 Purchase Price
Section 3.2 Working Capital Adjustment
Section 3.3 Earn-Out
Section 3.4 Payment of Adjustment and
Earn-Out: Distribution of Escrow
Section 3.5 Prorations and Other
Adjustments.
SECTION 4. CLOSING.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
AND THE EXECUTIVE SHAREHOLDERS
Section 5.1 Organization: Oualification
to Do Business: Subsidiaries
Section 5.2 Authorization and Validity of
Agreement
Section 5.3 No Conflict or Violation
Section 5.4 Consents and Approvals
Section 5.5 Financial Statements and
Projections
Section 5.6 Absence of Certain Changes or
Events
Section 5.7 Tax Matters
PAGE
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Section 5.8 Absence of Undisclosed Liabilities
Section 5.9 Accounts Receivable: Banking
Section 5.10 Real Property: Leases
Section 5.11 Equipment and Machinery
Section 5.12 Intellectual Property: Intangible Assets
Section 5.13 Licenses and Permits
Section 5.14 Litigation
Section 5.15 Professional Liability Claims
Section 5.16 Contracts
Section 5.17 Employee Plans and Benefits:
Employees and Independent Contractors
Section 5.18 Insurance
Section 5.19 Compliance with Law
Section 5.20 Change in Ownership
Section 5.21 Files and Records
Section 5.22 Related Party Transactions
Section 5.23 Sufficiency of and Title to Assets
Section 5.24 Accuracy of Information
Section 5.25 Brokers
Section 5.26 Disclosure
Section 5.27 Survival
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE
BUYER AND PARENT
Section 6.1 Corporate Organization
Section 6.2 Authorization and Validity of Agreement
Section 6.3 No Conflict or Violation
Section 6.4 Consents and Approvals
Section 6.5 Litigation
Section 6.6 Financing
Section 6.7 Brokers
Section 6.8 Accuracy of Representations and Warranties
Section 6.9 Survival
SECTION 7 COVENANTS.
Section 7.1 Information and Certain Tax Matters
Section 7.2 Conduct of the Businesses
Section 7.3 Tax Reporting and Allocation of Consideration
Section 7.4 Supplemental Schedules
Section 7.5 Transferred Persons
Section 7.6 Consents and Approvals
Section 7.7 Negotiations
Section 7.8 Further Assurances
Section 7.9 Covenant Not to Compete
Section 7.10 Non-Solicitation of Employees
Section 7.11 Assignment of Contracts
and Warranties
Section 7.12 Notice of Breach
Section 7.13 Bulk Sales Compliance
Section 7.14 Conduct of the Businesses after
Closing
Section 7.15 Meetings of the Board of
Directors of Buyer
Section 7.16 Information Technologies Budget
Section 7.17 Indemnification for Certain Liabilities
Section 7.18 Refinancing of Existing Bank Loan
SECTION 8. CONDITIONS TO OBLIGATIONS OF BUYER
Section 8.1 Representations and Warranties
Section 8.2 Performance of Seller's
and Shareholders' Obligations
Section 8.3 Consents and Approvals
Section 8.4 No Violation of Orders
Section 8.5 No Material Adverse Change
Section 8.6 Due Diligence with Respect to Third Party Payors
Section 8.7 Consents under Key Contracts
Section 8.8 ▇▇▇▇▇▇▇ Consulting Arrangement
Section 8.9 Employment Agreement with ▇▇. ▇▇▇▇▇
Section 8.10 Financial Statements and Projections
Section 8.11 Opinion of Counsel
Section 8.12 Other Closing Documents
Section 8.13 Legal Matters
Section 8.14 TPA and UR Licenses
SECTION 9 CONDITIONS TO OBLIGATIONS OF THE SELLERS
Section 9.1 Representations and Warranties of the Buyer
Section 9.2 Performance of the Buyer's Obligations
Section 9.3 Consents and Approvals
Section 9.4 No Violation of Orders
Section 9.5 Opinion of Counsel
Section 9.6 Other Closing Documents
Section 9.7 Legal Matters
SECTION 10. TERMINATION AND ABANDONMENT
Section 10.1 Methods of Termination: Upset
Section 10.2 Procedure Upon Termination
SECTION 11. INDEMNIFICATION.
Section 11.1 Indemnification by the Sellers
and the Executive Shareholders
Section 11.2 Procedures for Indemnification by the Sellers
Section 11.3 The Buyer's Right of Set-Off
Section 11.4 Indemnification by the Buyer and Parent
Section 11.5 Procedures for Indemnification
by the Buyer and Parent
Section 11.6 The Sellers' and Executive Shareholders'
Right of Set-Off
Section 11.7 Purchase Price Adjustment
SECTION 12. MISCELLANEOUS.
Section 12.1 Successors and Assigns:
Restrictions on Assignment and
Transfer of Purchase Price
Section 12.2 Governing Law. Jurisdiction
Section 12.3 Expenses
Section 12.4 Joint and Several Obligations
Section 12.5 Severability
Section 12.6 Notices
Section 12.7 Amendments: Waivers
Section 12.8 Public Announcements
Section 12.9 Entire Agreement
Section 12.10 Parties in Interest
Section 12.11 Scheduled Disclosures
Section 12.12 Section and Paragraph Headings
Section 12.13 Counterparts
Section 12.14 Post-Closing Survival
Section 12.15 Confidentiality
Section 12.16 Litigation
Section 12.17 Specific Performance
Section 12.18 Retention of Independent Accounting Firms
Section 12.19 Limited Obligations of Parent
EXHIBITS
A Form of Assumption Agreement
B Form of Escrow Agreement
C Form of Opinion of Broad and ▇▇▇▇▇▇
D Form of Opinion of Dow, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, PLLC
SCHEDULES
1.1(k) Best Knowledge and Knowledge
1.1(yyy) Permitted Encumbrances
1.1(hhhh) Excluded Assets
1.1(1111) Shareholders
2.4(a) Certain Excluded Contracts
2.4(b) Certain Payables
5.1(a) Equity Interests
5.1(b) Partnership Interests
5.3 Conflicts or Violations
5.4 Consents, Waivers, Authorizations and
Approvals for Sellers
5.5 Financial Statements
5.6(a) Material Changes or Events
5.6(b) Exceptions to Section 5.6(b)
5.6(b)(13) Certain Encumbrances
5.6(c) Exceptions to Section 5.6(c)
5.7(b) Tax Matter Exceptions
5.7(c) Tax Jurisdictions
5.9(b) Bank Accounts
5.10(a) Owned Real Property
5.10(b) Leased Real Property
5.10(c) Amendments to Leases; Defaults
5.10(d) Subleases; Restrictive Covenants
5.11 Equipment and Machinery
5.12(a) Intellectual Property
5.12(b) Intangible Assets
5.13(a) Licenses, Permits and Governmental Approvals
5.14 Litigation
5.15(a) Professional Liability Claims
5.16(a) Contracts
5.16(c) Material Compliance with Contracts
5.16(d) Restrictions on Assignment
5.16(e) Co-Contractants; Change of Control Payments
5.16(f) Capitation Fees
5.16(h)(i) Non-Competition Provisions (Payors)
5.16(h)(ii) Non-Competition Provisions (Network Physicians, Consultants)
5.16(i) Significant Terminations
5.17(a) Plans and Compensation Arrangements
5.17(d) Determination Letters; Material Liability
5.17(e)(i) Network Physicians
5.17(e)(ii) Consultants
5.17(e)(iii) Employees
5.18(a) Insurance
5.18(b) Insurance for Third Parties
5.19 Compliance with Law
5.22 Related Party Transactions
6.3 Conflicts
6.4 Consents, Waivers, Authorizations and Approvals for Buyer
7.2 Conduct of Business
7.3(b) Allocation
7.5(a) Employees to be Engaged by the Buyer
8.7 Key Contracts
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of October 16, 1997, among CMSF,
Inc.,a Florida corporation(the "Buyer"), Allied Health Group, Inc., a Florida
corporation ("AHG"), Gut Management, Inc., a Florida corporation ("Gut"), Sky
Management Co., a Florida corporation ("Sky"), Florida Specialty Network, Ltd.,
a Florida limited partnership ("FSN"), Surgical Associates of South Florida,
Inc., a Florida corporation ("SASF"), Surginet, Inc., a Florida corporation
("Surginet" and, together with AHG, Gut, Sky, FSN and SASF, the "Sellers"), and
▇▇▇▇▇ ▇▇▇▇▇, M.D., ▇▇▇▇▇ ▇▇▇▇▇▇, M.D. and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D. (each, in his
individual capacity, an "Executive Shareholder", and collectively, the
"Executive Shareholders"), and Magellan Health Services, Inc., a Delaware
corporation, the ultimate corporate parent of the Buyer ("Parent"),
W I T NE S S E T H:
WHEREAS, AHG is engaged in the business of managing physician
networks and providing administrative tasks relating thereto under a variety of
administrative services and managed care network agreements;
WHEREAS, Sky, SASF, Surginet and Gut are each engaged in the
business of providing surgical specialty networks which, in the case of Gut, is
specialized in gastroenterology, and certain related administrative tasks under
a variety of managed care agreements;
WHEREAS, FSN is engaged in performing various administrative and
data processing tasks for certain of the foregoing Sellers as well as to various
health maintenance organizations and managed care physician networks; and
WHEREAS, the Buyer desires to purchase the businesses of the Sellers
by purchasing all the assets relating to all the business activities and
operations of each Seller, including the activities described above (each, a
"Business," and collectively, taking into account the Business of each Seller,
the "Businesses") from the Sellers, and the Sellers desire to sell such
Businesses and assets to the Buyer, in each case upon the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants and agreements hereinafter contained, the parties hereby agree:
SECTION 1. DEFINITIONS.
Section 1.1 Definitions. Unless the context otherwise requires, as
used in this Agreement, the following terms shall have the following meanings
(terms defined in the singular to have the same meanings when used in the plural
and vice versa):
(a) "Accounts Receivable" shall mean all accounts and notes
receivable, claims, debtor obligations and other rights to receive payments from
third parties of each Seller relating
to its Business, existing on the Closing Date.
(b) "Accountants" shall have the meaning set forth in Section
3.3(a).
(c) "Affiliates" shall mean any individual, corporation,
partnership, joint venture, association, trust or unincorporated organization
that controls, is controlled by or is under common control with a Person and
"control" of a Person (including, with correlative meaning, the terms "control
by" and "under common control with") means the power to direct or cause the
direction of the management, policies or affairs of the controlled Person,
whether through ownership of securities or partnership or other ownership
interests, by contract or otherwise, provided, however, that in the case of any
Seller, the term "Affiliates" shall also include each other Seller, and each
Shareholder of such Seller.
(d) "Agreement" shall mean this Asset Purchase Agreement, as it may
be amended, modified or supplemented from time to time in accordance with its
terms.
(e) "Allocation" shall have the meaning set forth in Section 7.3(b).
(f) "Applicable Percentage" shall mean the percentage of the Closing
Cash Installment of the Purchase Price being paid to each Seller at Closing in
relation to the other Sellers as set forth in a schedule to be provided by the
Sellers to the Buyer at least 5 Business Days prior to the Closing Date.
(g) "Asset Acquisition Statement" shall have the meaning set forth
in Section 7.3(b).
(h) "Assumed Liabilities" shall mean the liabilities and obligations
of the Sellers expressly assumed by the Buyer pursuant to Section 2.4 and no
others.
(i) "Audited Financial Statements" shall mean, collectively, (i) for
each of Gut, Sky, and SASF, the audited balance sheets as of December 31, 1994,
1995 and 1996 and the related statements of operations and retained earnings,
and cash flows for the years then ended; (ii) the audited balance sheets of FSN
as of December 31, 1994, 1995 and 1996 and the related statements of operations,
partners' equity, and cash flows for the years then ended; (iii) the audited
balance sheets of AHG as of December 31, 1995 and 1996, and the related
statements of operations, stockholders' equity and cash flows from inception
(May 15, 1995) to December 31, 1996; (iv) the audited balance sheets of Surginet
as of December 31, 1995 and 1996, and the related statements of operations,
stockholders' equity and cash flows from inception (April 12, 1995) to December
31, 1996; and (v) collectively, for the Sellers taken as a whole, the audited
combined balance sheets as of December 31, 1994, 1995 and 1996, and the related
combined statements of operations, owners' equity and cash flows for the years
then ended.
(j) "Best Efforts" means that the obligated party is required to
make a diligent and good faith effort to accomplish the applicable objective.
Such obligation, however, does not require a material expenditure of funds or
the incurrence of a material liability on the part of the
obligated party, nor does it require that the obligated party act in a manner
that would be contrary to normal commercial practices in order to accomplish the
objective. The failure to accomplish a given objective is no indication that the
obligated party did not in fact utilize its Best Efforts in attempting to
accomplish the objective.
(k) "Best Knowledge" or "best knowledge"' when used with respect to:
(i) a Seller shall mean the collective knowledge of the persons identified on
Schedule 1.1(k), as well as all of the officers, directors and the Executive
Shareholders of such Seller, including the knowledge any such Person has or
could reasonably be expected to have after due inquiry, and (ii) an Executive
Shareholder shall mean the knowledge of such Executive Shareholder, including
the knowledge such Executive Shareholder has or could reasonably be expected to
have after due inquiry. For purposes of this definition, "due inquiry" shall
mean reasonable inquiry of those Persons who are, in the judgment of such
Person, likely to have knowledge of the facts which are the subject of the
inquiry.
(l) l recitals hereto.
"Business" shall have the meaning set forth in the
(m) "Business Day" shall mean days other than Saturdays, Sundays and
other legal holidays or days on which the principal office of First Union
National Bank of North Carolina is closed.
(n) "Buyer" shall have the meaning set forth in the introductory
paragraph hereto.
(o) "Buyer Indemnitees" shall have the meaning set forth in Section
11.
(p) "Buyer's Event of Breach" shall have the meaning set forth in
Section 11.4.
(q) "Cash and Cash Equivalents" shall mean the amount of cash on
hand and cash in any bank account or brokerage account of each of the Sellers,
including any securities with maturities of less than 90 days.
(r) "Change of Control Payment" shall have the meaning set forth in
Section 5.16(e).
(s) "Closing" shall have the meaning set forth in Sec
(t) "Closing Cash Installment" shall have the meaning set forth in
Section 3.1.
Section 4.
(u) "Closing Date" shall have the meaning set forth in as amended.
(v) "Code" shall mean the Internal Revenue Code of 1986,
(w) "Compensation Arrangements" shall have the meaning set forth in
Section 5.17(a).
(x) "Consultants" means all consultants, agents and independent
contractors providing consulting services, including marketing, promotion,
software development, administrative services and related services, engaged by
any Seller in connection with its Business, each of whom has been identified
pursuant to Section 5.17(e) and Schedule 5.17(e)(ii).
(y) "Contracts" shall mean, collectively, the Third Party Payor
Agreements, Leases, Purchase Orders and Other Contracts all of which are listed
on Schedule 5.16(a) hereto, and no others. The term Contracts shall not include
any of the Excluded Contracts regardless of whether such Excluded Contracts are
also listed on Schedule 5.16(a).
(z) "December 31, 1996 Combined Balance Sheet" shall mean the
audited combined balance sheet of the Sellers at December 31, 1996, which is
included in the Financial Statements.
(act) "Earn-Out Period" shall have the meaning set forth in Section
3.3(a).
3.3(a).
in Section 3.3(b).
(x) "EBITDA" shall have the meaning set forth in Section
(bb) "EBITDA Statement" shall have the meaning set forth
(cc) "Employees" means the employees of each Seller who are employed
in connection with its Business (excluding temporary, leased and contract
personnel), each of whom as of ten Business Days prior to the date of this
Agreement has been identified pursuant to Section 5.17(e) and Schedule
5.17(e)(iii).
(dd) "Encumbrance" shall mean any encumbrance or lien of any
character whatsoever, including, any option, right to purchase, right to
convert, mortgage, charge, claim, pledge, conditional sales contract, judgment
lien, material man's lien, mechanic's lien or security interest.
(ee) "Engagement Notice" shall have the meaning set forth in Section
7.5(a).
(ff) "Environmental Law" means the Comprehensive Environmental
Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. ▇▇.▇▇. 9601 et
seq.; the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. ▇▇.▇▇. 6901
et seq.; the Federal Water Pollution
Control Act, 33 U.S.C. ▇▇.▇▇. 1251 et seq.; the Clean Air Act, 42 U.S.C. ▇▇.▇▇.
7401 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. ▇▇.▇▇. 1801
et seq.; the Toxic Substances Control Act, 15 U.S.C., ▇▇.▇▇. 2601-2629; the Safe
Drinking Water Act, 42 U.S.C. ss.ss.300f-300j; and any state and local laws and
ordinances that regulate in any way hazardous materials or wastes and the
regulations implementing such statutes.
(gg) "Equipment and Machinery" shall mean (i) the equipment,
computer hardware, machinery, furniture, fixtures and improvements, spare parts,
supplies and vehicles owned or leased by each Seller with respect to the
operations of its Business on the Closing Date (including all such items as set
forth on the June 30, 1997 Combined Balance Sheet), (ii) the replacements for
any of the foregoing owned or leased by such Seller, (iii) the warranties,
service and maintenance documents, bills of sale, assignments and licenses (to
the extent assignable) received from manufacturers and sellers of the aforesaid
items and (iv) any related claims, credits, rights of recovery and set-off with
respect thereto.
(hh) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
(ii) "ERISA Affiliate" shall have the meaning set forth in Section
5.17(a).
(jj) "Escrow Agent" shall have the meaning set forth in Section
3.1(b).
(kk) "Escrow Agreement" shall mean the Escrow Agreement by and among
the Buyer, the Sellers, and the Escrow Agent, substantially in the form attached
hereto as Exhibit B.
(ll) "Escrow Deposit" shall have the meaning set forth in Section
3.1(b).
(mm) "Excluded Contracts" shall have the meaning set forth in
Section 2.4(a).
(nn) "Excluded Liabilities" shall have the meaning set forth in
Section 2.5.
(oo) "Excluded Employee Obligations" has the meaning set forth in
Section 2.5(d).
(pp) "▇▇▇▇▇▇▇ Consulting Agreement" shall mean that certain
agreement, made as of June 1, 1996, by and among FSN, Inc., FSN, AHG, and each
of the ▇▇▇▇▇▇▇ Parties.
(qq) "▇▇▇▇▇▇▇ Parties" shall mean, collectively, ▇▇▇▇▇▇ ▇▇▇▇▇
Company, a Missouri corporation, and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇.
(rr) "Files and Records" shall mean all files, books and records,
whether in hard copy or magnetic or optical format, of each Business or the
Purchased Property, including the following types of files, books and records
relating to such Business: patient and supplier files, commitments, reports of
examination, correspondence or internal memoranda regarding Contracts or other
Purchased Property, equipment maintenance records, equipment warranty
information
and all files relating to Employees or independent contractors of such Business
employed or engaged by the Buyer, including Form I-9's, credit records, and
other similar documents and records used and/or useful in connection with such
Business, and correspondence with Governmental Authorities relating to the
operation of such Business and related files and records of each Seller, in each
case, whether created prior to or following the Closing.
(ss) "Financial Statements" shall mean, collectively, (i) the
Audited Financial Statements, (ii) the Management Prepared Financial Statements,
and (iii) the Projections, each as defined herein. ~
(tt) "FSN, Inc." shall have the meaning set forth in Section 5.1(a).
(uu) "FSN Limited Partnership Agreement" shall have the meaning set
forth in Section 5.1(b).
(w) "GAAP" shall mean generally accepted accounting principles as
in effect from time to time.
(ww) "Governmental Authority" shall mean any agency, division,
department, regulatory body, subdivision, commission, board, bureau, court,
audit group, procuring office or other instrumentality of the government of the
United States, any state or local government, or any foreign national or local
government, any subdivision thereof, including the employees, officers,
representatives or agents thereof, as well as any arbitrator.
(xx) "Hazardous Materials" shall have the meaning set forth in
Section 5.19(f).
(yy) "IAF EBITDA Statement" shall have the meaning set forth in
Section 3.3(b).
(zz) "IBNR" shall have the meaning set forth in Section 5.5(b).
(aaa) "Independent Accounting Firm" shall have the meaning set forth
in Section 3.3(a).
(bbb) "Information Technologies Budget" shall have the meaning set
forth in Section 7.16.
(ccc) "Initial Purchase Price" shall have the meaning set forth in
Section 3.1.
(ddd) "Intangible Assets" shall mean all intangible personal
property rights, including the proceeds of any insurance policies and all claims
on the part of each Seller for recoupment, reimbursement and coverage under any
insurance policies, in each case in connection with its Business and all
goodwill of each Seller relating to its Business, and including those items
listed in Schedule 5.12(b).
(eee) "Intellectual Property" shall mean all letters patent, patent
qualifications,
patent applications, trademarks, trademark applications, service marks, service
▇▇▇▇ applications, trade names, brands, trade dress, logos, designs, private
labels, copyrights, know-how, trade secrets and licenses, including software,
computer network systems, claims processing procedures and other rights relating
to the administration of Third Party Payor Agreements or otherwise relating to
the Businesses, and rights with respect to the foregoing that each Seller holds
or possesses the rights to use relating to the Purchased Property or the
operations of its Business, including those items listed in Schedule 5.12(a)
hereto. Without limiting the generality of the foregoing, the name "Allied
Health Group" falls within the foregoing definition.
(fff) "Inventory" means all (i) inventoriable supplies held by each
Seller on the Closing Date (including all such items as set forth on the June
30, 1997 Combined Balance Sheet) for use in the operations of its Business, (ii)
any supplies delivered to each Seller's Business after the Closing Date which
such Seller has agreed to purchase in the ordinary course of business consistent
with past practices and (iii) any warranties received from each Seller's
suppliers with respect to such inventory (to the extent assignable) and related
claims, credits, rights of recovery and set-off with respect thereto.
(ggg) "June 30, 1997 Combined Balance Sheet" shall mean the
unaudited combined balance sheet of the Sellers at June 30, 1997, which is
included in the Financial Statements.
(hhh) "Key Contracts" shall have the meaning set forth in Section
8.7.
(iii) "Knowledge" or "knowledge" when used with respect to: (i) a
Seller shall mean the collective actual knowledge of the persons identified on
Schedule 1.1(k), as well as all of the other officers, directors and the
Executive Shareholders of such Seller; and (ii) an Executive Shareholder shall
mean the actual knowledge of such Executive Shareholder.
(jjj) "Leased Real Property" shall have the meaning set forth in
Section 5.10(b).
(kkk) "Leases" shall have the meaning set forth in Section 5.10(b).
"Leases" shall have the meaning set forth in Section 11.1.
(lll) "Licenses and Permits" shall have the meaning set forth in
Section 5.13.
(mmm) "Losses" shall have the meaning set forth in
(nnn) "Management Agreement" shall mean the management agreement, to
be effective as of the Closing Date, between the Buyer and a corporation formed
by the Executive Shareholders pursuant to which the services of the Executive
Shareholders will be made available to the Buyer for a period of three years in
consideration of the payment by the Buyer of $250,000 per year in the aggregate
and upon such other terms and conditions as shall be mutually agreed to by the
Buyer and the Executive Shareholders.
(ooo) "Management Prepared Financial Statements" shall mean,
collectively, (i) for each Seller the unaudited balance sheet as of June 30,
1997, and the related income statement for the six months then ended, (ii)
collectively, for the Sellers taken as a whole, the unaudited combined balance
sheet as of June 30, 1997, and the related income statement for the six months
then ended, (iii) for the Sellers monthly combined and combining unaudited
balance sheets and the related income statements as of and for the month ending
July 31, 1997 and each month thereafter through the month ending thirty days
prior to the Closing Date, prepared by management of the Sellers, and (iv) for
the Sellers combined and combining unaudited balance sheets and the related
income statements for the period commencing January 1, 1997 through the month
ending 30 days prior to the Closing Date and the corresponding period in the
prior year.
(ppp) "Minimum Amount" shall have the meaning set forth in Section
3.2(c).
(qqq) "Multiemployer Plan" shall have the meaning set forth in ERISA
Section 3(37).
(rrr) "Net Revenue" shall have the meaning set forth in Section
3.3(a).
(sss) "Network Physicians" means primary care or specialist
physicians serving as independent contractors of any Seller or any Person
contracting with a Seller for the provision of health care or medical services
but who is not an Employee, each of whom has been identified pursuant to Section
5.17(e) and Schedule 5.17(e)(i).
(ttt) "New ▇▇▇▇▇▇▇ Consulting Agreement" shall have the meaning set
forth in Section 8.8(c).
(uuu) "Objection Notice" shall have the meaning set forth in Section
3.3(b).
(vvv) "Occurrence" shall have the meaning set forth in Section
5.15(b).
(www) "Other Contracts" shall mean all Equipment and Machinery
leases, and all loan agreements, security agreements, partnership or joint
venture agreements, license agreements, software licenses, service contracts,
suretyship contracts, guarantees, letters of credit, reimbursement agreements,
distribution agreements, contracts or commitments limiting or restraining any
Seller with respect to its Business from engaging or competing in any lines of
business or with any person, firm or corporation, contracts or commitments
granting any Seller rights of first refusal or exclusive rights or similar
rights with respect to its Business or any lines
of business, documents granting the power of attorney with respect to the
affairs of any Seller, agreements not made in the ordinary course of business of
any Seller's Business, options to purchase any assets or property rights of the
Business, working capital maintenance or other form of guaranty agreements, and
all other agreements to which any Seller is a party and which are related to the
operation of its Business, all of which are listed on Schedule 5.16(a), but
excluding Leases, Third Party Payor Agreements and Purchase Orders.
(xxx) "Parent" shall have the meaning set forth in the introductory
paragraph hereto.
(yyy) "Permitted Encumbrances" means the Encumbrances set forth on
Schedule 1.1(yyy).
(zzz) "Person" shall mean any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization or Governmental Authority.
(aaaa) "Plans" shall have the meaning set forth in Section 5.17(a).
(bbbb) "Post-Closing Statement" shall have the meaning set forth in
Section 3.2(a).
(cccc) "Premises" shall mean the Leased Real Property.
(dddd) "Professional Liability Claims" shall have the meaning set
forth in Section 5.15(a).
(eeee) "Projections" shall mean collectively, (i) the projected
statement of operations for the twelve months ending September 30, 1998 of AHG
and FSN, and (ii) run rates of Gut, Sky, SASF and Surginet for the twelve months
ending September 30, 1998. All such projections have been prepared by the
management of the Sellers.
(ffff) "Purchase Orders" shall mean any outstanding purchase orders,
contracts or other commitments to suppliers of goods and services for materials,
supplies or other items used in the Business and listed on Schedule 5.16(a).
(gggg) "Purchase Price" shall mean the aggregate amount payable to
the Sellers pursuant to Section 3.
(hhhh) "Purchased Property" shall mean the (i) Accounts Receivable,
(ii) Contracts (except as set forth on Schedule 2.4(a)), (iii) Equipment and
Machinery, (iv) Files and Records, (v) Intangible Assets, (vi) Intellectual
Property, (vii) Inventory, (viii) Licenses and Permits (to the extent
transferable by the Sellers), (ix) Cash and Cash Equivalents, (x) any prepaid
expenses and other assets relating to the operations of each Business on the
Closing Date, (xi) all
software, software systems, databases and all other information systems used in
the Businesses, (xii) all other tangible and intangible assets of the Sellers
and the Executive Shareholders (other than items of personal property owned by
the Executive Shareholders which are not material to the operations of the
Businesses and do not have an aggregate fair market value of more than $25,000)
used in the respective Businesses (whether or not such assets are reflected on
the June 30, 1997 Combined Balance Sheet) and related thereto, (xiii) all
proceeds (including any Cash and Cash Equivalents) received by the Sellers or
the Shareholders in respect of any or all of the foregoing on or after the
Closing Date, (xiv) all proceeds (including any Cash and Cash Equivalents)
received by the Sellers or the Shareholders in respect of any insurance policy
of the Sellers relating to an event occurring on or after July 1, 1997, and (xv)
all of the goodwill associated with the Businesses and the Purchased Property;
provided; however, that the Purchased Property shall not include those items
described on Schedule 1.1(hhhh) hereto.
(iiii) "Seller" and "Sellers" shall have the respective meanings set
forth in the introductory paragraph hereto.
(jjjj) "Sellers' Event of Breach" shall have the meaning set forth
in Section 11.1.
(kkkk) "Seller Indemnitees" shall have the meaning set forth in
Section 11.4.
(llll) "Shareholders" shall mean the shareholders or partners
(including general and limited partners), as the case may be, of each of the
Sellers, including the Executive Shareholders, as set forth on Schedule
1.1(llll).
(mmmm) "Subject Business" shall mean contracting with independent
physician delivery systems and third party payers for the management of
established independent physician networks (including providing MSO services,
quality management, utilization review and claims processing), where the
physician providers are compensated on a fee for service basis out of a
capitated pool.
(nnnn) "Subsidiaries" (or "Subsidiary" as the context may require)
shall mean each entity as to which a Person, directly or indirectly, owns or has
the power to vote, or to exercise a controlling influence with respect to, 10%
or more of the securities of any class of such entity the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the election
of directors (or persons performing similar functions) of such Person.
(oooo) "Tax Returns" shall mean any return, report, information
return or other document (including any related or supporting information) filed
or required to be filed with any Governmental Authority in connection with the
determination, assessment, collection or administration of any Taxes and shall
include any amended returns required as a result of any examination adjustments
made by the Internal Revenue Service or other Tax authority.
(pppp) "Taxes" shall mean for all purposes of this Agreement all
taxes however denominated, including any interest, penalties or additions to tax
that may become payable in respect thereof, imposed by any Governmental
Authority, which taxes shall include, without
limiting the generality of the foregoing, all income taxes, payroll and employee
withholding taxes, unemployment insurance, social security, sales and use taxes,
excise taxes, franchise taxes, gross receipts taxes, occupation taxes, real and
personal property taxes, stamp taxes, utility, severance, production, premium,
capital stock, license, transfer and transfer gains taxes, workmen's
compensation taxes and other obligations of the same or a similar nature,
whether arising before, on or after the Closing; and "Tax" shall mean any one of
them.
(qqqq) "Third Party Payor Agreements" shall mean all agreements
listed on Schedule 5.16(a) hereto to which any Seller is a party relating to the
furnishing, management or maintenance of, or administration or data processing
services relating to, physician or other professional service networks in
connection with professional, medical or health maintenance services or other
health cost arrangements in connection with any of the Businesses.
(rrrr) "Transferred Consultant" shall have the meaning set forth in
Section 7.5(a).
(ssss) "Transferred Employee" shall have the meaning set forth in
Section 7.5(a).
(tttt) "Transferred Network Physician" shall mean a Network
Physician who is offered engagement as a Network Physician by the Buyer and who
serves as an independent contractor of the Buyer as of the Closing Date.
(uuuu) "Unrestricted Cash" shall mean the aggregate of cash of the
Sellers immediately available for disbursement without restriction or limitation
of any kind, plus Due from Plan/Client amounts, less Contract Reserve amounts,
less Physician Payable amounts, as said terms are historically used and
reflected in the Financial Statements.
(vvvv) "Working Capital Amount" shall have the meaning set forth in
Section 3.2(c).
(wwww) "Year 1 Adjustment" shall have the meaning set forth in
Section 3.3(a).
(xxxx) "Year 2 Adjustment" shall have the meaning set forth in
Section 3.3(a).
(yyyy) "Year 3 Adjustment" shall have the meaning set forth in
Section 3.3(a).
(zzzz) "Year 1 Earn-Out" shall have the meaning set forth in Section
3.3(a).
(aaaaa) "Year 2 Earn-Out" shall have the meaning set forth in
Section 3.3(a).
(bbbbb) "Year 3 Earn-Out" shall have the meaning set forth in
Section 3.3(a).
(ccccc) "Year 1 EBITDA" shall have the meaning set forth in Section
3.3(c)(1).
(ddddd) "Year 2 EBITDA" shall have the meaning set forth in Section
3.3(d)(1).
(eeeee) "Year 3 EBITDA" shall have the meaning set forth in Section
3.3(e)(1).
(fffff) "Year 1 Earn-Out Period" shall have the meaning set forth in
Section 3.3(a).
(ggggg) "Year 2 Earn-Out Period" shall have the meaning set forth in
Section 3.3(a).
(hhhhh) "Year 3 Earn-Out Period" shall have the meaning set forth in
Section 3.3(a).
(iiiii) "Year 1 Threshold EBITDA" shall have the meaning set forth
in Section 3.3(a).
(jjjjj) "Year 2 Threshold EBITDA" shall have the meaning set forth
in Section 3.3(a).
(kkkkk) "Year 3 Threshold EBITDA" shall have the meaning set forth
in Section 3.3(a).
Section 1.2 Principles of Construction. Definitions used in this
Agreement shall apply equally to both the singular and plural forms of the terms
defined. Whenever used in this Agreement, the words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without limitation."
Unless the context otherwise requires, all references herein to Articles,
Sections, Exhibits and Schedules shall be deemed references to articles and
sections of, and schedules to this Agreement. Unless the context otherwise
requires, the term "party" when used in this Agreement means a party to this
Agreement, and references to a party or other Person shall be deemed to include
successors and permitted assigns of such party. All references herein to any
agreement or document shall be deemed to include such agreement or document
(unless specific reference is made to that agreement or document as in effect on
a specific date), as the same may be amended, supplemented or otherwise modified
from time to time. The parties acknowledge and agree that they have been
represented by counsel and that each of the parties has participated in the
drafting of this Agreement. Accordingly, it is the intention and agreement of
the parties that the language, terms and conditions of this Agreement are not to
be construed in any way against or in favor of any party hereto by reason of the
responsibilities in connection with the preparation of this Agreement.
SECTION 2. PURCHASE AND SALE OF THE PURCHASED PROPERTY.
Section 2.1 Transfer of Assets. Subject to the terms and conditions
herein set forth, each Seller shall sell, convey, transfer, assign and deliver
to the Buyer, and the Buyer shall purchase, acquire and accept from each Seller
on the Closing Date, all right, title and interest of each Seller and its
Affiliates in or to the Purchased Property, wherever located, free and clear of
all Encumbrances except for Permitted Encumbrances. Notwithstanding anything to
the contrary
contained in this Agreement, to the extent that the sale or assignment of any
Account Receivable is prohibited by applicable contract, law or regulation, this
Agreement shall not constitute an agreement to sell or assign such Account
Receivable, provided however, each Seller agrees to pay to the Buyer the
equivalent cash value of any and all such Account Receivable(s), and upon each
Seller's collection of any such Account Receivable shall immediately remit a
check to the Buyer for such amount. Each Seller covenants and agrees to use its
Best Efforts to collect any such Account Receivable and shall deliver to Buyer
on a monthly basis a report setting forth the status of any such outstanding
Account Receivable and describing its collection efforts.
Section 2.2 Sale at Closing Date. The sale, transfer, assignment and
delivery by each Seller of the Purchased Property to the Buyer, as herein
provided, shall be effected on the Closing Date by deeds, bills of sale,
endorsements, assignments and other instruments of transfer and conveyance
reasonably satisfactory in form and substance to counsel for the Buyer.
Section 2.3 Subsequent Documentation. Each Seller and each Executive
Shareholder shall, at any time and from time to time after the Closing Date,
upon the reasonable request of the Buyer and at the expense of the Sellers and
the Executive Shareholders, do, execute, acknowledge and deliver, or cause to be
done, executed, acknowledged and delivered (whether by any Seller, any
Shareholder or any other Person), all such further deeds, assignments, transfers
and conveyances as may be required for the better assigning, transferring,
granting, conveying and confirming to the Buyer or its successors and assigns or
for aiding and assisting in collecting and reducing to possession, any or all of
the Purchased Property. Each Seller and each Executive Shareholder hereby
constitutes and appoints, effective as of the Closing Date, the Buyer, its
successors and assigns as the true and lawful attorney-in-fact of such Seller or
Executive Shareholder with full power of substitution in the name of such Buyer
or in the name of the Seller or Executive Shareholder but for the benefit of the
Buyer (a) to collect for the account of the Buyer any item of Purchased Property
and (b) to institute and prosecute all proceedings which the Buyer may in its
discretion deem proper in order to assert or enforce any right, title or
interest in or to the Purchased Property and to defend or compromise (subject to
Section 10, if applicable) any and all actions, suits or proceedings in respect
of any of the Purchased Property. The Buyer shall be entitled to retain for its
own account any amounts collected pursuant to the foregoing powers, including
any amounts payable as interest in respect thereof. EACH SELLER AND EACH
EXECUTIVE SHAREHOLDER HEREBY DECLARES THAT THE FOREGOING APPOINTMENT IS COUPLED
WITH AN INTEREST AND SHALL BE IRREVOCABLE AND PERPETUAL AND SHALL NOT BE
TERMINATED BY ANY ACT OF ANY SELLER, ANY EXECUTIVE SHAREHOLDER OR THEIR
RESPECTIVE SUCCESSORS OR ASSIGNS, BY OPERATION OF LAW OR BY THE OCCURRENCE OF
ANY OTHER EVENT OR IN ANY OTHER MANNER.
Section 2.4 Assumption of Liabilities. On the Closing Date, the
Buyer shall execute and deliver an assumption agreement in the form attached
hereto as Exhibit A, pursuant to which the Buyer shall accept, assume and agree
to pay, perform and discharge when due, in accordance with the respective terms
and subject to the respective conditions thereof, all of the liabilities and
obligations of the Sellers pursuant to and under the Assumed Liabilities. The
"Assumed Liabilities" shall mean:
(a) All liabilities and obligations of each Seller of any kind
arising from the operations of the Businesses beginning on or after the first
day following the Closing Date, other than those (i) to which the Buyer is
entitled to indemnification by the Executive Shareholders pursuant to Section 11
of the Agreement, (ii) Taxes with respect to periods ending on or prior to the
Closing Date, and (iii) Change of Control Payments, if any; provided, however,
that in the case of Contracts, Third Party Payor Agreements, Leases, and Other
Contracts, only to the extent such Contracts, Third Party Payor Agreement, Lease
or Other Contract is described in Schedule 5.16(a) of this Agreement; and
provided, further, that in no event shall the Buyer assume or be responsible for
the contracts listed on Schedule 2.4(a) (the "Excluded Contracts"); provided,
further, that in the event that the parties hereto become aware of the fact at
any time after the Closing that a contract of any of the Sellers in existence on
the Closing Date is not listed on either Schedule 5.16(a) or Schedule 2.4(a),
such contract, at the sole election of Buyer, shall be assigned to and assumed
by Buyer and shall for all purposes under this Agreement be treated as a
Contract under this Agreement; and
(b) Additional payables arising from the operations of the
Businesses prior to the first day following the Closing Date and specified on
Schedule 2.4(b), as such Schedule may be amended by the mutual agreement of the
Sellers and Buyer prior to the Closing Date.
Section 2.5 Excluded Liabilities. The Assumed Liabilities shall not
include, and the Buyer shall not assume or be liable for any liabilities and
obligations of the Sellers or any of their Affiliates not expressly assumed in
Section 2.4 (collectively, the "Excluded Liabilities"), including, without
limitation:
(a) Any liability or obligation relating to Professional Liability
Claims arising from services performed on or before the Closing Date;
(b) Any liability or obligation relating to the Plans or the
Compensation Arrangements (as such terms are defined in Section 5.17);
(c) Other than as required pursuant to Sections 2.4(a) or (b), any
liabilities or obligations to current or former employees of, or independent
contractors with, any Seller who do not become Transferred Network Physicians,
Transferred Consultants or Transferred Employees, as the case may be;
(d) Any employment-related liabilities for which the Buyer is
indemnified under Section 11.1(d) (an "Excluded Employee Obligation") and any
other liability for which the Buyer is indemnified under Section 11; Affiliates;
(e) Any liabilities with respect to Taxes of any Seller or
Shareholder or relating to any period ending on or prior to the Closing Date,
including liabilities related to (i) income Taxes of the Sellers or any of their
Affiliates whether arising before or after the Closing Date, (ii) Taxes
relating to the Purchased Property acquired under the terms and conditions of
this Agreement for all periods (or portions thereof) ending on or prior to the
Closing Date, (iii) Taxes attributable to or imposed with respect to the
transfer, assignment and delivery of the Purchased Property under Section 12.3
hereof or otherwise or to any other transactions contemplated by this Agreement
and (iv) Taxes of any other Person for which any of the Sellers may be liable by
contract or otherwise;
(f) Any liabilities to any Shareholders or any of their
(g) Any liabilities or obligations relating to or arising under the
▇▇▇▇▇▇▇ Consulting Agreement;
(h) Any liability arising from operations of the Businesses before
the Closing Date not expressly assumed pursuant to Section 2.4;
(i) Any liability or obligations under Contracts not included in
Purchased Property;
(j) Any liability or obligations relating to Nudel & ▇▇▇▇▇, M.D.,
P.A. and Young, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ Surgical Associates, M.D., P.A.(d/b/a South
Florida Surgical Group); and
(k) Any other liability not expressly assumed pursuant to Section
2.4 notwithstanding the inclusion of any such liability on the June 30, 1997
Combined Balance Sheet or any Management Prepared Financial Statements.
Section 2.6 Breach of Representations. Nothing in Section 2.4 shall
limit the Buyer's right to indemnification for the breach by any Seller or any
Executive Shareholder of any of its representations, warranties or covenants
hereunder.
Section 2.7 Right of Enforcement. Commencing on the Closing Date,
the Buyer will have complete control over the payment, settlement or other
disposition of the Assumed Liabilities and the right to commence, conduct and
control all negotiations and proceedings with respect thereto. The Sellers and
the Executive Shareholders will notify the Buyer promptly of any claim made with
respect to any Assumed Liabilities or Purchased Property and shall not, except
with the Buyer's prior written consent, voluntarily make any payment of,
settlement or offer to settle, or consent to any compromise or admit liability
with respect to, any Assumed Liabilities or Purchased Property. The Sellers will
cooperate, with the Buyer in connection with any negotiations or proceedings
involving any Assumed Liabilities or Purchased Property.
SECTION 3. PURCHASE PRICE; EARN-OUT.
Section 3.1 Purchase Price. As consideration for the sale and
transfer of the Purchased Property, the Buyer shall pay on the Closing Date an
amount equal to $70,000,000 (the "Initial Purchase Price"), payable as follows:
(a) The Buyer will pay to the Sellers, collectively, an amount equal
to $50,000,000, subject to the proration provisions of Section 3.4 (the "Closing
Cash Installment") in cash by wire transfer to the "Broad and ▇▇▇▇▇▇ Trust
Account" in accordance with wire transfer instructions to be furnished in
writing by the Executive Shareholders (which shall be provided to the Buyer not
less than three Business Days before the Closing Date), for further credit to
each Seller in accordance with such Seller's Applicable Percentage.
(b) The Buyer will pay to the escrow agent designated in the Escrow
Agreement (the "Escrow Agent") in cash by wire transfer of immediately available
funds $20,000,000 (the "Escrow Deposit," which together with the interest or
other proceeds from the investment thereof and the amount of the Year 1
Earn-Out, Year 2 Earn-Out and Year 3 Earn-Out, if any, deposited pursuant to
Section 3.3 and not yet released from escrow, but less such amounts, if any,
previously distributed to the Buyer or to any of the Sellers pursuant to Section
3.3, is collectively referred to as the "Escrow Funds"). The Escrow Funds shall
be held in escrow by the Escrow Agent pursuant to the terms and conditions of
the Escrow Agreement in order to provide a fund for the payment to the Sellers
of any upward adjustments to the Initial Purchase Price and/or the payment to
the Buyer of any downward adjustments to the Initial Purchase Price to which
such party or parties may be entitled from time to time pursuant to this Section
3. At such times as payments to be made from the Escrow Funds are due and
payable pursuant to the terms and conditions of this Section 3, the Buyer and
the Sellers agree to give the Escrow Agent prompt notice to make the applicable
disbursements from the Escrow Funds.
Section 3.2 Working Capital Adjustment. The Purchase Price shall be
subject to a working capital adjustment after the Closing as follows:
(a) Within 60 days after the Closing, the Buyer shall prepare (with
the full cooperation and assistance of the Sellers and the Executive
Shareholders, to the extent requested by the Buyer) a statement of the
Businesses' (taken as a whole) current liabilities (to the extent assumed by the
Buyer) and current assets (to the extent purchased by the Buyer) as of the
Closing (the "Post-Closing Statement"), and shall submit such statement to the
Sellers for review and approval.
(b) Within 30 days after receipt of the Post-Closing Statement, the
Sellers shall notify the Buyer of any objections the Sellers may have to the
Post-Closing Statement. In the absence of any such objections, the Sellers shall
be deemed to have approved the Post-Closing Statement for purposes of the
adjustment to be made pursuant to this Section 3.2. If the Sellers notify the
Buyer of any such objections, the Buyer and the Sellers shall attempt to resolve
such objections in good faith for a period of 15 days from the date of such
notice of objection. If any objections of the Sellers cannot be resolved by the
Sellers and the Buyer within such 15-day period, such dispute shall immediately
be referred to an Independent Accounting Firm mutually selected by the parties.
The determination of such Independent Accounting Firm with respect to such
dispute shall be conclusive and binding on the Sellers and the Buyer. The party
whose determination differs the most from the determination of such Independent
Accounting Firm shall pay the fees of such firm.
(c) Upon final determination of the Post-Closing Statement in
accordance with the foregoing, in the event that the current assets of the
Businesses (taken as a whole and to the extent purchased by the Buyer) less the
current liabilities of the Businesses (taken as a whole and to the extent
assumed by the Buyer), as stated in the Post-Closing Statement (the "Working
Capital Amount"), is an amount which is less than $1,000,000 (the "Minimum
Amount"), then the Purchase Price shall be reduced by the difference between the
Working Capital Amount and the Minimum Amount and the Sellers shall be jointly
and severally obligated to pay to the Buyer an amount equal to such difference
with 5 Business Days of the final determination of the Post-Closing Statement.
Section 3.3 Earn-Out. The Purchase Price shall be subject to
adjustment after the Closing as set forth in this Section 3.3:
(a) Earn-Out Definitions. Unless the context otherwise requires, as
used in this Agreement, the following terms shall have the following meanings:
(1) "Accountants" shall mean the independent public accountants of
the Buyer.
(2) "Earn-Out Period" shall mean each of the Year 1 Earn-Out Period,
the Year 2 Earn-Out Period and the Year 3 EarnOut Period.
(3) "EBITDA" shall mean the aggregate Net Revenue from the
operations of the Businesses, minus all expenses incurred in operating the
Businesses but before interest, income taxes, depreciation and amortization,
prepared in accordance with GAAP, consistently applied, and adjusted as follows:
(l)Introduced Business will be deemed to have been conducted at the Businesses'
cost of providing services for such Introduced Business plus the applicable IB
Profit Margin. (2) Any increase in EBITDA earned by the Businesses through the
restructuring of the ▇▇▇▇▇▇▇ Consulting Agreement that requires one-time cash
payments by Buyer or Buyer's Affiliates shall be deducted from EBITDA. (3) As
long as the Businesses are operated as a separate subsidiary or division,
administrative services provided to the Businesses will be actual corporate
overhead, including services provided by Parent or Parent's Affiliates, on a
cost basis, and will only include administrative services that are reasonably
and directly related to the Businesses. In the event the Businesses are
integrated into Parent or an Affiliate of Parent to the extent that the
corporate overhead attributable to the Businesses cannot be readily determined,
then, in lieu of actual overhead, an amount equal to a percentage of Net Revenue
of the Businesses shall be allocated to the Businesses as deemed overhead, which
percentage will be established by dividing (A) the amount of actual overhead
incurred with respect to the Businesses for the six month period immediately
preceding such integration by (B) the Net Revenue of the Businesses for said
six-month period. Said fixed percentage shall thereafter be applied to the Net
Revenue of the Businesses for purposes of determining the deemed overhead to be
allocated to the Businesses. (4) Net proceeds from dispositions of assets of the
Businesses shall be reinvested in the Businesses. (5) With respect to
acquisitions made from and after the Closing, in lieu of including Net Revenue
and expenses related to such acquisition in the calculation of EBITDA, net
income, determined in accordance with GAAP, from such acquisition shall be
included in EBITDA. (6) Expenses and capital expenditures with respect to the
items set forth in the Information
Technologies Budget, will be allocated and treated as set forth in the
Information Technologies Budget regardless of their treatment under GAAP. (7)
Any and all amounts payable under, or in connection with the termination of, any
Leases which are assumed by the Buyer as part of the Contracts for Leased Real
Property which is no longer used in any of the Businesses shall be treated as
current expenses for purposes of calculating EBITDA regardless of their
treatment under GAAP.
(4) "IB Profit Margin' shall mean a profit margin equal to fifty
percent (50%) or such other agreed upon percentage (the "IB Profit Margin
Percentage") of the average profit margin of the Businesses for services similar
to the applicable Introduced Business provided during the fiscal quarter
immediately preceding the fiscal quarter in which the Businesses are to begin to
provide services for the Introduced Business. The proposed IB Profit Margin
Percentage and the proposed calculation of the IB Profit Margin (collectively,
the "IB Profit Margin Calculation") will be made by the Buyer in good faith and
presented in writing to the Executive Shareholders as soon as practicable prior
to the date on which services relating to the Introduced Business are to be
rendered. The Executive Shareholders shall, not later that five Business Days
after receipt of the IB Profit Margin Calculation, notify the Buyer in writing
of any objections thereto. Absent delivery of a written objection as provided
above, the IB Profit Margin Calculation will be conclusive and binding upon the
parties to this Agreement. If written objection is delivered to the Buyer and
the Buyer and the Executive Shareholders are unable, within 5 Business Days
after the receipt by the Buyer of such written objection, to resolve the
dispute, the Buyer, in its sole discretion, may elect either (i) to not make the
Introduced Business available to the Buyer or (ii) to submit the IB Profit
Margin Calculation to an Independent Accounting Firm mutually acceptable to the
Executive Shareholders and the Buyer whose determination shall be conclusive and
binding on the parties. In the event the Buyer elects to submit the matter to an
Independent Accounting Firm, the Businesses shall provide services for the
Introduced Business pending determination of the IB Profit Margin Calculation.
(5) "Independent Accounting Firm" shall mean one of the "big-six"
certified public accounting firms that does not have a conflict of interest with
respect to the preparation or review of the EBITDA Statements.
(6) "Introduced Business" shall mean business introduced to the
Buyer by Parent or Parent's Affiliates (i) as part of a contract with Parent or
its Affiliates, or (ii) by reason of introductions to the Buyer made by Parent
or Parent's Affiliates. The Executive Shareholders acknowledge and agree that
neither Parent nor any Parent Affiliate shall be obligated to introduce any
business to the Buyer or to otherwise cause any business that could be conducted
by the Buyer as Introduced Business to be referred to or conducted by the Buyer.
(7) "Net Revenue" shall be defined as the combined revenues of the
Businesses (including income on operating cash and monies held on behalf of
third parties remaining after Buyer distributes cash in excess of working
capital requirements to Parent) (after elimination of all inter-Business
transactions and balances) which are capitation fees (net of physician services
expenses for AHG only, and net of any retroactive
adjustments under the terms of any managed care plans), service bureau billing
fees, administrative fees, facility fees, and fee for service ▇▇▇▇▇▇▇▇ (less
contractual adjustments, bad debt expense, charity adjustments, refunds, NSF
checks, collection agency fees and other adjustments to gross revenues), all as
computed in accordance with GAAP.
(8) "Year 1 Adjustment" shall mean the amount, if any, payable to
the Buyer from the Escrow Funds in accordance with the provisions of Section
3.3(c) and Section 3.4(a).
any, payable to the provisions
(9) "Year 2 Adjustment" shall mean the amount, if the Buyer from the
Escrow Funds in accordance with of Section 3.3(d) and Section 3.4(b).
(10) "Year 3 Adjustment" shall mean the amount, if any, payable to
the Buyer from the Escrow Funds in accordance with the provisions of Section
3.3(e) and Section 3.4(c).
(11) "Year 1 Earn-Out" shall mean the amount, if any, payable by the
Buyer to the Escrow Agent in accordance with the provisions of Section 3.3(c)
and Section 3.4(a).
(12) "Year 2 Earn-Out" shall mean the amount, if any, payable by the
Buyer to the Escrow Agent in accordance with the provisions of Section 3.3(d)
and Section 3.4(b).
(13) "Year 3 Earn-Out" shall mean the amount, if any, payable by the
Buyer to the Escrow Agent in accordance with the provisions of Section 3.3(e)
and Section 3.4(c).
(14) "Year 1 EBITDA" shall have the meaning set forth in Section
3.3(c)(1).
(15) "Year 2 EBITDA" shall have the meaning set forth in Section
3.3(d)(1).
(16) "Year 3 EBITDA" shall have the meaning set forth in Section
3.3(e)(1).
(17) "Year 1 Earn-Out Period" shall mean the 12 month period ending
on September 30, 1998.
(18) "Year 2 Earn-Out Period" shall mean the 12 month period ending
on September 30, 1999.
(19) "Year 3 Earn-Out Period" shall mean the 12 month period ending
on September 30, 2000.
(20) "Year 1 Threshold" shall mean $11,000,000.
(21) "Year 2 Threshold" shall mean the greater of (i) $11,000,000
or (ii) Year 1 EBITDA.
(22) "Year 3 Threshold" shall mean the greater of (i) $11,000,000,
(ii) Year 1 EBITDA, or (iii) Year 2 EBITDA.
(b) EBITDA Statement. Within 75 calendar days after the last day of
each of the Year 1 Earn-Out Period, the Year 2 Earn-Out Period and the Year 3
Earn-Out Period, the Buyer shall prepare, the Accountants shall review, and the
Buyer shall deliver to AHG a statement reflecting the EBITDA from the
consolidated operations of the Businesses during such Earn-Out Period (each, an
"EBITDA Statement"), which statement will be determined in accordance with GAAP,
applied on a basis consistent with the financial statements of the Buyer and
Parent for such period. The parties shall ensure that the Accountants have full
access to the books, records, facilities and employees of the Businesses for
purposes of reviewing the EBITDA Statement and shall cooperate with the
Accountants to the extent reasonably requested to review the EBITDA Statement.
The EBITDA Statement will be examined by AHG (and, if AHG so chooses, by a firm
of independent certified public accountants), who shall, not later than 45
calendar days after receipt of the EBITDA Statement, raise any objections it has
to the EBITDA Statement by notifying the Buyer in writing within such time
period in a statement indicating the item or items disputed, AHG's proposed
adjustments and an adjusted EBITDA Statement reflecting such adjustments (an
"Objection Notice"). During such 45 day period, AHG and any such independent
certified public accountants shall have full access to the books and records,
other financial information (including the working papers of the Accountants)
and appropriate financial personnel of the Buyer reasonably necessary for the
preparation of an Objection Notice. Absent delivery of an Objection Notice as
provided above, the EBITDA Statement will be conclusive and binding upon the
parties to this Agreement for the purposes of any purchase price adjustment
under this Section 3.3. In the event that an Objection Notice is delivered by
AHG as provided above, and if the Buyer and AHG are unable, within 15 calendar
days after receipt by the Buyer of such Objection Notice, to resolve the
disputed exceptions, such disputed exceptions will be referred to an Independent
Accounting Firm mutually acceptable to AHG and the Buyer. The Independent
Accounting Firm shall, within 60 days following its engagement by the Buyer and
AHG for this purpose, deliver to AHG and the Buyer a written report determining
such disputed exceptions (the "IAF EBITDA Statement"). During such 60 day
period, the Independent Accounting Firm shall have full access to the books and
records, other financial information (including the working papers of the
Accountants and AHG's accountants, if any) and appropriate financial personnel
of the Buyer which the Independent Accounting Firm reasonably deems necessary or
advisable for the preparation of the IAF EBITDA Statement. The EBITDA reflected
in the IAF EBITDA Statement will be conclusive and binding upon the parties to
this Agreement for the purposes of any purchase price adjustment under this
Section 3.3, subject to application of the following provisions: (i) if the IAF
EBITDA Statement reflects EBITDA in excess of $300,000 over the amount of the
EBITDA reflected in the EBITDA Statement for the Earn-Out Period at issue, then
EBITDA for such Earn-Out Period shall be deemed to be equal to the EBITDA
reflected in the IAF EBITDA Statement, and the Buyer shall bear all the fees and
disbursements of the Independent Accounting Firm in respect of its services
under this Section 3.3 for such Earn-Out Period; (ii) if the IAF EBITDA
Statement reflects EBITDA that is equal to or less than $300,000 over the amount
of the EBITDA reflected in the EBITDA Statement for such Earn-Out Period, but
greater than the amount of the EBITDA reflected in such EBITDA Statement, then
EBITDA for such Earn-Out Period shall be deemed to be equal to (A) the sum of
(1) the EBITDA reflected
in the EBITDA Statement and (2) the EBITDA reflected in the IAF EBITDA Statement
divided by (B) two, and AHG and the Executive Shareholders, on a joint and
several basis, shall bear all the fees and disbursements of the Independent
Accounting Firm in respect of its services under this Section 3.3 for the
Earn-Out Period at issue; and (iii) if the IAF EBITDA Statement reflects EBITDA
that is equal to or less than the amount of the EBITDA reflected in the EBITDA
Statement for such Earn-Out Period, then EBITDA for such Earn-Out Period shall
be deemed to be equal to the EBITDA reflected in the IAF EBITDA Statement, and
AHG and the Executive Shareholders, on a joint and several basis, shall bear all
the fees and disbursements of the Independent Accounting Firm in respect of its
services under this Section 3.3 for the Earn-Out Period at issue.
(c) Year 1 Adjustment/Year 1 Earn-Out Calculation.
(1) In the event the EBITDA for the Year 1 Earn-Out Period
calculated pursuant to Section 3.3(b)above (the "Year 1 EBITDA") is less than
$10,000,000, then the Year 1 Adjustment is the amount equal to seven multiplied
by the difference between the Year 1 EBITDA and $10,000,000.
(2) In the event the Year 1 EBITDA is equal to or less than the Year
1 Threshold and equal to or greater than $10,000,000, then the Year 1 Adjustment
is $0.00.
(3) In the event the Year 1 EBITDA is greater than the Year 1
Threshold, then the Year 1 Earn-Out is the amount equal to six multiplied by the
difference between the Year 1 EBITDA and the Year 1 Threshold.
(d) Year 2 Adjustment/Year 2 Earn-Out Calculation.
(1) In the event the EBITDA for the Year 2 Earn-Out Period
calculated pursuant to Section 3.3(b) above (the "Year 2 EBITDA") is equal to or
less than the Year 2 Threshold, then the Year 2 Adjustment is the amount equal
to the sum of (i) six multiplied by the difference between the Year 2 Threshold
and the greater of (x) $11,000,000 or (y) the Year 2 EBITDA, plus (ii) the
amount equal to seven multiplied by the amount, if any, by which the Year 2
EBITDA is less than $10,000,000; provided, however, that the Year 2 Adjustment
will be $0.00 if the Year 2 EBITDA is equal to or greater than $10,000,000 but
less than or equal to $11,000,000.
(2) In the event the Year 2 EBITDA is greater than the Year 2
Threshold, then the Year 2 Earn-Out is the amount equal to six multiplied by the
difference between the Year 2 EBITDA and the Year 2 Threshold; provided,
however, that the Year 2 Earn-Out will be $0.00 if the Year 2 EBITDA is equal to
or greater than $10,000,000 but less than or equal to $11,000,000.
(e) Year 3 Adjustment/Year 3 Earn-Out Calculation.
(1) In the event the EBITDA for the Year 3 Earn-Out Period
calculated pursuant to Section 3.3(b) above (the "Year 3 EBITDA") is equal to or
less than the Year 3 Threshold, then the Year 3 Adjustment is the amount equal
to the sum Qf (i) four multiplied by the difference between Year 3 Threshold and
the greater of (x) $11,000,000 or (y) the-Year 3 EBITDA, plus (ii) the amount
equal to seven multiplied by the amount, if any, by which the Year 3 EBITDA is
less than $10,000,000; provided, however, that the Year 3 Adjustment will be
$0.00 if the Year 3 EBITDA is equal to or greater than $10,000,000 but less than
or equal to $11,000,000.
(2) In the event the Year 3 EBITDA is greater than the Year 3
Threshold, then the Year 3 Earn-Out is the amount equal to four multiplied by
the difference between the Year 3 EBITDA and the Year 3 Threshold; Provided,
however, that the Year 3 Earn-Out will be $0.00 if the Year 3 EBITDA is equal to
or greater than $10,000,000 but less than or equal to $11,000,000.
Section 3.4 Payment of Adjustment and Earn-Out: Distribution of
Escrow. The Year 1 Adjustment or Year 1 Earn-Out, Year 2 Adjustment or Year 2
Earn-Out and Year 3 Adjustment or Year 3 Earn-Out, if any, shall be paid within
5 Business Days of final determination of EBITDA for the applicable Earn-Out
Period pursuant to Section 3.3(b) and shall be paid to the Buyer or the Escrow
Agent, as the case may be, in the following manner:
(a) Year 1 Adjustment/Year 1 Earn-Out.
(1) In the event the Year 1 Adjustment is calculated pursuant to
Section 3.3(c)(1) above, then the Escrow Agent shall deliver to Buyer from the
Escrow Funds an amount equal to the Year 1 Adjustment, together with the
interest or earnings thereon as set forth in Section 3.4(d).
(2) In the event the Year 1 Earn-Out is calculated pursuant to
Section 3.3(c)(3) above, the Buyer shall pay to the Escrow Agent the Year 1
Earn-Out in cash by wire transfer of immediately available funds, which shall be
held by the Escrow Agent as part of the Escrow Funds. Upon receipt by the Escrow
Agent of the Year 1 Earn-Out, the Escrow Agent shall then deliver to AHG, on
behalf of the Sellers, an amount equal to one-third of the principal of the
Escrow Funds, together with the interest or earnings thereon as set forth in
Section 3.4(d).
(b) Year 2 Adjustment/Year 2 Earn-Out.
(1) In the event the Year 2 Adjustment is calculated pursuant to
Section 3.3(d)(1) above, then the Escrow Agent shall deliver to the Buyer from
the Escrow Funds an amount equal to the Year 2 Adjustment, together with the
interest or earnings thereon as set forth in Section 3.4(d).
(2) In the event the Year 2 Earn-Out is calculated pursuant to
Section 3.3(d)(2) above, then the Buyer shall pay to the Escrow Agent the Year 2
Earn-Out in cash by wire transfer of immediately available funds, which shall be
held by the Escrow Agent as part of the Escrow Funds. Upon receipt by the Escrow
Agent of the Year 2 Earn-Out, the Escrow Agent shall then
deliver to AHG, on behalf of the Sellers, an amount equal to one-half of the
principal of the Escrow Funds, together with the interest or earnings thereon as
set forth in Section 3.4(d).
(c) Year 3 Adjustment/Year 3 Earn-Out.
(1) In the event the Year 3 Adjustment is calculated pursuant to
Section 3.3(e)(1) above, then the Escrow Agent shall deliver to the Buyer from
the Escrow Funds an amount equal to the Year 3 Adjustment, together with the
interest or earnings thereon as set forth in Section 3.4(d). Any Escrow Funds
remaining after distribution of the Year 3 Adjustment to the Buyer shall be
disbursed to AHG, on behalf of the Sellers, promptly after disbursement of the
Year 3 Adjustment, together with interest or earnings thereon, to the Buyer.
(2) In the event the Year 3 Earn-Out is calculated pursuant to
Section 3.3(e)(2) above, then the Buyer shall pay to AHG, on behalf of the
Sellers, the Year 3 Earn-Out in cash by wire transfer of immediately available
funds, and the Escrow Agent shall transfer the Escrow Funds to AHG, on behalf of
the Sellers.
(d) Distributions of Interest or Earnings on the Escrow Funds.
Interest or other earnings on the Escrow Deposit and additional amounts paid by
the Buyer to the Escrow Agent pursuant to this Section 3.4 shall be disbursed
prorate to the recipient of principal held in the Escrow Funds. For income tax
purposes, it shall be assumed that the Sellers will be entitled to receive all
interest and other earnings on the principal amounts held in the Escrow Fund and
the Buyer and AHG agree to direct the Escrow Agent pursuant to joint
instructions to disburse to AHG, on behalf of the Sellers, an amount from the
Escrow Funds necessary for the Sellers to pay their federal income tax liability
on said interest and earnings, assuming for purposes hereof an effective tax
rate of 31%. The amount of any previous distributions for taxes made to AHG, on
behalf of the Sellers, shall be taken into account in the event that
disbursements from the Escrow Funds are later made to the Buyer and appropriate
adjustments will be made in accordance with joint instructions from the Buyer
and AHG to the Escrow Agent.
(e) Limitations on Purchase Price Adjustments/ EarnOuts.
Notwithstanding anything to the contrary contained in this Section 3, in no
event shall the Purchase Price, as adjusted pursuant to the provisions of
Sections 3.3 and 3.4, be greater than $110,000,000 nor less than $50,000,000.
(f) Adjustments in Excess of Escrow Funds. In the event that the
Adjustment for any Earn-Out Period should exceed the amount of the remaining
Escrow Funds, the amount of such excess shall be applied as a credit in favor of
the Buyer and shall be deducted from the amount otherwise payable by the Buyer
as the Year 2 Earn-Out and Year 3 Earn-Out, as applicable.
Section 3.5 Prorations and Other Adjustments.
(a) All revenues and expenses arising from the business and
operations of the Businesses, including without limitation business and license
fees (and any retroactive adjustments thereof), utility charges, property and
equipment rentals, real and personal property Taxes and assessments, and similar
prepaid and deferred items shall be prorated between the Buyer and the Sellers
in accordance with the principle that the Sellers shall receive all revenues and
all refunds and shall be responsible for all expenses, payables, costs,
liabilities and obligations allocable to the conduct and operations of the
Businesses for the period on or prior to the Closing Date, and the Buyer shall
receive all revenues and be responsible for all expenses, payables, costs,
liabilities and obligations allocable to the conduct and operations of the
Businesses for the period after the Closing Date; provided, however, that the
parties shall allocate any real property Tax in accordance with Section 164(d)
of the Code. The Buyer and the Sellers shall deliver a statement setting forth
such prorations at the time of making any such proration payment.
Notwithstanding the foregoing, there shall be no proration with regard to, and
the Sellers shall remain solely liable with respect to, any Excluded Liabilities
and any assets not included in the Purchased Property.
(b) Any adjustments and prorations pursuant to this Section 3.5
will, insofar as feasible, be determined and paid on the Closing Date, with
final settlement and payment by the appropriate party or parties occurring no
later than 30 days after the actual amount becomes known.
SECTION 4. CLOSING.
The closing hereunder (the "Closing") shall take place on the first
practicable date after all required regulatory and other approvals have been
obtained and after the satisfaction or waiver of all other conditions precedent
set forth in Sections 8 and 9, but in any event no later than November 30, 1997,
or such other date as Buyer and AHG shall mutually agree, and shall be held at
the offices of Broad and ▇▇▇▇▇▇, Miami, Florida, at 9:00 a.m. or at such other
place and time as may be mutually agreed to by the Buyer and AHG (the "Closing
Date"). Notwithstanding the actual time the following steps are taken on the
Closing Date, the parties hereto agree that the Closing shall be effective and
deemed for all purposes to have occurred as of 12:01 a.m. local time on the date
immediately following the Closing Date.
At the Closing, the parties agree to take the following steps in the
order listed below (provided, however, that upon their completion all of these
steps shall be deemed to have occurred simultaneously):
(a) Each of the Sellers and the Buyer shall deliver to the other a
copy of the resolutions of its Board of Directors and, in the case of each
Seller, its shareholders or partners, as the case may be, authorizing the
transactions contemplated by this Agreement as to such Seller, certified in each
case by its Secretary or Assistant Secretary or partner, as the case may be;
(b) Each of the Sellers and the Buyer shall deliver to the other a
good standing certificate of such party (which is dated not more than 15 days
prior to the Closing);
(c) Each of the Sellers shall deliver to the Buyer instruments
reasonably
satisfactory to the Buyer and its counsel for such Seller to assign the
Purchased Property (including, without limitation, the Cash and Cash
Equivalents, which, at the election of the Buyer, shall be either by bank check
or wire transfer of immediately available funds) to the Buyer, and the Buyer
shall deliver to the Sellers the Assumption Agreement;
(d) Each of the Sellers shall deliver to the Buyer, or make
available at the locations specified by the Buyer prior to the Closing, the
originals of the Files and Records, Licenses and Permits and Contracts, together
with originals of any required consents to assignment;
(e) Each of the Sellers and their Affiliates shall have delivered to
the Buyer all other agreements, documents and certificates required by this
Agreement to be delivered by them to the Buyer at or before the Closing;
(f) Each of the Sellers and the Buyer shall deliver to each other
certificates by appropriate officers of such parties certifying the fulfillment
of the conditions set forth in Section 8, and, in the case of the Buyer, the
fulfillment of the conditions set forth in Section 9;
(g) The Buyer shall pay the Closing Cash Installment to the Sellers
and the Escrow Deposit to the Escrow Agent in accordance with Section 3.1, and
each of the Sellers, the Buyer and the Escrow Agent shall execute and deliver
the Escrow Agreement and documents acknowledging receipt from the other,
respectively, of the Purchased Property, the Closing Cash Installment and the
Escrow Deposit. ~
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE EXECUTIVE
SHAREHOLDERS.
Each of the Sellers and each of the Executive Shareholders, on a
joint and several basis, hereby represents and warrants to, and covenants with,
the Buyer as follows, each of which is relied upon by the Buyer in consummating
the transactions contemplated hereby regardless of any other investigation made
or information obtained by the Buyer; provided, however, that the
representations, warranties and covenants of each Executive Shareholder in this
Section 5 shall be made only as to himself and to each Seller in which such
Executive Shareholder owns any shares or partnership interests, as the case may
be:
Section 5.1 Organization: Qualification to Do Business:
Subsidiaries.
(a) Each of the Sellers (except FSN), and Florida Specialty Network,
Inc. ("FSN Inc."), is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida, and is duly qualified as a
foreign corporation in each jurisdiction in which it is required to be so
qualified, and has all requisite corporate power and authority to own its
properties and assets and to conduct its business as now conducted. The Sellers
have furnished the Buyer true, complete and correct copies of the Articles of
Incorporation and By-laws of each Seller (except FSN), and FSN Inc., with all
amendments thereto. Schedule 5.1(a) sets forth as to
each Seller the name and security ownership of each holder of equity or any
right to acquire equity of such Seller.
(b) FSN is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Florida, and is duly
qualified as a foreign limited partnership in each jurisdiction in which it is
required to be so qualified, and has all partnership powers necessary to own its
properties and conduct its business as now conducted. The Sellers have furnished
the Buyer true, complete and correct copies of FSN's limited partnership
agreement, with all amendments thereto (the "FSN Limited Partnership
Agreement"). FSN's sole general partner, FSN Inc. has all requisite corporate
power and authority to fulfill its duties as the sole general partner of FSN in
accordance with the FSN Limited Partnership Agreement. Schedule 5.1(b) sets
forth the name and ownership interest of each partner of FSN and of each person
who has a right to acquire any interest in FSN.
(c) None of the Sellers has any direct or indirect Subsidiaries, or
has made any advances to or investments in, or owns any securities of or other
interests in, any Person.
(d) Each Shareholder has full power to vote his or her shares
without obtaining the consent or approval of any Person.
Section 5.2 Authorization and Validity of Agreement. Each Seller has
all requisite corporate (or, in the case of FSN, partnership) power and
authority to enter into this Agreement and to carry out its obligations
hereunder. Except for FSN, the execution and delivery of this Agreement and the
performance of each Seller's obligations hereunder have been duly authorized by
all necessary corporate action by the Board of Directors and shareholders of
such Seller, and no other corporate or shareholder proceedings on the part of
such Seller are necessary to authorize such execution, delivery and performance.
The execution and delivery of this Agreement and the performance of FSN's
obligations hereunder have been duly authorized by all necessary partnership
action on behalf of FSN, and by FSN Inc., as sole general partner on behalf of
FSN, and no other proceedings on the part of FSN or FSN Inc. are necessary to
authorize such execution, delivery and performance. This Agreement has been duly
executed and delivered by each Seller and each Executive Shareholder and
constitutes its or his legal, valid and binding obligation, enforceable against
it or him in accordance with its terms.
Section 5.3 No Conflict or Violation. The execution, delivery and
performance by each Seller and each Executive Shareholder of this Agreement (a)
does not and will not, as of the violate of the Closing Date, conflict with any
Provision of the Articles of Incorporation or By-laws (or, in the case
Certificate of Limited Partnership or the FSN Limited Agreement) of such Seller,
(b) does not and, as of Closing Date, will not violate any order, judgment or
decree of any court, arbitrator or other Governmental Authority or, except as
set forth on Schedule 5.19, to the knowledge of each Seller and each Executive
Shareholder, any provision of law, (c) as of the date hereof, except as set
forth on Schedule 5.3 does not, and as at the Closing Date will not, violate or
result in a breach of or constitute (with due notice or lapse of time or both) a
default under, or give rise to a right to terminate or modify, any Contract or
any other contract, lease, loan agreement, mortgage, security agreement or other
agreement or instrument (whether or not
the same is in writing) to which any Seller or Shareholder is a party or by
which it or any of them is bound or to which any of its or their properties or
assets is subject, and (d) will not result in the creation or imposition of any
Encumbrance upon any of the Purchased Property or accelerate any indebtedness of
any Seller to which the Purchased Property may be bound, or result in the
cancellation, modification, revocation or suspension of any of the Licenses and
Permits.
Section 5.4 Consents and Approvals. Schedule 5.4 sets forth a true
and complete list of (i) each consent, waiver, authorization or approval of any
Governmental Authority, or of any other Person, and (ii) to the knowledge of
each Seller and~each Executive Shareholder, each declaration to or filing or
registration with any such Governmental Authority that is required in connection
with the execution and delivery of this Agreement by each Seller or the
performance by each Seller of its obligations hereunder.
Section 5.5 Financial Statements and Prolections.
(a) The Sellers have heretofore delivered to the Buyer true and
complete copies of the Financial Statements, accompanied in the case of the
Audited Financial Statements by reports thereon from the Sellers' independent
certified public accountants. The Audited Financial Statements and the
Management Prepared Financial Statements (i) were prepared in accordance with
GAAP applied on a consistent basis, (ii) present fairly the financial condition,
results of operation and cash flows of each Business (and, in the case of the
Audited Financial Statements presenting combined financial statements, the
Businesses taken as a whole) as of their respective dates, (iii) are complete,
correct and in accordance with the books of account and records of each Seller,
(iv) can be legitimately reconciled with the financial statements and the
financial records maintained and the accounting methods applied by each Seller
for federal income tax purposes, and (v) in the case of the Audited Financial
Statements, contain all entries recommended by the Sellers' independent
certified public accountants. Except as provided in the Audited Financial
Statements or the Management Prepared Financial Statements, or as fully
disclosed in Schedule 5.5, no Seller has any liabilities or obligations (whether
accrued, absolute, contingent, whether due or to become due or otherwise) which
might be or become a charge against the Purchased Property, including any "loss
contingencies" considered "probable" or "reasonably possible" within the meaning
of the Financial Accounting Standard Board's Statement of Financial Accounting
Standards No. 5, except trade payables and similar liabilities and obligations
incurred in the ordinary and regular course of business since the dates of the
Audited Financial Statements and the Management Prepared Financial Statements,
respectively. The Audited Financial Statements were audited by ▇▇▇▇▇▇▇, ▇▇▇▇▇ &
▇▇▇▇▇. The Projections are reasonable in light of the historical operations and
results of the Businesses, represent each Seller's management's good faith best
estimate of the future operating performance of such Seller's Business, and were
prepared on an accounting basis consistent with historical earnings reports of
each Seller as set forth in the Financial Statements.
(b) The most recent Management Prepared Financial Statements as at
the date hereof reflect all adjustments, which consist only of normal accruals,
including provision for accrued liabilities, including vacation and sick,
medical claims and extended reporting endorsement for each of the Sellers
(including all incurred but not reported ("IBNR") amounts).
Section 5.6 Absence of Certain Changes or Events.
(a) Except as set forth in Schedule 5.6(a), since January 1, 1997:
(1) there has not been any material adverse change in the assets,
properties, business, operations, prospects, net income or condition (financial
or other) of any Business, no event has occurred and, to the knowledge of each
Seller and each Executive Shareholder, no factor or condition exists that would
reasonably be likely to result in any such change;
(2) there has not been any material loss, damage, destruction or
other casualty to the Purchased Property (whether or not insured);
(3) there has been no adverse change in the amount of total assets
set forth on the December 31, 1996 Combined Balance Sheet except for reductions
attributable to amortization and/or depreciation on a basis consistent with past
practice as reflected in the Audited Financial Statements or the Management
Prepared Financial Statements;
(4) there has not been any change in any method of accounting or
accounting practice of any Business or any Seller relating to its Business;
(5) there has not been a loss of the employment, services or
benefits of any Consultants or Employees, or of any Network Physicians (A) in
excess of 8\ of the number of Network Physicians engaged in respect of any
single Third Party Payor Agreement, or (B) which would cause any Seller to be in
breach of any Third Party Payor Agreement to which it is a party; and
(6) there has not been any default, breach or termination of, or any
notification of any of the foregoing, or any modification or requested
modification that would be materially adverse to any Seller, in respect of, any
Third Party Payor Agreement or any Contract;
(b) Since January 1, 1997, each Seller has operated its Business in
the ordinary course of its business consistent with past practice (including
without limitation by keeping in full force and effect insurance comparable in
amount and scope to the coverage maintained by it (or on behalf of it) at such
date), and, except as set forth in Schedule 5.6(b) hereto, no Seller has:
(1) permitted any of the Purchased Property (real or personal,
tangible or intangible) to be sold, licensed or subjected to any Encumbrance
(other than a Permitted Encumbrance) except in dispositions of inventory or of
wornout or obsolete equipment for fair or reasonable value in the ordinary
course of business consistent with past practices, canceled any debts or claims,
or waived or released any rights material to such Business relating to the
operations of such Business, or defaulted on any material obligation relating to
the operations of its Business;
(2) failed to exercise all Best Efforts to maintain and preserve for
the Buyer its
relationships with customers, suppliers, managers, Employees, Network
Physicians, Consultants, parties to Third Party Payor Agreements and actively
sought prospective parties to Third Party Payor Agreements (including, without
limitation PruCare), active patients and others having business relationships
with the Business;
(3) acquired any assets or properties, or entered into any other
transaction, other than in the ordinary course of business consistent with past
practice and which does not require payment of aggregate amounts exceeding
$10,000;
(4) made or committed to make any capital expenditure other than
ordinary repairs or maintenance;
(5) paid, lent or advanced any amount to, or sold, transferred or
leased any properties or assets to, or entered into any agreement or arrangement
with, any of its Affiliates;
(6) issued, granted or sold any capital stock, partnership
interests, options, or other right to purchase any equity interests in such
Seller, or issued any security convertible into such capital stock, partnership
interests or equity interests, or entered into any subscription contract or
other arrangements obligating such Seller to issue or sell any of the foregoing,
or redeem, purchase or otherwise acquire any such capital stock or equity
interests;
(7) made any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change required by
reason of a concurrent change in GAAP, or written down the value of any
inventory or written off as uncollectible any accounts receivable except in the
ordinary course of business consistent with past practice;
(8) settled, released or forgiven any claim or litigation or waived
any right thereto;
(9) made, entered into, modified, amended or terminated any
Contract, including any Third Party Payor Agreement or bid with respect to any
of the Businesses, that could be materially adverse to any Seller;
(10) deferred the payment of any expense or liability, or prepaid
any expense or liability, in anticipation of the consummation of the
transactions contemplated hereby;
(11) accelerated the collection of any accounts receivable or any
other amounts owed to it;
(12) decreased by a material amount the quantity of Equipment and
Machinery or Inventory maintained for use in its Business;
(13) failed to discharge or satisfy any Encumbrance or pay or
satisfy any obligation or liability (whether absolute, accrued, contingent or
otherwise) arising from the operation of its Business in a timely manner, other
than liabilities being contested in good faith and for which adequate reserves
have been provided, each of which is set forth on Schedule
5.6(b)(13) hereof, and Permitted Encumbrances;
(14) failed to continue to maintain the Purchased Property in
accordance with past practice; or
(15) entered into any agreement or made any commitment to do any of
the foregoing or taken any other action that would cause any of the
representations and warranties made by any Seller in this Agreement not to
remain true and correct.
(c) Except as set forth on Schedule 5.6(c):
(1) from and after July 1, 1997, no Seller has declared, set aside,
paid or made any dividend or other distribution or payment (whether in cash,
stock, interests, equity or property) with respect to, or purchased or redeemed,
any shares of the capital stock or any partnership interests or other equity
interests (including profit sharing plans or distributions relating to such
Seller's financial results) of such Seller, or otherwise withdrawn any cash from
such Seller for the direct or indirect benefit of the holders of any such shares
or interests or for any third party, or made or agreed to make any other
payments to any Shareholder or any of his or her Affiliates; provided, however,
that nothing set forth in this Section 5.6(c)shall prohibit or require
disclosure of cash distributions to the extent that after giving effect to such
cash distributions the Sellers still have at least $1,000,000 in Unrestricted
Cash in the aggregate;
(2) from and after July 1, 1997, no Seller has entered into any new
(or amended any existing) employee benefit plan, program or arrangement or any
new (or amend any existing) employment, independent contractor, severance or
consulting agreement, granted any general increase in the compensation of
officers or Employees (including any such increase pursuant to any bonus,
pension, profit-sharing or other plan or commitment) or granted any increase in
the compensation payable or to become payable to any Network Physician,
Consultant or Employee, except (i) in accordance with preexisting contractual
provisions or consistent with past practice, (ii) increases on an annual basis
for the 1997 calendar year up to a maximum amount of five percent in excess of
such Person's aggregate compensation for the 1996 calendar year and (iii) in
respect of the Executive Shareholders, as permitted in Section 7.2(i) below; and
(3) from and after July 1, 1997, no Seller has made or agreed to
make any payment or incurred or agreed to incur any obligation or liability
(whether absolute, accrued, contingent or otherwise) with respect to any
Contract except in accordance with the terms of such Seller's Contracts as in
effect on June 30, 1997, or in accordance with the terms of Contracts which such
Seller has modified or entered into after June 30, 1997 with the prior written
consent of the Buyer.
Section 5.7
Tax Matters.
(a) The Sellers have provided the Buyer a true and complete copy of
all Tax
Returns filed by each Seller since January 1, 1994.
(b) Except as set forth in Schedule 5.7(b), all Tax Returns required
to be filed before the Closing Date in respect of each Seller have been filed on
a timely basis, and each Seller has paid when due, Taxes required to be paid in
respect of the periods covered by such Tax Returns and has adequately reserved
for the payment of all Taxes with respect to periods ended on or before the
Closing Date for which tax returns have not yet been filed. All Taxes of each
Seller have been paid or adequately provided for, there are not any proposed
additional Tax assessments against any Seller not adequately provided for in the
June 30, 1997 Combined Balance Sheet. There are no unpaid Taxes which are or
could become an Encumbrance on the Purchased Property. No Tax liens have been
filed against the Purchased Property of any Seller and there are no audits
pending with respect to any Seller with any Governmental Authority. The charges,
accruals and reserves with respect to Taxes on the books of each Seller are
adequate (as determined in accordance with GAAP). All Taxes that any Seller is
or was legally required to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Governmental
Authority.
(c) To the knowledge of each Seller and each Executive Shareholder,
Schedule 5.7(c) sets forth each state and locality with jurisdiction to impose
any Tax on the Purchased Property or the Business at any time prior to the
Closing Date. Each of the Sellers represent that they have properly and timely
filed all Tax Returns required to be filed in such jurisdictions on or before
the Closing Date.
Section 5.8 Absence of Undisclosed Liabilities. None of the Sellers
has any indebtedness or liability, absolute or contingent, known or unknown
relating to its Business, which is not shown or provided for on the most recent
Management Prepared Financial Statements, other than liabilities as shall have
been incurred or accrued in the ordinary course of business since the date of
such Management Prepared Financial Statements, and which are consistent in
amount and type with those incurred during the year ended December 31, 1996.
Except as shown in the most recent Management Prepared Financial Statements,
none of the Sellers is directly or indirectly liable upon or with respect to (by
discount, repurchase agreements or otherwise), or obliged in any other way to
provide funds in respect of, or to guarantee or assume, any debt, obligation or
dividend of any Person in connection with its Business, except endorsements in
the ordinary course of business in connection with the deposit, in banks or
other financial institutions, of items for collection.
Section 5.9 Accounts Receivable; Banking.
(a) All Accounts Receivable (i) reflected on the June 30, 1997
Combined Balance Sheet or (ii) acquired by each Business after June 30, 1997
have been collected or are (or will be) current and collectible in amounts not
less than the aggregate amount thereof (net of reserves established in
accordance with prior practice) carried or to be carried on the books of each
Business, are not subject to any counterclaims or set-offs, and have arisen only
in the ordinary course of business in accordance with the customary credit
policies of each of the Sellers.
(b) Schedule 5.9(b) contains a complete list of all of each Seller's
bank accounts (including name, location, and account number) and all lines of
credit owned or used by each Seller, and the names of all persons with authority
to withdraw funds from, or execute drafts or checks on, each such account.
Section 5.10 Real Property; Leases.
(a) None of the Sellers, the Shareholders or their respective
Affiliates owns, directly or indirectly, any real property that is used in its
Business except as set forth on Schedule 5.10(a).
(b) Schedule 5.10(b) sets forth a list of all properties in which
any Seller has a leasehold interest and which is used in connection with its
Business (each, a "Lease" and collectively, the "Leases"; the property covered
by such Leases is referred to herein as the "Leased Real Property"). None of the
Leased Real Property consists of a Lease of an entire building.
(c) Except as set forth in Schedule 5.10(c), no Lease has been
modified or amended in writing. No party to any Lease has given any Seller
written notice of or made a claim with respect to any breach or default.
(d) Except as set forth in Schedule 5.10(d), none of the Leased Real
Property is subject to (i) any sublease, license or other agreement granting to
any person or entity any right to the use, occupancy or enjoyment of such
property or any portion thereof or (ii) to the knowledge of each Seller and each
Executive Shareholder, any restrictive covenant, zoning ordinance, building
code, use or occupancy restriction that restricts the use of such Leased Real
Property in connection with the Businesses.
(e) To the knowledge of each Seller and each Executive Shareholder,
the plumbing, electrical, heating, air conditioning, elevator, ventilating and
all other mechanical or structural systems for which any Seller is responsible
under the Leases in the buildings or improvements are in good working order and
condition, and the roof, basement and foundation walls of such buildings and
improvements for which such Seller is responsible under the Leases are in good
condition and free of leaks and other defects. To the knowledge of each Seller
and each Executive Shareholder, all such mechanical and structural systems and
such roofs, basement and foundation walls for which others are responsible under
said Leases are in good working order and condition and free of leaks and other
defects. To each Seller's and each Executive Shareholder's knowledge, there is
no asbestos-containing material in any of the buildings or facilities on the
Leased Real Property or any polychlorinated biphenyls in any hydraulic oils,
transformers, capacitors or other electrical equipment, nor does any Seller or
Executive Shareholder operate any underground or aboveground tanks on the Leased
Real Property.
Section 5.11 Equipment and Machinery. Schedule 5.11 sets forth a
complete and correct list and brief description of each item of Equipment and
Machinery having an original purchase cost or aggregate lease cost exceeding
$2,500. Each Seller has good title, free and clear
of all title defects and objections, and Encumbrances (other than the
Encumbrance of current property taxes and assessments not yet due and payable,
if any), to the Equipment and Machinery owned by it. Except as set forth on
Schedule 5.3, each Seller holds good and transferable leaseholds in all of the
Equipment and Machinery leased by it, in each case under valid and enforceable
leases. No Seller is in default with respect to any item of Equipment or
Machinery leased by it, and no event has occurred that constitutes or with due
notice or lapse of time or both may constitute a default under any lease
thereof. To the knowledge of each Seller and each Executive Shareholder, the
Equipment and Machinery is sufficient and adequate to carry on the Business of
each Seller as presently conducted and, to the knowledge of each Seller and each
Executive Shareholder, all material items thereof have generally been maintained
in satisfactory operating condition and repair, ordinary wear and tear excepted.
Section 5.12 Intellectual Property; Intangible Assets.
(a) Schedule 5.12(a) sets forth a complete and correct listing of
the Intellectual Property. Except as described in Schedule 5.12, all
Intellectual Property listed therein is owned by the Sellers, free and clear of
all Encumbrances and is in good standing and is not known to be the subject of
any challenge. As of the date hereof, except as described in Schedule 5.12(a),
there are no unresolved claims made and there has not been communicated to any
of the Sellers the threat of any claim that the holder of such Intellectual
Property is in violation or infringement of any service ▇▇▇▇, patent, trademark,
trade name, trademark or trade name registration, copyright, copyright
registration or other intellectual property of any other Person. Each Seller is
the owner of the Intellectual Property and other proprietary and trade rights
necessary for the conduct of its Business as now conducted, and without any
known conflict with the rights of others, and no Seller has knowingly forfeited
or otherwise relinquished any such Intellectual Property or other proprietary
right necessary for the conduct of its Business as conducted on the date hereof.
Each Seller owns or has the right to use all computer software, software systems
and databases and all other information systems included in the Purchased
Property and has the right to transfer title thereto or such rights of the use
thereof to the Buyer free and clear of any Encumbrances. All of the Intellectual
Property listed on Schedule 5.12(a) are subsisting and have not been abandoned,
and all required annuities, renewal fees, maintenance fees, royalty payments,
amendments and/or other filings or payments which are necessary to preserve and
maintain such Intellectual Property have been filed and/or made.
(b) Schedule 5.12(b) sets forth a true and complete list of all of
the Intangible Assets. There is no restriction affecting the use of any of the
Intangible Assets, and no license has been granted with respect thereto. Each of
the Intangible Assets is valid and in good standing, is not currently being
challenged, is not involved in any pending or, to the knowledge of each Seller
and each Executive Shareholder, threatened administrative or judicial
proceeding, and, to the knowledge of each Seller and each Executive Shareholder,
does not conflict with any rights of any other Person. Each Seller's rights in
and to the Intangible Assets are sufficient and adequate in all respects to
permit the conduct of its Business as now conducted and none of the products or
operations of such Business involves any infringement of any proprietary right
of any other Person.
Section 5.13 Licenses and Permits.
(a) Schedule 5.13(a) sets forth a true and complete list of all
licenses, permits, franchises, authorizations and approvals issued or granted to
each Seller with respect to its Business by any Governmental Authority (the
"Licenses and Permits"), and all pending applications therefor. Such list, where
applicable, specifies the date issued, granted or applied for, the expiration
date and the current status thereof. Each License and Permit has been duly
obtained, is valid and in full force and effect, and is not subject to any
pending or threatened administrative or judicial proceeding to revoke, cancel,
suspend or declare such License and Permit invalid in any respect. To the
knowledge of each Seller and each Executive Shareholder, no license, permit,
franchise, authorization or approval by or from any Governmental Authority,
other than the Licenses and Permits, is required to permit the continued lawful
conduct of the Businesses in the manner now conducted and none of the operations
of the Businesses are being conducted in a manner that violates any of the terms
or conditions under which any License and Permit was granted. Except as set
forth in Schedule 5.13(a), no such License and Permit will in any way be
affected by, or terminate or lapse by reason of, the transactions contemplated
by this Agreement.
(b) To the knowledge of each Seller and Executive Shareholder, no
Network Physician ever has (i) had his/her license to practice medicine in any
jurisdiction denied, surrendered, limited, suspended, revoked or subject to
probationary conditions or is subject to any pending proceedings regarding any
of the foregoing, (ii) had his/her Federal or State Drug Enforcement Agency
controlled substance authorization denied, revoked, suspended, reduced or not
renewed or has been subject to institution of, or is subject to any pending or
threatened proceedings regarding any of the foregoing, or (iii) been the subject
of administrative sanctions or been suspended from or lost eligibility for
participating in Medicare, Medicaid or other medical insurance programs offered
by any Governmental Authority or any non-governmental body or is subject to any
pending or threatened proceedings regarding any of the foregoing.
Section 5.14 Litigation. Except as set forth in Schedule 5.14, there
are no claims, actions, suits, proceedings, labor disputes or investigations
pending or, to the knowledge of each Seller and each Executive Shareholder,
threatened, before any Governmental Authority, or before any arbitrator or
mediator of any nature, domestic or foreign, brought by or against any Seller or
any of its officers, directors, employees, agents or Affiliates involving,
affecting or relating to its Business, the Purchased Property or the
transactions contemplated by this Agreement, nor is any basis known to any
Seller or any Executive Shareholder for any such action, suit, proceeding or
investigation. Schedule 5.14 sets forth a list and a summary description of all
such pending actions, suits, proceedings, disputes or investigations. Neither
any Business nor any Purchased Property is subject to any order, writ, judgment,
award, injunction or decree of any Governmental Authority or arbitrator,
domestic or foreign, that affects any Businesses or Purchased Property, or that
would or might interfere with the transactions contemplated by this Agreement.
Section 5.15 Professional Liability Claims.
(a) Except as set forth in Schedule 5.15(a), to the knowledge of
each Seller and
each Executive Shareholder, in respect of Network Physicians: (i) there is no
notice, demand, claim, action, suit, inquiry, hearing, proceeding, notice of
violation or investigation of a civil, criminal or administrative nature before
any Governmental Authority or before any arbitrator or mediator of any nature
against or involving any professional services performed in connection with or
on behalf of any Business, or class of claims or lawsuits involving the same or
similar services performed in connection with or on behalf of any Business
which, in any such case, is pending or, to the knowledge of the Sellers and the
Executive Shareholders, threatened (collectively, "Professional Liability
Claims") and (ii) there has not been any Occurrence (as such term is defined
below).
(b) The term "Occurrence" shall mean any accident, happening or
event which takes place at any time which is caused or allegedly caused by any
such accident, happening or event otherwise involving any professional services
performed in connection with or on behalf of any Business that is likely to
result in a claim or loss.
Section 5.16 Contracts.
(a) Schedule 5.16(a) sets forth a complete and correct list of all
Contracts (as in effect on the date hereof), which list of Contracts constitutes
all the contracts, agreements, understandings or commitments, whether or not the
same are in writing, to which each Seller is a party in connection its Business.
(b) Each Contract is valid, binding and enforceable against the
parties thereto in accordance with its terms, and in full force and effect. Each
Seller has performed all material obligations required to be performed by it
under, and is not in default or delinquent in performance, status or any other
respect (claimed or actual) in connection with any Contract, and no event has
occurred which, with due notice or lapse of time or both, would constitute such
a default. To the knowledge of each Seller and each Executive Shareholder, no
other party to any Contract is in default in respect thereof, and no event has
occurred which, with due notice or lapse of time or both, would constitute such
a default.
(c) Except as set forth in Schedule 5.16(c), with respect to each
Contract, each Seller which is a party thereto has complied in all material
respects with and expects to comply in all material respects with all material
terms thereof, all certifications and representations of such Seller with
respect thereto and all statutes and regulations applicable thereto. By way of
example, and not by way of limitation, "material obligations" or "material
terms" shall include (i) any obligation to comply with rules or regulations
imposed by any party to a Third Party Payor Agreement, whether or not such rules
or regulations are attached to the relevant Contract, (ii) any obligation to
provide most favored pricing terms, (iii) non-competition agreements, (iv)
exclusive service requirements, (v) requirements to report information, or to
furnish reports, (vi) confidentiality obligations, (vii) indemnification
obligations and obligations to maintain insurance, and (viii) any term in
respect of which the failure to observe or comply with would, with due notice or
lapse of time or both, constitute a ground for default or termination.
(d) Each Seller has permitted the Buyer to inspect and review true
and complete
copies of all of the Contracts to which it is a party (and, in the case of oral
agreements, true and complete written summaries of the material terms of such
oral agreements), all attachments, schedules, exhibits, annexes, all rules,
regulations or other documents referenced in such Contracts, together with and
all amendments and addendums thereto (including any and all oral modifications
to such agreements and all amendments that do not require the consent of any
Seller). Except as set forth in Schedule 5.16(d), each Seller has full legal
power and authority to assign its rights under such Contracts to the Buyer in
accordance with this Agreement, and such assignment will not affect the
validity, enforceability or continuity of any of such Contracts. All consents,
waivers, approvals and authorizations which may be required under the Contracts
with respect to the transactions contemplated hereby are listed on Schedule
5.16(d).
(e) Except as set forth in Schedule 5.16(e), none of the Contracts
that any Seller has with its Network Physicians, Consultants or Employees
provides or requires that (i) any Person other than the aforementioned personnel
and such Seller will be a party to such Contracts (including any party to any
Third Party Payor Agreement), and the assignment of each Seller's agreements
with such Persons to the Buyer does not require the consent or approval of any
party to any Third Party Payor Agreement or any other Person, or (ii) any
compensation or payment be made to any such Person (a "Change of Control
Payment") by reason of (A) the transactions contemplated by this Agreement,
including by reason of the sale of all or substantially all of the assets
relating to the Businesses or (B) the acquisition by any Person of beneficial
ownership of 50` or more of the voting securities of the Buyer or any of its
Affiliates or (C) the merger of the Buyer or any of its Affiliates with and into
another Person.
(f) Set forth in Schedule 5.16(f) is a true and correct schedule
reflecting the monthly capitation fees required to be paid by each party to a
Third Party Payor Agreement to any Seller in accordance with each Third Party
Payor Agreement.
(g) None of the Sellers is required to make any payments to, or to
receive lower capitation fees from, any party to any Third Party Payor Agreement
in accordance with the foregoing provisions or by reason of any other provision
in any Third Party Payor Agreement, and none of the Sellers has any reason to
believe that any such payment or reduction in capitation fees will be required
under the terms of any Third Party Payor Agreement in the foreseeable future.
(h) Except as set forth in Schedule 5.16(h), there are no
non-competition or exclusive service agreements (i) between any Executive
Shareholder, any Seller or their respective Affiliates, and any party to any
Third Party Payor Agreement, that would restrict any such Seller, Executive
Shareholder or Affiliate in the manner in which it conducts, or could conduct,
its Business, or that would restrict the manner in which the Buyer or its
Affiliates conducts, or could conduct, its (or their) businesses, including,
after the Closing, the Businesses or (ii) between any Seller and any Network
Physician, Consultant, Employee or Shareholder, that would restrict any such
Person from performing services for the Buyer or its Affiliates. Each Seller has
previously furnished the Buyer with true, correct and complete copies of all the
agreements (including all amendments thereto) set forth in Schedule 5.16(h).
(i) Except as set forth on Schedule 5.16(i), since June 30, 1997, no
party to any
Third Party Payor Agreement has terminated or changed significantly, or to the
knowledge of the Sellers and the Executive Shareholders, intends to terminate or
change significantly, its relationship with any of the Businesses.
(j) There has been no material change in the terms of or manner of
administering any of the Contracts since June 30, 1997.
(k) To the knowledge of each Seller and each Executive Shareholder,
no current Network Physician, Consultant, or Employee intends to terminate or
materially change the terms of his agreements with any of the Sellers relating
to its Business.
Section 5.17 Employee Plans and Benefits; Employees and Independent
Contractors.
(a) Except as set forth on Schedule 5.17(a), neither any Seller nor
any member of a "controlled group" (within the meaning of Section 4971(e)(2)(B)
of the Code) that includes a Seller (hereinafter referred to as an "ERISA
Affiliate") is a party to or participates in or has any liability or contingent
liability with respect to:
any "employee welfare benefit plan" or Employee pension plan" (as
those terms are respectively defined in ERISA Sections 3(1)and 3(2)) or a
Multiemployer Plan (referred to collectively as the "Plans"); or
any retirement or deferred compensation plan, incentive compensation
plan, stock plan, unemployment compensation plan, vacation pay, severance pay,
bonus or benefit arrangement, insurance or hospitalization program or any other
fringe benefit arrangements for any employee, director, consultant or agent,
whether pursuant to contract, arrangement, custom or informal understanding,
which does not constitute an "employee benefit plan," as defined in Section 3(3)
of ERISA (referred to collectively as "Compensation Arrangements".
Complete and accurate copies of any such written Plans and
Compensation Arrangements (or related insurance policies), including any
amendments thereto, have been furnished to Buyer, along with copies of any
employee handbooks or similar documents describing such Employee Plans and
Compensation Arrangements. Any unwritten Employee Plans or Compensation
Arrangements also are listed in Schedule 5.17(a), and complete descriptions
thereof have been furnished to Buyer. Except as disclosed in Schedule 5.17(a),
neither Seller nor any ERISA Affiliate-is a party to and or has in effect or to
become effective after the date of this Agreement any plan or arrangement that
will become a Plan or Compensation Arrangement.
(b) Each Plan and Compensation Arrangement has been administered in
compliance with its own terms and in material compliance with the provisions of
ERISA, the Code, the Age Discrimination in Employment Act and any other
applicable Federal or state laws.
(c) No Seller has within the last six (6) years, does or is required
to contribute to any Multiemployer Plan with respect to the Employees, and
neither any or the Sellers nor any
ERISA Affiliate of any of them has incurred, within the last six (6) years, or
reasonably expect to incur any "withdrawal liability," as defined under Section
4201 et seq. of ERISA.
(d) Except as described in Schedule 5.17(d), with respect to each
Plan and, to the extent applicable, each Compensation Arrangement: (i) each Plan
that is intended to be tax-qualified, and each amendment thereto, is the subject
of a favorable determination letter, and no plan amendment that is not the
subject of a favorable determination letter would affect the validity of a
Plan's letter; (ii) no condition or event exists or is expected to occur that
could subject, directly or indirectly, any assets to any material liability,
contingent or otherwise, or the imposition of any lien under the Code or Title
IV of ERISA.
(e) Attached hereto as Schedules 5.17(e)(i). (ii) and (iii),
respectively, are true and complete lists, as of ten Business Days prior to the
date of this Agreement, of (i) all Network Physicians, (ii) all Consultants, and
(iii) all Employees. Set forth opposite the name of each Employee is such
Employee's employment position title, the base salary, any bonus provisions, any
additional compensation arrangements, all other benefits to which such person is
entitled. Each Seller, for each of the persons who are, or may be deemed,
Employees of such Seller's Business, as listed on Schedule 5.17(e)(iii), has
either paid or adequately provided for the payment of all accrued benefits such
Employees are entitled to receive as of the Closing Date as set forth on
Schedule 5.17(e)(iii), including all accrued vacation, sick or personal time and
benefits due under any Plans.
(f) There are no severance pay, stay or retention bonus,
continuation pay or termination pay arrangements between any Seller and any
officer, director, employee, independent contractor, consultant or Shareholder
thereof, that will become Assumed Liabilities. Each Seller has paid on a current
basis and will continue to pay on a current basis through the Closing Date all
amounts owed to any officer, employee, independent contractor and consultant.
Each Seller has previously permitted Buyer to inspect and review true and
correct copies of all the agreements described in the foregoing sentence. The
Buyer assumes no liability or obligation with respect to, and receives no right
or interest in, any of the employment, consulting or independent contractor
agreements to which any Seller or Affiliate thereof is or was from time to time
a party.
(g) None of the Sellers or the Executive Shareholders has received
notice or has any knowledge (i) of any discrepancy in any application filed with
any Seller at any time by such Network Physician or (ii) that any Network
Physician (whether or not credentialed by any Seller) has been decredentialed by
any party to a Third Party Payor Agreement or otherwise. With respect to each
Network Physician, (i) no regulatory authority has asserted any claim against
any Seller challenging the characterization of such Network Physician as an
independent contractor, and no such assertion is pending, or to each of the
Seller's and Executive Shareholder's knowledge, threatened, and (ii) no
liability exists or is pending or, to each of the Seller's and Executive
Shareholder's knowledge, threatened, which results from characterization of any
Network Physician as an independent contractor.
(h) The Sellers have permitted Buyer to inspect and review true,
complete and correct copies of their forms of independent contractor or
employment agreements used with
respect to each of the Network Physicians.
Section 5.18 Insurance.
(a) Schedule 5.18(a) lists (i) the fidelity bonds, (ii) the
aggregate coverage amount, (iii) the type and generally applicable deductibles,
(iv) a brief description of each claim of more than $10,000, and (v) the
aggregate amounts paid out under each such policy during the period from January
1, 1995 to the date hereof, of or relating to all policies of general and
professional liability and other forms of insurance of each Seller insuring each
Business, Consultants and all Employees of the Sellers, the Purchased Property,
and all insurance required under the Contracts or the Leases. Each Seller has
furnished a true, complete and accurate copy of all such policies and bonds to
the Buyer. Except as set forth in Schedule 5.18(a), all such policies and bonds
are in full force and effect, and are sufficient for all Contracts and, to the
knowledge of the Sellers and the Executive Shareholders, all applicable
requirements of law. None of the Sellers is in material default under any
provisions of any such policy of insurance or has received notice of
cancellation of any such insurance. None of the Sellers has received (i) any
notice that any issuer of any such policy has filed for protection under
applicable bankruptcy laws or is otherwise in the process of liquidating or has
been liquidated, (ii) any other indication that such policies are no longer in
full force and effect or that the issuer of any such policy is no longer willing
or able to perform its obligations thereunder. There is no claim by any Seller
pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds or
any notice that a defense will be afforded with reservation of rights. Since
December 31, 1996, except as set forth in Schedule 5.18(a), none of the Sellers
or the Executive Shareholders has received any written notice from or on behalf
of any insurance carrier issuing such policies, that there will hereafter be a
cancellation, or an increase in a deductible or non-renewal of existing
policies. All premiums due on such policies have been paid, and the aggregate
amount of all claims under such policies do not exceed policy limits. Each
Seller has given notice to the insurers of all claims that may be insured
thereunder. The insurance maintained by each Seller in connection with its
Business is adequate in accordance with the requirements of any applicable
Leases. After the Closing each Seller will provide the Buyer with all reasonable
assistance and information necessary to enable the Buyer to obtain and maintain
insurance coverage for the Businesses and the Purchased Property.
(b) Except as set forth on Schedule 5.18(b), none of the Sellers is
obligated, pursuant to any of the Contracts or otherwise, to maintain insurance
for the benefit of any Person (including any Network Physician or customer), or
to name any Person (including any Network Physician or customer) as an
additional insured party.
Section 5.19 Compliance with Law.
(a) Except as set forth on Schedule 5.19, and except with respect to
Environmental Laws which are referred to in Section 5.19(f), the operations of
each Business have been conducted in accordance with all applicable laws,
regulations, orders and other requirements of all courts and other Governmental
Authorities having jurisdiction over any Seller or its Network Physicians,
Consultants, Employees, assets, properties and operations, including all such
laws,
regulations, orders and requirements promulgated by or relating to consumer
protection, equal opportunity, health, architectural barriers to the
handicapped, fire, zoning and building and occupation safety, and, to the
knowledge of each Seller and each Executive Shareholder, there are no
circumstances arising out of the operation of any Business prior to the Closing
that will give rise to any claim against the Buyer under any such laws if the
Closing occurs, except where the failure to comply would not have material
adverse effect on the Purchased Property, operations, prospects, net income or
condition (financial or other) of such Business. None of the Sellers, Executive
Shareholders or their respective Affiliates has received notice of any violation
of any such law, regulation, order or other legal requirement or, to the best
knowledge of each Seller and each Executive Shareholder, are in default with
respect to any order, writ, judgment, award, injunction or decree of any
Governmental Authority or arbitrator, domestic or foreign, applicable to any
Business or any of the assets, properties or operations with respect thereto.
(b) None of the Sellers, the Shareholders, or persons or entities
providing professional services for any Business, and, to the knowledge of the
Sellers and the Executive Shareholders, the Network Physicians, have engaged in
any activities which are prohibited under Section 1320a-7b to Title 42 of the
United States Code or the regulations promulgated thereunder, or related state
or local statutes or regulations, or which are prohibited by rules of
professional conduct including, but not limited to, the following: (i) knowingly
and willfully making or causing to be made any false statement or representation
of a fact in any application for any benefit or payment; (ii) any failure by a
claimant to disclose knowledge of the occurrence of any event affecting the
initial or continued right to any benefit or payment on its own behalf or on
behalf of another, with the intent to secure fraudulently such benefit or
payment; (iii) knowingly and willfully offering, paying, soliciting or receiving
any remuneration (including any kickback, bribe or rebate) directly or
indirectly, overtly or covertly, in cash or in kind, or offering to receive such
remuneration (A) in - referring an individual to a person or accepting a an
individual from a person for the furnishing or the furnishing of any item or
service for Which made in whole or in part by the Medicare or Medicaid or (B) in
return for purchasing, leasing or ordering or for, or recommending any good,
facility, service or item payment may be made in whole or in part by the
Medicare or Medicaid programs or (iv) knowingly and willfully making or causing
to be made, agreeing to be made, or aware that there is any agreement to make,
any political contribution or any contributions, payments or gifts of their
respective funds or property to or for the private use of any employee, official
or agent of any Governmental Authority, in circumstances in which the payment or
the purpose of such contribution, payment or gift relates to any Business and is
illegal under the laws of any Governmental Authority. Furthermore, each Seller
has at all times billed for professional services in accordance with 42 U.S.C.
Section 1395nn and the regulations promulgated thereunder, and has not been
engaged in any conduct violation of 42 U.S.C. Section 1395nn or the regulations
thereunder, including, without limitation, billing for or receiving payment for
a service which arose out of a refund prohibited by that Section.
(c) All bills submitted by or on behalf of each Seller, its
Consultants, Employees or Executive Shareholders, and, to the knowledge of each
Seller and Executive Shareholder, its Network Physicians, to Medicare or
Medicaid have been submitted in compliance with all laws, regulations and manual
instructions pertaining to billing for services rendered to recipients and
beneficiaries of the Medicaid and Medicare programs.
(d) Each Seller and each Executive Shareholder has at all times
complied with the requirements of all state laws relating to self referrals,
including, without limitation, the 1992 Florida Patient Self Referral Act, as
amended, and codified at Sections 455.236 and 455.237, Florida Statutes, which
prohibits physicians who have an ownership or investment interest in certain
health care facilities from referring patients to such facilities for the
provisions of designated and other health services. Furthermore, each Seller and
each Executive Shareholder has filed all reports required to be filed by state
and federal law regarding compensation arrangements and financial relationships
between a physician and an entity to which the physician refers patients.
(e) Each Seller is in compliance with all federal, state and local
laws, rules and regulations relating to the employment authorization of its
employees and independent contractors (including the Immigration Reform and
Control Act of 1986, as amended and supplemented, and Sections 212(n) and 274A
of the Immigration and Nationality Act, as amended and supplemented, and all
implementing regulations relating thereto), and no Seller is employing or
engaging as an independent contractor any unauthorized aliens (as such term is
defined under 8 CFR ss.274a.1(a)(1994)). No Seller or Executive Shareholder is a
party to, or is otherwise bound by, any agreement or arrangement, including any
confidentiality, non-competition or proprietary rights agreement, between such
individual and any other Person that in any way adversely affects the
performance of his duties or the ability of any Seller to conduct its Business.
(f) To the knowledge of the Sellers, the operations of each Business
have been conducted in accordance with all applicable Environmental Laws except
where the failure to comply would not have a material adverse effect on the
Purchased Property, operations, prospects, net income or condition (financial or
other) of such Business. None of the Sellers or Executive Shareholders has
received notice from any Governmental Authority with respect to, nor do they
have any knowledge of, any material violation by any Seller of any law,
regulation or ordinance of any federal, state or local government relating to
the storage, disposal or release of Hazardous Materials. For purposes of this
Section 5.19(f), the term "Hazardous Materials" means any flammable materials,
explosives, radioactive materials, hazardous wastes, hazardous or toxic
substances, infectious wastes, medical wastes or related or similar materials.
Section 5.20 Change in Ownership. Neither the purchase of the
Purchased Property by the Buyer nor the consummation of the transactions
contemplated by this Agreement will result in any material adverse change in the
Businesses or in the loss of the benefits of any material relationship with any
party to any Third Party Payor Agreement or any other customer or supplier.
Section 5.21 Files and Records. All the Files and Records included
in the Purchased Property are true and complete in all material respects, are
maintained in accordance with good business practice and all laws and
regulations of any Governmental Authority applicable to the business, and
accurately present and reflect in all material respects all of the transactions
therein described.
Section 5.22 Related Party Transactions. Schedule 5.22 hereto sets
forth, in respect of the Businesses, (i) all management, computer, telephone or
other services, and all space, facilities and services, provided by any Seller
or its Affiliates to any other Seller or its Affiliates at any time since
January 1, 1994 that could or will result in aggregate payments by any Seller of
$2,500 or more, and (ii) all other Contracts and transactions between any Seller
or its Affiliates and any other Seller or its Affiliates currently in effect or
which were in effect or occurred since January 1, 1994 that resulted in or will
result in aggregate payments by any Seller of $2,500 or more.
Section 5.23 Sufficiency of and Title to Assets. Upon the
consummation of the transactions contemplated by this Agreement, the Sellers
will have assigned, transferred and conveyed to the Buyer all of the Purchased
Property free and clear of any Encumbrances, except for Permitted Encumbrances,
which Purchased Property (a) constitutes all of the properties and assets now
held or employed by the Sellers or any of their Affiliates that are attributable
to the Businesses, (b) constitutes and on the Closing Date will constitute, all
of the property and assets that are necessary to permit the operation of the
Businesses as historically and currently conducted, (c) is suitable for the
purposes for which it is currently used, and (d) is to be conveyed hereunder in
good operating condition and repair, subject to reasonable use, wear and tear.
No assets used in the Businesses are owned by any party other than one of the
Sellers except for property that is the subject of the Contracts.
Section 5.24 Accuracy of Information. None of the Sellers' or
Executive Shareholders' representations, warranties or statements contained in
this Agreement, or in the schedules, exhibits and other attachments hereto,
contains any untrue statement of a material fact or omits to state any material
fact necessary in order to make any of such representations, warranties or
statements in light of the circumstances under which they were made not
misleading.
Section 5.25 Brokers. Except for ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ of JeMJ
Financial Services, Inc. and for Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, the fees and expenses of
which shall be the sole responsibility of the Sellers and the Executive
Shareholders, no broker, investment banker, financial advisor or other Person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of any Seller. The Sellers and the
Executive Shareholders, jointly and severally, agree to indemnify and hold
harmless the Buyer against any fee, loss or expense arising out of any claim by
any broker of finder employed or alleged to have been employed by any of them.
Section 5.26 Disclosure. Each of the Shareholders has been furnished
with a copy of this Agreement and has been given sufficient opportunity to ask
questions and receive answers from the Sellers and the Executive Shareholders as
to all financial terms and all other material terms of this Agreement.
Section 5.27 Survival. Each of the representations and warranties
set forth in this Article 5 shall survive the Closing, notwithstanding any
investigation on the part of the Buyer, for
a period terminating on the second anniversary of the Closing Date; provided,
however, that the representations and warranties contained in Sections 5.1, 5.2,
5.7, 5.14, 5.15, 5.17 and 5.19 shall survive until the fourth anniversary of the
Closing Date.
SECTION 6. BUYER AND PARENT.
REPRESENTATIONS AND WARRANTIES OF THE
The Buyer and Parent hereby, jointly and severally represent and
warrant to, and covenant with, the Sellers as follows:
Section 6.1 Corporate Organization. Each of the Buyer and Parent is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Florida and the State of Delaware, respectively, is duly
qualified as a foreign corporation in each jurisdiction in which it is required
to be so qualified, and each has all requisite corporate power and authority to
own its properties and assets and to conduct its businesses as now conducted.
The Buyer is a wholly owned subsidiary of Parent. Each of Parent and the Buyer
has furnished to the Sellers true, complete and correct copies of its Articles
or Certificate of Incorporation and By-laws, with all amendments thereto.
Section 6.2 Authorization and Validity of Agreement. Each of the
Buyer and Parent has all requisite corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the performance of the respective obligations of
the Buyer and Parent hereunder have been duly authorized by all necessary
corporate action by the Buyer and Parent, respectively, and no other corporate
or shareholder proceedings on the part of the Buyer or Parent are necessary to
authorize such execution, delivery and performance. This Agreement has been duly
executed and delivered by each of the Buyer and Parent, respectively, and
constitutes the legal, valid and binding obligation of the Buyer and Parent,
enforceable against each in accordance with its terms.
Section 6.3 No Conflict or Violation. Except as set forth on
Schedule 6.3, the execution, delivery and performance by the Buyer and Parent of
this Agreement do not and will not violate or conflict with any provision of the
Articles or Certificate of Incorporation or By-Laws of the Buyer or Parent,
respectively, and do not and will not violate any provision of law, or any
order, judgment or decree of any Governmental Authority, nor violate nor will
result in a breach of or constitute (with due notice or lapse of time or both) a
default under, or give rise to a right to terminate or modify, any contract,
lease, loan agreement, mortgage, security agreement, trust indenture or other
agreement or instrument to which the Buyer or Parent is a party or by which it
is bound or to which any of its properties or assets is subject.
Section 6.4 Consents and Approvals. Except as disclosed on Schedule
6.4, the execution, delivery and performance of this Agreement on behalf of the
Buyer and Parent does not require the consent or approval of, or filing with,
any Governmental Authority or other entity or person except such consents,
approvals and filings, of which the failure to obtain or make would not,
individually or in the aggregate, have a material adverse effect on the ability
of the
Buyer or Parent to consummate the transactions contemplated hereby.
Section 6.5 Litigation. There are no claims, actions, suits,
proceedings, labor disputes or investigations pending, or to the knowledge of
the Buyer or Parent, threatened, before any Governmental Authority, or before
any arbitrator or mediator of any nature, domestic or foreign, brought by or
against the Buyer or Parent or any of their respective officers, directors,
employees, agents or Affiliates, involving, affecting or relating to the
transactions contemplated by this Agreement or which would prohibit the Buyer or
Parent from consummating the transactions contemplated by this Agreement nor is
any basis known to the Buyer or Parent for any such action, suit, proceeding or
investigation.
Section 6.6 Financing. As of the date hereof, neither the Buyer nor
Parent has any reason to believe that the Buyer will not be able to obtain the
financing necessary for it to consummate the transactions contemplated by this
Agreement.
Section 6.7 Brokers. No broker, investment banker, financial advisor
or other Person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based on arrangements made by or on behalf of the Buyer. The
Buyer and the Parent, jointly and severally, agree to indemnify and hold
harmless the Sellers and the Shareholders against any fee, loss or expense
arising out of any claim by any broker or finder employed or alleged to have
been employed by Buyer or Parent.
Section 6.8 Accuracy of Representations and Warranties. None of the
Buyer's or Parent's representations, warranties or statements contained in this
Agreement contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make any such representations or warranties
not misleading or includes any untrue statement of a material fact or omits to
state any material fact necessary in order to make such statements, in the light
of the circumstances under which they were made, not misleading.
Section 6.9 Survival. Each of the representations and warranties set
forth in this Article 6 shall survive the Closing, notwithstanding any
investigation on the part of the Sellers or the Executive Shareholders, for a
period terminating on the second anniversary of the Closing Date; provided,
however, that the representation and warranty contained in Sections 6.1, 6.2 and
6.5 shall survive until the fourth anniversary of the Closing Date.
SECTION 7.
COVENANTS.
Each Seller and each of the Executive Shareholders, jointly and
severally, and, to the extent expressly specified, the Buyer and Parent,
covenants as follows:
Section 7.1 Information and Certain Tax Matters.
(a) Each Seller will give to the Buyer and to its officers,
employees, accountants,
counsel and other representatives reasonable access during its normal business
hours throughout the period prior to the Closing to all of such Seller's
properties, Files and Records, Licenses and Permits, Contracts, Tax Returns, and
other Purchased Property relating to the Businesses (subject to any limitations
that are reasonably required to preserve any applicable attorney-client
privilege or third-party confidentiality obligation). Such access by the Buyer
will be coordinated through one of the Executive Shareholders, as
representatives of the Sellers.
(b) After the Closing Date, the Sellers and the Buyer will provide
to each other and to their respective officers, employees, counsel and other
representatives, upon request (subject to any limitations that are reasonably
required to preserve any applicable attorney-client privilege or third-party
confidentiality obligation), access for inspection and copying, of all Files and
Records, Licenses and Permits, Contracts and any other information existing as
of the Closing Date and relating to the Businesses or the Purchased Property,
and will make their respective personnel reasonably available to provide
information relating to the Businesses or the Purchased Property prior to the
Closing Date, and as otherwise may be necessary or desirable to enable the party
requesting such assistance to: (i) comply with reporting, filing or other
requirements imposed by any foreign, local, state or federal court, agency or
regulatory body; (ii) assert or defend any claims or allegations in any
litigation or arbitration or in any administrative or legal proceeding other
than claims or allegations that one party to this Agreement has asserted against
the other; or (iii) subject to clause (ii) above, perform its obligations under
this Agreement. The party requesting such information or assistance shall
reimburse the other party for all out-of-pocket costs and expenses incurred by
such party in providing such information and in rendering such assistance. The
access to files, books and records contemplated by this Section 7.1(b) shall be
during normal business hours and upon not less than two Business Days' prior
written request and shall be subject to such reasonable limitations as the party
having custody or control thereof may impose to preserve the confidentiality of
information contained therein. For a period of seven years after the Closing
Date, the Buyer shall keep and preserve all medical and other records of the
Sellers in its possession which are existing as of the Closing Date and which
are required to be kept and preserved (i) by any applicable federal or state law
or regulation or (ii) in connection with any claim or controversy still pending
involving any of the Sellers.
(c) The Buyer, Parent, the Sellers and the Executive Shareholders
shall cooperate fully, as and to the extent reasonably requested by the other
party, in connection with any Tax audit, litigation or other Tax proceeding
relating to the Businesses or the Purchased Property. Such cooperation shall
include the retention and, upon the other party's request, the provision of
records and information reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually convenient basis
to provide additional information and explanation of any records and information
provided hereunder. The Buyer, Parent, the Sellers and the Executive
Shareholders further agree to furnish or cause to be furnished to each other, as
promptly as practicable, such information and assistance relating to the
Businesses as is reasonably necessary to the preparation and filing of any Tax
Return, claim for refund or other required or optional filings relating to Tax
matters, for the preparation for and proof of facts during any Tax audit, for
the preparation for any Tax protest, for the prosecution or defense of any suit
or other proceeding relating to Tax matters and for the answer to any inquiry
relating to Tax matters by any Governmental Authority.
(d) Without limiting the generality of the foregoing, each Seller
agrees (i) to provide both before and after the Closing Date financial
information reasonably requested by the Buyer from time to time in connection
with the preparation by the Buyer of financial statements relating to the
Businesses and (ii) to use its Best Efforts to cause Sellers' independent
accountants to provide any such information (including copies of all workpapers)
reasonably promptly upon the request of the Buyer. The Buyer will use such
information for its normal business purposes only, including, without
limitation, preparation of financial information required to be included in
reports filed with the Securities Exchange Commission and each Seller will use
its Best Efforts to provide or cause to be provided to the Buyer such
information in a timely fashion.
(e) The Sellers agree to retain possession of all accounting,
business, financial and Tax records and information (i) relating to the
Businesses in existence on the Closing Date transferred to the Buyer hereunder
and (ii) coming into existence after the Closing Date which relate to the
Businesses before the Closing Date, for the period not less than seven years
from the Closing Date. In addition, from and after the Closing Date, the Sellers
agree that they will not unreasonably withhold access by the Buyer and its
attorneys, accountants and other representatives (after reasonable notice and
during normal business hours and with reasonable charge), to such personnel,
books, records, documents and any or all other information relating to the
Businesses as the Buyer may reasonably deem necessary to properly prepare for,
file, prove, answer, prosecute and/or defend any such return, filing, audit,
protest, claim, suit, inquiry or other proceeding or for other legitimate
business purposes. Such access shall include, without limitation, access to any
computerized information retrieval systems relating to the Businesses.
Section 7.2 Conduct of the Businesses.
From and after the date of this Agreement and until the Closing
Date, except as set forth on Schedule 7.2 or as otherwise contemplated by this
Agreement or as the Buyer shall otherwise consent to in writing, each Seller
will, with respect to its Business, and each Executive Shareholder will cause
each Seller in which he or his Affiliates have any direct or indirect ownership
interest to:
(a) carry on its Business in the ordinary course in a manner
consistent with past practice, including without limitation by keeping in full
force and effect insurance comparable in amount and scope to the coverage
maintained by it (or on behalf of it) on the date hereof, not cancel any debts
or claims, or waive or release any rights material to such Business relating to
the operations of such Business, or default on any material obligation relating
to the operations of its Business;
(b) not permit all or any of the Purchased Property
o (real or personal, tangible or intangible) to be sold, licensed or
subjected to any Encumbrance (other than a Permitted Encumbrance) except in
dispositions of inventory or of worn-out or obsolete equipment for fair or
reasonable value in the ordinary course of business consistent with past
practices;
(c) exercise all Best Efforts to maintain and preserve for the Buyer
its relationships with customers, suppliers, managers, Employees, Network
Physicians, Consultants, parties to Third Party Payor Agreements and actively
sought prospective Parties to Third Party Pavor Agreements (including, without
llmlcatlon ~rucare) ▇▇▇ owners nav1ng Business relationships with the Business;
(d) not acquire any assets or properties, or enter into any other
transaction, other than in the ordinary course of business consistent with past
practice and which does not require payment of aggregate amounts exceeding
$10,000;
(e) not enter into any new (or amend any existing) Plan, including,
any employee benefit plan, program or arrangement or any new (or amend any
existing) employment, independent contractor, severance or consulting agreement,
grant any general increase in the compensation of officers or Employees
(including any such increase pursuant to any bonus, pension, profit-sharing or
other plan or commitment) or grant any increase in the compensation payable or
to become payable to any Network Physician, Consultant or Employee, except (i)
in accordance with pre-existing contractual provisions or consistent with past
practice, (ii) increases on an annual basis for the 1997 calendar year up to a
maximum amount of five percent in excess of such Person's aggregate compensation
for the 1996 calendar year and (iii) in respect of the Executive Shareholders,
as permitted in Section 7.2(i)(B) below;
(f) not issue, grant or sell any capital stock, partnership
interests, options, or other right to purchase any equity interests in such
Seller, or issue any security convertible into such capital stock, partnership
interests or equity interests, or enter into any subscription contract or other
arrangements obligating such Seller to issue or sell any of the foregoing, or
redeem, purchase or otherwise acquire any such capital stock or equity
interests;
(g) not make or commit to make any capital expenditure except as
expressly contemplated by the Information Technologies Budget, other than
ordinary repairs or maintenance;
(h) not pay, lend or advance any amount to, or sell, transfer or
lease any properties or assets to, or enter into any agreement or arrangement
with, any of its Affiliates;
(i) not declare, set aside, pay or make any dividend or other
distribution or payment (whether in cash, stock, interests,
o equity or property) with respect to, or purchase or redeem, any
shares of the capital stock or any partnership interests or other equity
interests (including profit sharing plans or distributions relating to such
Seller's financial results) of such Seller, or otherwise withdraw any cash from
such Seller for the direct or indirect benefit of the holders of any such shares
or interests or for any third party, or make or agree to make any other payments
to any Shareholder or any of his or her Affiliates; provided, however, that
nothing set forth in this Section 7.2(i) shall prohibit cash distributions to
the extent that after giving effect to such cash distributions the Sellers still
have at least $1,000,000 in Unrestricted Cash in the aggregate;
(j) not make any change in any method of accounting or accounting
principle, method, estimate or practice except for any such change required by
reason of a concurrent change in GAAP, or write down the value of any inventory
or write off as uncollectible any accounts receivable except in the ordinary
course of business consistent with past practice;
(k) not settle, release or forgive any claim or litigation or waive
any right thereto;
(l) not make, enter into, modify, amend or terminate any Contract,
including any Third Party Payor Agreement or bid with respect to any of the
Businesses;
(m) not defer the payment of any expense or liability, or prepay any
expense or liability, in anticipation of the consummation of the transactions
contemplated hereby;
(n) not accelerate the collection of any accounts receivable or any
other amounts owed to it;
(o) not decrease by a material amount the quantity of Equipment and
Machinery or Inventory maintained for use in its Business;
(p) discharge or satisfy all Encumbrances and pay or satisfy all
obligations or liabilities (whether absolute, accrued, contingent or otherwise)
arising from the operation of its Business in a timely manner, other than
liabilities being contested in good faith and for which adequate reserves have
been provided, each of which is set forth on Schedule 5.6(b)(13) hereof, and
Permitted Encumbrances;
(q) continue to maintain the Purchased Property in accordance with
present practice; and
(r) not enter into any agreement or make any commitment not in
compliance with any of the foregoing and not take any other action that would
cause any of the representations and warranties made by any Seller in this
Agreement not to remain true and correct.
Section 7.3 Tax Reporting and Allocation of Consideration.
(a) Each of the Sellers and the Buyer acknowledge and agree that (i)
the Sellers will be responsible for and will perform all Tax withholding,
payment and reporting duties with respect to any wages and other compensation
paid by any Seller to any Transferred Employee (and, if applicable, any
Transferred Consultant) in connection with operating the Businesses prior to or
on the Closing Date and (ii) the Buyer will be responsible for and will perform
all Tax withholding payment and reporting duties with respect to any wages and
other compensation paid by Buyer to any employee or independent contractor in
connection with operating the Businesses after the Closing Date.
(b) The Buyer and each of the Sellers recognize their mutual
obligations pursuant to Section 1060 of the Code to timely file IRS Form 8594
(the "Asset Acquisition Statement") with each of their respective federal income
Tax Returns. The Buyer and each of the Sellers acknowledge that they will
allocate the Purchase Price and the Assumed Liabilities among the Purchased
Property in the manner set forth on Schedule 7.3(b) (such agreed allocation
hereinafter referred to as the "Allocation"). The Buyer and each of the Sellers
further agree to act in accordance with the Allocation, if any, in any Tax
Returns or similar filings. In the event that any Tax authority disputes the
Allocation, if any, the Sellers or the Buyer, as the case may be, shall promptly
notify the other party of the nature of such dispute and shall provide
reasonable cooperation with the goal of resolving such dispute.
Section 7.4 Supplemental Schedules. The Sellers and the Executive
Shareholders shall, from time to time prior to the Closing (but no later than
three Business Days prior to the Closing), by notice in accordance with this
Agreement, supplement or amend any Schedule to correct any matter which would
constitute a breach of any representation or warranty herein contained. No such
supplemental or amended Schedule shall be deemed to cure any breach of such
representation or warranty for purposes of conditions to Closing or termination,
or for any other purpose, and the Buyer shall continue to have all of its rights
and remedies hereunder.
Section 7.5 Transferred Persons.
(a) The Buyer, in its sole discretion, may offer employment or
engagement, as the case may be, to as many Consultants and Employees whose
Contracts are not being assumed by the Buyer as is consistent with, and subject
to, the Buyer's requirements and employment policies. Notwithstanding anything
to the contrary in the previous sentence, within five Business Days prior to the
Closing, the Buyer shall offer employment to the Employees listed on Schedule
7.5(a), such terms of employment to be no more advantageous to such Employees
than the terms on which such Employees are currently employed as set forth on
Schedule 5.17(e)(iii) opposite their respective names (an "Engagement Notice"),
provided, however, that nothing herein requires the Buyer to employ any such
Employees for any period of time after the Closing Date except that (i) the
Buyer agrees not to terminate the employment of any such Employees without the
prior consent of the Executive Shareholders, which consent will not be
unreasonably withheld or delayed, for a period ending 90 days after the Closing
Date, and (ii) the Buyer agrees to offer to employ each of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ at her respective current salary and not to terminate the
employment of either one without the prior consent of the Executive
Shareholders, which consent will not be unreasonably withheld or delayed, for a
period ending one year after the Closing Date. All Employees hired by Buyer
shall be referred to as "Transferred Employees" and all Consultants engaged by
Buyer, including Consultants relating to Contracts assumed by Buyer, shall be
referred to as "Transferred Consultants." Promptly following the delivery by the
Buyer of the list of Transferred Consultants and Transferred Employees, each
Seller will make appropriate arrangements with each of its Consultants, and
Employees being so transferred, in order to terminate any existing agreements
which are not being assigned to the Buyer, including any non-competition
restrictions that may be contained in related agreements, or, if requested by
the Buyer, provide for the assignment of such employment, consulting or
independent contractor
agreements to the Buyer at the Closing to the extent such contracts or
agreements constitute Contracts.
(b) All Transferred Employees (but not Network Physicians or
Transferred Consultants) shall participate in the employee benefit plans,
programs, policies and arrangements of the Buyer in accordance with the terms
thereof generally applicable to employees of the Buyer. Except to the extent
expressly provided for in Section 7.5(a), nothing herein requires the Buyer to
employ any Transferred Employee or to engage any Network Physicians, or
Transferred Consultants for any period of time after the Closing Date.
(c) Except as otherwise expressly provided in Section 2.4, neither
the Buyer nor its Affiliates shall assume or have any direct or indirect
obligation or liability of any nature, whether matured or unmatured, accrued or
contingent, due or to become due or otherwise, to any Network Physician,
Transferred Consultant or Transferred Employee or other present or former
employee of or independent contractor with any of the Sellers or its Affiliates,
or to any dependent, survivor or beneficiary thereof, arising out of or in
relation to such person's employment or engagement with any of the Sellers or
its Affiliates or the termination of such employment, nor shall the Buyer or its
Affiliates have any such liability to any such Person to make any Change of
Control Payments.
(d) Sellers shall assume full responsibility and liability for
offering and providing "continuation coverage" to any "qualified beneficiary"
who is covered by a "group health plant' sponsored or contributed to by any
Seller and who has experienced a "qualifying event" or is receiving
"continuation coverage" on or prior to the Closing. "Continuation coverage,"
"qualified beneficiary," "qualifying event" and "group health plan" all shall
have the meanings given such terms under Section 4980B of the Code and Section
601 et seq. of ERISA. Sellers, jointly and severally, shall hold Buyer and any
entity required to be combined with Buyer (within the meaning of Sections
414(b), (c), (m) or (i) of the Code) harmless from and fully indemnify them
against any costs, expenses, losses, damages and liabilities incurred or
suffered by them directly or indirectly, including, but not limited to,
reasonable attorneys' fees and expenses, which relate to continuation coverage
and arise as a result of any action or omission by Seller or because Buyer is
deemed to be a successor employer to any Seller.
Section 7.6 Consents and Approvals. The Sellers and the Executive
Shareholders (a) shall, at their own cost and expense, use their Best Efforts to
obtain all necessary consents, waivers, authorizations, domestic and foreign,
and of all other persons, firms or corporations required in connection with the
execution, delivery and performance by them of this Agreement, and (b) shall
diligently assist and cooperate with the Buyer in preparing and filing all
documents required to be submitted by the Buyer to any Governmental Authority in
connection with such transactions and in obtaining any consents, waivers,
authorizations or approvals from any Governmental Authority which may be
required to be obtained by the Buyer in connection with such transactions (which
assistance and cooperation shall include timely furnishing to the Buyer all
information concerning the Sellers, the Executive Shareholders and their
respective Affiliates that counsel to the Buyer reasonably determines is
required to be included in such documents or would be helpful in obtaining any
such required consent, waiver, authorization or approval
Section 7.7 Negotiations. From and after the date hereof through and
until the earlier to occur of Closing or termination of this Agreement, neither
the Sellers, nor their respective officers, directors, Employees or Shareholders
nor anyone acting on behalf of the Sellers or any of the foregoing persons
shall, directly or indirectly, encourage, solicit, engage in discussions or
negotiations with, or provide any information to, any person, firm, or other
entity or group (other than the Buyer or its representatives) concerning any
merger, sale of substantial assets, purchase or sale of shares of capital stock
or similar transaction involving any Seller or any of the Businesses or any
other transaction inconsistent with the transactions contemplated hereby. The
Sellers and the Executive Shareholders shall promptly communicate to the Buyer
any inquiries or communications concerning any such transaction which they may
receive or of which they may become aware prior to the termination of this
Agreement.
Section 7.8 Further Assurances. Upon the reasonable request of the
Buyer at any time after the Closing Date, each Seller shall forthwith execute
and deliver such further instruments of assignment, transfer, conveyance,
endorsement, direction or authorization and other documents as the Buyer or its
counsel may request to perfect title of the Buyer and its successors and assigns
to the Purchased Property or otherwise to effectuate the purposes of this
Agreement.
Section 7.9
Covenant Not to Compete.
(a) The Sellers and the Executive Shareholders agree for themselves
and their respective Affiliates that, for a period commencing on the Closing
Date hereof and ending on the fifth anniversary of the Closing Date, without the
written consent of the Buyer, they shall not, jointly or severally, provide or
have any interest in any Person that provides or is engaged in, whether as an
owner, employee, officer, director, shareholder, partner, contractor,
consultant, agent, joint venturer, or advisor, (i) subspecialty capitated or
discounted fee for service networks, or related administrative or management
services, to any Person providing, directly or indirectly, health care services
or (ii) the business presently engaged in, or engaged in at such time by any
Seller, any Executive Shareholder, the Buyer, or any of their respective
Affiliates, in either case in the United States of America, its territories and
possessions.
(b) The Sellers and the Executive Shareholders acknowledge and agree
that the restrictions set forth in Section 7.9(a), including the territory set
forth therein, are reasonable and necessary to protect the legitimate business
interests of the Buyer including the goodwill of the Sellers, the Executive
Shareholders, and their respective Affiliates being purchased by the Buyer
pursuant to this Agreement and the substantial relationships (as reflected, in
part, in the Contracts)
with payors and other medical providers and patients that are being
transferred to the Buyer as contemplated by this Agreement.
(c) The Sellers and the Executive Shareholders agree that a monetary
remedy for a breach of the agreement set forth in Section 7.9(a) hereof will be
inadequate and impracticable and further agree that such a breach would cause
the Buyer irreparable harm, and that the Buyer shall be entitled to temporary
and permanent injunctive relief without the necessity of proving actual damages.
In the event of such a breach, the Sellers and the Executive Shareholders agree
that, in addition to all other remedies available at law or in equity, the Buyer
shall be entitled to such injunctive relief, including temporary restraining
orders, preliminary injunctions and permanent injunctions as a court of
competent jurisdiction shall determine.
(d) If any provision of this Section 7.9 is invalid, void or
unenforceable in part, it shall be curtailed, both as to time and location, to
the minimum extent required for its validity under applicable laws and shall be
binding and enforceable with respect to each Seller and each Shareholder as so
curtailed.
(e) The foregoing five-year period shall be tolled for any period(s)
of violation or period(s) of time required for litigation to enforce the
covenants herein.
Section 7.10 Non-Solicitation of Employees. The Sellers and the
Executive Shareholders agree for themselves and their respective Affiliates, for
a period commencing on the Closing Date hereof and ending on the fifth
anniversary of the Closing Date, not to make, offer, solicit or induce to enter
into, any written or oral arrangement, agreement or understanding regarding
employment or retention as a consultant or independent contractor with any
person who (i) was, on the date hereof, a Network Physician, Consultant, or an
Employee of any Seller and employed or engaged in any Business, or (ii) is at
the time of such solicitation, or who was at any time during the six-month
period prior to such solicitation, an employee or consultant or independent
contractor of Buyer or an Affiliate of Buyer, without the written consent of the
Buyer.
Section 7.11 Assignment of Contracts and Warranties. Each Seller
assigns to the Buyer effective from and after the Closing all right, title and
interest of each Seller and its Affiliates in, to and under the Contracts.
Notwithstanding the foregoing, no Contract shall be assigned contrary to law or
the terms of such Contract and, with respect to Contracts that cannot be
assigned to the Buyer, the performance obligations of the applicable Seller
thereunder shall, unless not permitted by such Contract, be deemed to be
subleased or subcontracted to the Buyer until such Contract has been assigned.
The Buyer shall reasonably assist each Seller in obtaining any necessary
approvals to such subleases and subcontracts. The Buyer shall take all necessary
actions to perform and complete all Contracts in accordance with their terms if
neither assignment, subleasing nor subcontracting is permitted by the other
party, and each Seller shall pay over to the Buyer any amounts received by such
Seller after the Closing Date as a result of performance by the Buyer of such
Contracts; provided; however, to the extent any such Contract is a Key Contract,
nothing set forth herein shall require the Buyer to assume any obligation of any
of the Sellers under such Key Contract until the consent to assignment with
respect thereto has been obtained unless the Buyer shall have waived the
requirement that such consent be obtained as a condition to Closing as
contemplated in Section 8.7 hereof.
Section 7.12 Notice of Breach.
(a) The Sellers and the Executive Shareholders shall promptly give
the Buyer and Parent notice with particularity upon having knowledge of any
matter that may constitute a breach of any of their respective representations,
warranties, agreements or covenants contained in this Agreement.
(b) Each of the Buyer and Parent shall promptly give the Sellers and
the Executive Shareholders written notice with particularity upon having
knowledge of any matter that may constitute a breach of any of their respective
representations, warranties, agreements or covenants contained in this
Agreement.
Section 7.13 Bulk Sales Compliance. The Sellers and the Executive
Shareholders shall take all action necessary such that all transactions
contemplated by this Agreement comply in all material respects with any "Bulk
Transfer" provisions of the Uniform Commercial Code which may be in effect in
each applicable jurisdiction.
Section 7.14 Conduct of the Businesses after Closing. Each of
Parent, the Buyer, the Sellers and the Executive Shareholders covenant and agree
that the business of the Buyer shall be conducted in accordance with the
provisions of this Section 7.14 from and after the Closing Date through and
including the third anniversary of the Closing Date: ~
(a) Parent, the Buyer and the Executive Shareholders acknowledge
that it is their intent to exercise their Best Efforts to facilitate the growth
and profitability of the Subject Business; provided, however, that nothing set
forth in this Agreement shall require the Parent or any Affiliate of the Parent
to refer any business to or to otherwise conduct any business through the Buyer.
Parent is not prohibited from acquiring or merging with other entities engaged
in the Subject Business, or from being acquired by or merged with those who are,
but in the event the Buyer is sold or otherwise ceases to be an Affiliate of the
Parent, the Parent will seek to obtain contractual protection from the acquiring
entity or entities to agree not to interfere with the existing business of the
Buyer or with the Buyer's existing contractual relationships.
(b) Notwithstanding anything to the contrary in this Section 7.14,
the prior approval of the Board of Directors of the Buyer shall be required for
any Third Party Payor Agreements to which the Buyer or any of its subsidiaries
is a party and which involves aggregate payments or liabilities in excess of
$100,000. Parent shall use its Best Efforts to cause the directors designated by
it to vote in favor of any such contract unless Parent determines in good faith
that the operations, prospects, net income or condition (financial or other) of
Parent or any Affiliate of Parent would be adversely affected by entering into
or performing the contract.
(c) Without the consent of the Executive Shareholders, Buyer shall
not sell, merge, transfer, consolidate or otherwise dispose of any material part
of the Businesses to any other party, other than as a whole entity or entities;
provided, however, that nothing set forth in this Section 7.14 shall prohibit or
restrict Buyer from making any distributions of any kind to the Parent.
Section 7.15 Meetings of the Board of Directors of Buyer. From and
after the Closing Date through and including the third anniversary of the
Closing Date, the Executive Shareholders shall be entitled to attend and
participate in a non-voting capacity in all meetings of the board of directors
of the Buyer. In this regard, the Executive Shareholders will receive all
notices and other materials distributed to members of the board of directors of
the Buyer in such capacity.
Section 7.16 Information Technologies Budget. Within 30 days
following the date of this Agreement, Buyer and AHG shall mutually agree upon a
budget for information technologies expenditures (the "Information Technologies
Budget"). The Information Technologies Budget will designate which items will be
expensed and which items will be capitalized for purposes of calculating EBITDA
regardless of the treatment of such items under GAAP.
Section 7.17 Indemnification for Certain Liabilities. ▇▇▇▇▇ ▇▇▇▇▇,
M.D. and Gut agree to jointly and severally indemnify and hold harmless Buyer
Indemnitees (as said term is define in Section 11) from and against any Losses
(as said term is defined in Section ll) arising out of, relating to or resulting
from the following legal action: ▇▇▇▇▇▇▇ ▇▇▇▇▇, M.D., Plaintiff, vs. ▇▇▇▇▇
▇▇▇▇▇, M.D., et al, Defendants, filed in the Circuit Court of the Seventeenth
Judicial Circuit in and for Broward County, Florida, General Jurisdiction
Division, Case No. 97 04553. In the event said action has not been dismissed
with prejudice on or before the Closing Date or in the event that all
Encumbrances on any of the Purchased Property arising out of said litigation or
the settlement thereof have not been released in full on or before the Closing
Date to the Buyer's satisfaction, at the election of the Buyer, in its sole
discretion, it shall withhold from the Closing Cash Installment payable to Gut
an amount not to exceed 50% of such sum and to pay said sum to a mutually
acceptable escrow agent to be held in escrow and released pursuant to the terms
and conditions of a mutually acceptable escrow agreement in order to provide a
fund for the payment of any indemnification claim to which the Buyer Indemnitees
may be entitled pursuant to the terms and conditions set forth in this Section
7.17. At the election of Buyer, in its sole discretion, it may also direct that
up to 50` of Gut's share of any future distributions to be made to AHG, on
behalf of the Sellers, pursuant to Section 3.4 be deposited into the escrow
agreement entered into pursuant to this Section 7.17. ▇▇▇▇▇ ▇▇▇▇▇, M.D. and Gut
acknowledge and agree that if the indemnification claims under this Section
exceed the amount held pursuant to said indemnification agreement, ▇▇▇▇▇ ▇▇▇▇▇,
M.D. and Gut shall remain liable for any such excess.
Section 7.18 Refinancing of Existing Bank Loan. Pursuant to that
certain Business Loan Agreement dated March 7, 1997 between FSN and Executive
National Bank, FSN borrowed the principal amount of $240,000. Magellan agrees to
refinance the outstanding indebtedness under said bank loan as follows. At the
Closing, Magellan agrees to loan the Buyer such amount as is necessary to enable
the Buyer to pay said bank loan, including all accrued interest, in full. The
loan from Magellan shall bear interest at the same rate as that of the bank loan
and shall be payable in three equal annual installments on each of the first
three anniversaries of the Closing Date. Payments of principal shall be taken
into account in connection with the calculation of the earn-out and/or
adjustment amounts pursuant to Section 3.3.
SECTION 8. CONDITIONS TO OBLIGATIONS OF BUYER.
The obligations of the Buyer to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or before the
Closing Date, of the following conditions, any one or more of which may be
waived by the Buyer in its sole discretion.
Section 8.1 Representations and Warranties. All representations and
warranties made by each Seller and each Executive Shareholder in this Agreement
shall be true and correct on and as of the Closing Date as if again made by such
Seller and such Executive Shareholder on and as of such date.
Section 8.2 Performance of Seller's and Shareholders' Obligations.
Each Seller and each Executive Shareholder shall have performed in all respects
all obligations required under this Agreement to be performed by them on or
before the Closing Date.
Section 8.3 Consents and Approvals. All consents, waivers,
authorizations and approvals of any Governmental Authority, and of any other
person, firm or corporation, required of each Seller and each Shareholder in
connection with the execution, delivery and performance of this Agreement, shall
have been duly obtained and shall be in full force and effect on the Closing
Date.
Section 8.4 No Violation of Orders. No preliminary or permanent
injunction or other order issued by any Governmental Authority, nor any statute,
rule, regulation, decree or executive order promulgated or enacted by any
Governmental Authority, which declares this Agreement invalid in any respect or
prevents the consummation of the transactions contemplated hereby, or which
materially and adversely affects the Purchased Property, operations, prospects,
net income or financial condition of any Seller shall be in effect; and no
action or proceeding before any Governmental Authority shall have been
instituted or threatened by any Governmental Authority or by any other person,
or entity which seeks to prevent or delay the consummation of the transactions
contemplated by this Agreement or which challenges the validity or
enforceability of this Agreement.
Section 8.5 No Material Adverse Change. During the period from July
1, 1997 to the Closing Date, there shall not have been any material adverse
change in the Purchased Property, business, operations, prospects, net income or
condition (financial or other) of the Businesses of the Sellers, taken as a
whole.
Section 8.6 Due Diligence with Respect to Third Party Payors. The
Buyer shall have completed its due diligence investigation of the Third Party
Payor Agreements, the parties thereto and actively sought prospective parties to
Third Party Payor Agreements (including, without limitation PruCare) and shall
have concluded, in its sole and absolute discretion, that the results of such
investigation are satisfactory to it and that it is willing, following such
review, to consummate the transactions contemplated by this Agreement. The
Sellers and the Executive Shareholders acknowledge and agree that the Buyer may
conclude for any reason deemed
sufficient by it that the results of such investigation are not satisfactory.
Section 8.7 Consents under Key Contracts. On or before the Closing
Date, the Sellers shall have obtained all necessary or appropriate consents,
approvals, notations, authorizations, exemptions or waivers from parties to the
Contracts, Licenses and Permits listed or referred to on Schedule 8.7 (as the
same shall be amended at the Buyer's request to reflect Contracts, Licenses and
Permits disclosed on any supplemental Schedule delivered pursuant to Section
7.4) (collectively, the "Key Contracts") on terms satisfactory to the Buyer;
provided, however, that the Buyer shall not require any changes to any such
Contracts or Licenses and Permits in connection with such consents, approvals,
notations, authorizations, exemptions or waivers; and provided, further that
none of the Sellers shall make any changes to any such Contracts or Licenses and
Permits in connection with such consents, approvals, notations, authorizations,
exemptions or waivers.
Section 8.8 ▇▇▇▇▇▇▇ Consulting Arrangement.
(a) The Sellers shall have demonstrated and presented evidence to
the Buyer's satisfaction that the ▇▇▇▇▇▇▇ Consulting Agreement shall have been
terminated as of the Closing, which termination shall provide an express
exculpation of each of the Buyer and its Affiliates, the Sellers and the
Executive Shareholders as to any past, present or future liability or obligation
toward the ▇▇▇▇▇▇▇ Parties arising out of the ▇▇▇▇▇▇▇ Consulting Agreement and
each of the ▇▇▇▇▇▇▇ Parties shall have agreed to indemnify and hold harmless, on
a joint and several basis, each of the Sellers, the Executive Shareholders and
the Buyer and its Affiliates from and against any damages, costs and expenses
suffered by any such party arising from any such claim.
(b) Each of the ▇▇▇▇▇▇▇ Parties shall have executed and delivered to
the Buyer a buy-out agreement with the Buyer (with its effectiveness conditioned
on completion of the Closing) in such form as shall be mutually acceptable to
the parties.
(c) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have executed and delivered to the Buyer a
consulting agreement with the Buyer (with its effectiveness conditioned on
completion of the Closing) in such form as shall be mutually acceptable to the
parties (the "New ▇▇▇▇▇▇▇ Consulting Agreement"). Notwithstanding anything to
the contrary set forth in the New ▇▇▇▇▇▇▇ Consulting Agreement, Buyer shall not
be responsible for any compensation or other benefits or expenses owing to ▇▇.
▇▇▇▇▇▇▇ in excess of $800,000 per year, and the Sellers and the Executive
Shareholders agree, jointly and severally, to be responsible for and to
indemnify and hold Buyer and its Affiliates harmless from and against any and
all liability for amounts owing to ▇▇. ▇▇▇▇▇▇▇ in excess of $800,000 per year.
(d) Global Health Systems, Inc., a limited partner of FSN, shall
have agreed to provide software support services to the Buyer relating to the
Business of and the Purchased Property relating to FSN for no more than $60,000
per year during the EarnOut Periods in substantially the same manner as Global
Health Systems, Inc. performed such services prior to the Closing, such
agreement to be in form and substance reasonably satisfactory to the Buyer, and
the Buyer shall have received such assurances as it deems necessary or advisable
that the Buyer will
continue to have a perpetual license to the underlying software with the right
to make modifications.
Section 8.9 Employment Agreement with ▇▇. ▇▇▇▇▇. The Buyer and Dr.
▇.▇. ▇▇▇▇▇ shall have executed and delivered an amendment to that certain
employment agreement with ▇▇. ▇▇▇▇▇ identified on Schedule 5.16(a) (with its
effectiveness conditioned on completion of the Closing), containing mutually
acceptable nonsolicitation and non-competition provisions in favor of the Buyer
in such form as shall be mutually acceptable to the parties.
Section 8.10 Financial Statements and Projections. On the Closing
Date, the most recent Management Prepared Financial Statements available prior
to the Closing reflect provision for accrued liabilities, including vacation and
sick, medical claims and extended reporting endorsement for each of the Sellers
(including all IBNR amounts), in an amount which the Sellers and Executive
Shareholders reasonably believe will be adequate to meet such accrued
liabilities. On the Closing Date, the Sellers shall have Cash and Cash
Equivalents and Accounts Receivable in an amount sufficient to satisfy the
aggregate current liabilities of the Sellers as set forth in the most recent
Management Prepared Financial Statements. The Audited Financial Statements and
the Management Prepared Financial Statements reflect all professional liability
claims and reserves, including all IBNR amounts, as at the respective dates of
the Audited Financial Statements and the Management Prepared Financial
Statements.
Section 8.11 Opinion of Counsel. The Buyer shall have received a
favorable opinion, dated as of the Closing Date, from Broad and ▇▇▇▇▇▇, counsel
to the Sellers and the Executive Shareholders, in form and substance reasonably
satisfactory to the Buyer and its counsel, to the effect set forth on Exhibit C.
Section 8.12 Other Closing Documents. The Buyer shall have received
such other certificates, instruments and documents in confirmation of the
representations and warranties of the Sellers and the Shareholders or in
furtherance of the transactions contemplated by this Agreement as the Buyer or
its counsel may reasonably request, including, without limitation, the
Management Agreement in form and substance satisfactory to the Buyer.
Section 8.13 Legal Matters. All certificates, instruments, opinions
and other documents required to be executed or delivered by or on behalf of any
of the Sellers and the Shareholders under the provisions of this Agreement, and
all other actions and proceedings required to be taken by or on behalf of any of
the Sellers and the Shareholders in furtherance of the transactions contemplated
hereby, shall be reasonably satisfactory in form and substance to counsel for
the Buyer. Each of the Sellers shall have provided the Buyer with a certificate
stating that it is not a "foreign person" within the meaning of Treasury
Regulations ss. 1.1445-2(b). The certificate shall be in such form as shall be
mutually acceptable to the parties.
Section 8.14 TPA and UR Licenses. The Buyer shall have received
approval from all required state agencies, including Florida's and Texas'
Department of Insurance, to operate as a "third party administrator" or the
Buyer shall have otherwise received such assurances as the Buyer, in its sole
discretion, deems necessary or advisable, that it will be able to operate the
Businesses pursuant to an agreement with a holder of a TPA license upon such
terms
and conditions acceptable to the Buyer in its sole discretion.
SECTION 9. CONDITIONS TO OBLIGATIONS OF THE SELLERS.
The obligations of the Sellers to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or before the
Closing Date, of the following conditions, any one or more of which may be
waived by the Sellers in their sole discretion:
Section 9.1 Representations and Warranties of the Buyer. All
representations and warranties made by the Buyer and Parent in this Agreement
shall be true and correct on and as of the Closing Date as if again made by the
Buyer and Parent on and as of such date.
Section 9.2 Performance of the Buyer's Obligations. Each of the
Buyer and Parent shall have performed in all respects all obligations required
under this Agreement to be performed by it on or before the Closing Date.
Section 9.3 Consents and Approvals. All consents, waivers,
authorizations and approvals of any Governmental Authority and of any other
person, firm or corporation, required of the Buyer and Parent in connection with
the execution, delivery and performance of this Agreement, shall have been duly
obtained and shall be in full force and effect on the Closing Date.
Section 9.4 No Violation of Orders. No preliminary or permanent
injunction or other order issued by any Governmental Authority, nor any statute,
rule, regulation, decree or executive order promulgated or enacted by any
Governmental Authority -which declares this Agreement invalid or unenforceable
in any respect or which prevents the consummation of the transactions
contemplated hereby shall be in effect and no action or proceeding before any
Governmental Authority shall have been instituted or threatened by any
Governmental Authority or by any other person which seeks to prevent or declare
the consummation of the transactions contemplated by this Agreement or which
challenges the validity or enforceability of this Agreement.
Section 9.5 Opinion of Counsel. The Sellers shall have received a
favorable opinion, dated as of the Closing Date, from Dow, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇,
PLLC, counsel to the Buyer and Parent, in form and substance reasonably
satisfactory to the Sellers and their counsel, to the effect set forth on
Exhibit D. In addition, the Sellers shall have received a favorable opinion,
dated as of the Closing Date, from in-house counsel of the Buyer and Magellan,
in form and substance reasonably satisfactory to the Sellers and their counsel,
to the effect that the execution and delivery of this Agreement by the Buyer and
Parent did not, and the performance of this Agreement by the Buyer and Parent
will not violate or conflict with any provision of the Articles or Certificate
of Incorporation or By-Laws of the Buyer or Parent, respectively, and did not
and will not violate any provision of any order, judgment or decree of any
Governmental Authority to which either the Buyer or Parent is bound, and (other
than as disclosed in Schedule 6.4) did not and will not violate or result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any material loan agreement, mortgage, security agreement or trust
indenture to which the Buyer or Parent is a party or by which it is bound or to
which any of its
properties or assets is subject, which violation, breach or default would have a
material adverse effect on the financial condition of the Buyer or Parent, taken
as a whole.
Section 9.6 Other Closing Documents. The Sellers shall have received
such other certificates, instruments and documents in confirmation of the
representations and warranties of the Buyer and Parent or in furtherance of the
transactions contemplated by this Agreement as the Sellers, the Executive
Shareholders or their counsel may reasonably request, including, without
limitation, the Management Agreement in form and substance satisfactory to the
Executive Shareholders.
Section 9.7 Legal Matters. All certificates, instruments, opinions
and other documents required to be executed or delivered by or on behalf the
Buyer and Parent under the provisions of this Agreement, and all other actions
and proceedings required to be taken by or on behalf of the Buyer and Parent in
furtherance of the transactions contemplated hereby, shall be reasonably
satisfactory in form and substance to counsel for the Sellers.
SECTION 10. TERMINATION AND ABANDONMENT.
Section 1..1 Methods of Termination: Upset Date This Agreement may
be terminated and the transactions contemplated hereby may be abandoned at any
time before the Closing:
(a) By the mutual written consent of the Buyer and all of the
Sellers;
(b) By the Buyer, if all the conditions set forth in Section 8 of
this Agreement shall not have been satisfied or waived on or before November 30,
1997 unless such satisfaction frustrated or made impossible by any act or
failure to act of the Buyer;
(c) By agreement of all the Sellers if all the conditions set forth
in Section 9 of this Agreement shall not have been satisfied or waived on or
before November 30, 1997, unless such satisfaction has been frustrated or made
impossible by any act or failure to act of any Seller or any Shareholder;
(d) By either the Buyer, on the one hand, or the agreement of all
the Sellers, on the other, if the Buyer, in the case of the Sellers, or any of
the Sellers or the Executive Shareholders, in the case of the Buyer, fails to
comply in any material respect with any of its covenants or agreements contained
herein or in any document delivered in connection herewith, or breaches any of
its representations and warranties in any material way;
(e) By the Buyer or agreement of all the Sellers if a Governmental
Authority of competent jurisdiction shall have issued an order, decree or ruling
or taken any other action (which order, decree or ruling the parties hereto
shall use their reasonable efforts to lift), which permanently restrains,
enjoins or otherwise prohibits the transactions contemplated by this
Agreement; or
(f) By the Buyer on or before October 23, 1997, in the event Parent
and the minority shareholders of Care Management Resources, Inc. (i) shall not
have terminated that certain shareholders agreement with respect to their
interests in said corporation, or (ii) shall not have otherwise amended said
shareholders agreement to Parent's satisfaction, or (iii) shall not have
otherwise entered into an agreement providing for such termination or amendment,
all upon such terms and conditions acceptable to Parent, in its sole discretion.
Section 10.2 Procedure Upon Termination. In the event of termination
and abandonment of this Agreement by the Sellers or the Buyer pursuant to
Section 10.1, written notice thereof shall forthwith be given to the other party
or parties, as applicable, and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned, without further action by
the Sellers or the Buyer. If this Agreement is terminated as provided herein, no
party to this Agreement shall have any liability or further obligation to any
other party to this Agreement except as provided below and elsewhere in this
Agreement, including Sections 12.3, 12.4, 12.8 and 12.14 hereof; provided,
however, that no termination of this Agreement pursuant to this Section 10 shall
relieve any party of liability for a breach of any provision of this Agreement
occurring before such termination. Upon the termination of this Agreement,
Parent and Buyer, on the one hand, and the Sellers and Executive Shareholders,
on the other, shall return all confidential materials previously furnished to
the other except to the extent that a party may require such materials for
purposes of enforcing its rights or pursuing any of its remedies under this
Agreement, at law or in equity. This provision shall survive the termination of
this Agreement.
SECTION 11. INDEMNIFICATION.
Section 11.1 Indemnification by the Sellers and the Executive
Shareholders. Notwithstanding the Closing or the delivery of the Purchased
Property and regardless of any investigation at any time made by or on behalf of
the Buyer or Parent or of any knowledge or information that the Buyer or Parent
may have, each Seller and each of the Executive Shareholders agrees to jointly
and severally indemnify and fully defend, save and hold the Buyer, any Affiliate
of the Buyer and their respective directors, officers and employees (the "Buyer
Indemnitees"), harmless if any Buyer Indemnitee shall at any time or from time
to time suffer any damage, liability, loss, cost, expense (including all
reasonable attorneys' and experts' fees and disbursements), deficiency,
interest, penalty, impositions, assessments or fines, whether or not arising
with respect to any claim, charge, suit, proceeding, investigation, arbitration
or mediation and, if instituted, whether at any trial or appellate level, and
whether raised by the parties hereto or any third party (collectively, "Losses")
arising out of or resulting from, or shall pay or become obliged to pay any sum
on account of, any Sellers' Event of Breach. As used herein, "Sellers' Event of
Breach" shall be and mean any one or more of the following:
any untruth or inaccuracy in any representation of any Seller or any
Executive Shareholder or the breach of any warranty of any Seller or Executive
Shareholder, without giving effect to any "materiality" qualification or
limitation stated in such representation or warranty and
without regard to whether the indemnifying Seller or Executive Shareholder made
such representation or breached such warranty (including, without limitation,
(i) any misrepresentation in, or omission from, any statement, certificate,
schedule, exhibit, annex or other document furnished pursuant to this Agreement
by any Seller or any Shareholder (or any of their representatives) to the Buyer
(or any representative of the Buyer) and any misrepresentation in or omission
from any document furnished to the Buyer in connection with the Closing and (ii)
any and all liabilities of or claims against any Business, the Purchased
Property, or any Buyer Indemnitee arising out of any action, suit, proceeding,
dispute or investigation or order, writ, judgment, award, injunction or decree
of the character described in Section 5.15 or out of any Contract to the extent
not set forth in Schedule 5.16(a) or with respect to any obligation under any
such Contract with respect to any period prior to the Closing Date);
(b) any failure of any Seller or any Executive Shareholder to
perform or observe any term, provision, covenant, agreement or condition on the
part of any Seller or any Executive Shareholder to be performed or observed;
(c) any claim or cause of action by any party against any Buyer
Indemnitee, with respect to the Excluded Liabilities; or with respect to Losses
arising with respect to the operation of any Business or the Purchased Property
on or prior to the Closing Date or with respect to any services provided by the
Seller or its employees, independent contractors or consultants on or prior to
the Closing Date;
(d) any direct or indirect obligations or liabilities described in
Section 7.5(c) that may arise before or after the Closing Date; or
(e) any claim or cause of action against any Buyer Indemnitee by any
Shareholder (other than the Executive Shareholders) other than by reason of
their employment agreements, if any, with the Buyer;
provided, however, that, except as otherwise stated in the following
proviso, the Sellers and the Executive Shareholders shall have no obligation to
make any payment under Section 11.1(a) with respect to any representation or
warranty made in good faith without actual knowledge or notice of falsity unless
the aggregate amount to which all Buyer Indemnitees are entitled by reason of
all such claims exceeds $100,000, it being understood that once such amount is
exceeded, the aggregate of all such claims (including such $100,000 amount and
any amount in excess thereof) shall be payable jointly and severally by the
Sellers and the Executive Shareholders to the Buyer. In addition, the Sellers
and the Executive Shareholders shall have no obligation to make any payment
under Section 11.1(a) with respect to the representation and warranty made in
Section 5.13(b), made in good faith without actual knowledge or notice of
falsity, unless such Losses arise as a result of events, conditions or facts
existing before the Closing Date.
Section 11.2 Procedures for Indemnification by the Sellers. If a
Sellers' Event of Breach occurs or is alleged and a Buyer Indemnitee asserts
that the Sellers or any of the Executive Shareholders has become obligated to
such Buyer Indemnitee pursuant to Section 11.1, or if any suit, action,
investigation, mediation, claim or proceeding is begun, made or instituted as
a result of which the Sellers or any of the Executive Shareholders may become
obligated to a Buyer Indemnitee hereunder, such Buyer Indemnitee shall give
written notice to the Sellers and the Executive Shareholders. The Sellers and
the Executive Shareholders agree to jointly and severally defend, contest or
otherwise protect the Buyer Indemnitee against any such suit, action,
investigation, claim or proceeding at their sole cost and expense. The Buyer
Indemnitee shall have the right, but not the obligation, to participate at its
own expense in the defense thereof by counsel of the Buyer Indemnitee's choice
and shall in any event cooperate with and assist the Sellers and the Executive
Shareholders to the extent reasonably possible. If the Sellers and the Executive
Shareholders fail to timely defend, contest or otherwise protect against such
suit, action, investigation, claim or proceeding, the Buyer Indemnitee shall
have the right to do so, including the right to make any compromise or
settlement thereof, and the Buyer Indemnitee shall be entitled to recover the
entire cost thereof jointly and severally from the Sellers or the Executive
Shareholders, including reasonable attorneys' fees, disbursements and amounts
paid as the result of such suit, action, investigation, mediation, claim or
proceeding.
Section 11.3 The Buyer's Right of Set-Off. In the event the Buyer
has a claim against any of Sellers or Executive Shareholders for indemnification
pursuant to this Section 11 or as a result of the failure by the Sellers or the
Executive Shareholders to pay the Buyer any amounts owed to it pursuant to
Section 3, the Buyer may set-off the amount of such Losses against any amounts
payable directly or indirectly by or on behalf of the Buyer to the Sellers from
time to time pursuant to this Agreement or the agreements and documents
referenced herein, including without limitation any amounts payable by the Buyer
to the Escrow Agent pursuant to Section 3.
Section 11.4 Indemnification by the Buyer and Parent.
Notwithstanding the Closing or the delivery of the Purchased Property and
regardless of any investigation at any time made by or on behalf of the Sellers
or the Executive Shareholders or of any knowledge or information that the
Sellers or the Executive Shareholders may have, the Buyer and Parent shall
jointly and severally indemnify and agree to fully defend, save and hold each of
the Sellers, and its directors, officers and employees, and each Executive
Shareholder (collectively, the "Seller Indemnitees"), harmless if any Seller
Indemnitee shall at any time or from time to time suffer any Losses arising out
of or resulting from, or shall pay or become obligated to pay any sum on account
of, any Buyer's Event of Breach. As used herein, "Buyer's Event of Breach" shall
be and mean any one or more of the following:
(i) any untruth or inaccuracy in any representation of the Buyer or
Parent or the breach of any warranty of the Buyer or Parent contained in this
Agreement;
(ii) any failure of the Buyer or Parent duly to perform or observe
any term, provision, covenant, agreement or condition contained in this
Agreement on the part of the Buyer or Parent to be performed or observed; and
(iii) any claim or cause of action by any party against any Seller
Indemnitees with respect to Assumed Liabilities;
provided, however, that neither the Buyer nor Parent shall have any obligation
to make any
payment under Section 11.4(a) with respect to any representation or warranty
made in good faith without actual knowledge or notice of falsity unless the
aggregate amount to which all Seller Indemnitees are entitled by reason of all
such claims exceeds $100,000, it being understood that once such amount is
exceeded, the aggregate of all such claims (including such $100,000 amount and
any amount in excess thereof) shall be payable by the Buyer and Parent on demand
by the Seller Indemnitees.
Section 11.5 Procedures for Indemnification by the Buyer and Parent.
If a Buyer's Event of Breach occurs or is alleged and a Seller Indemnitee
asserts that the Buyer or Parent has become obligated to it pursuant to Section
11.4, or if any suit, action, investigation, claim or proceeding is begun, made
or instituted as a result of which the Buyer or Parent may become obligated to a
Seller Indemnitee hereunder, such Seller Indemnitee shall give written notice to
the Buyer and Parent. The Buyer and Parent agree to defend, contest or otherwise
protect such Seller Indemnitee against any such suit, action, investigation,
claim or proceeding at its sole cost and expense. Such Seller Indemnitee shall
have the right, but not the obligation, to participate at its own expense in the
defense thereof by counsel of its choice and shall in any event cooperate with
and assist the Buyer or Parent to the extent reasonably possible. If the Buyer
or Parent fails timely to defend, contest or otherwise protect against such
suit, action, investigation, claim or proceeding, such Seller Indemnitee shall
have the right to do so, including the right to make any compromise or
settlement thereof, and such Seller Indemnitee shall be entitled to recover the
entire cost thereof from the Buyer or Parent including reasonable attorneys'
fees, disbursements and amounts paid as the result of such suit, action,
investigation, claim or proceeding.
Section 11.6 The Sellers' and Executive Shareholders' Right of Set-Off. In the
event the Sellers or Executive Shareholders have a claim against the Buyer or
Parent for indemnification pursuant to this Section 11 or as a result of the
failure by the Buyer or Parent to pay the Sellers any amounts owed to them
pursuant to Section 3, the Sellers and Executive Shareholders may set-off the
amount of such Losses against any amounts payable directly or indirectly by or
on behalf of the Sellers or Executive Shareholders to the Buyer or Parent from
time to time pursuant to this Agreement or the agreements and documents
referenced herein, including without limitation any amounts payable by the
Sellers or Executive Shareholders pursuant to Section 3.
Section 11.7 Purchase Price Adjustment. The Buyer and each of the
Sellers agree to treat any payments under this Section 11 as an adjustment to
the Purchase Price for all federal, state and local Tax purposes.
MISCELLANEOUS.
SECTION 12.
Section 12.1 Successors and Assigns; Restrictions on Assignment and
Transfer of Purchase Price. Except as otherwise provided in this Agreement, no
party hereto shall assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other party hereto and any such
attempted assignment without such prior written consent shall be void and of no
force and effect, Provided, that the Buyer may assign its rights hereunder to
any of its
Affiliates, and the Buyer may assign its rights to indemnification or damages
hereunder to the lender or lenders providing financing to the Buyer; provided,
further, that no such assignment shall reduce or otherwise vitiate any of the
obligations of any of the Sellers, the Executive Shareholders or Parent
hereunder. This Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective successors, permitted assigns,
heirs, beneficiaries, estates, executors and personal representatives.
Section 12.2 Governing Law. Jurisdiction. This Agreement shall be
construed, performed and enforced in accordance with, and governed by, the laws
of the State of Florida, without giving effect to the principles of conflicts of
laws thereof.
Section 12.3 Expenses. Except as otherwise provided herein, each of
the parties hereto shall pay its own expenses in connection with this Agreement
and the transactions contemplated hereby, including any legal and accounting
fees, whether or not the transactions contemplated hereby are consummated. The
Sellers shall pay all state and local sales, use, transfer, excise, value-added
or other similar Taxes and all recording and filing fees that may be imposed by
reason of the sale, transfer, assignment and delivery of the Purchased Property
and shall prepare and file all Tax Returns related thereto. The Buyer shall pay
50` and the Sellers shall pay 50` of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ filing fee, if any,
required in connection with the transaction contemplated hereby.
Section 12.4 Joint and Several Obligations.
Notwithstanding anything to the contrary contained in this Agreement, each and
every obligation of any Seller or Executive Shareholder hereunder shall be a
joint and several obligation of all the Sellers and Executive Shareholders.
Section 12.5 Severability. In the event that any part of this Agreement is
declared by any court or other judicial or administrative body to be null, void
or unenforceable, said provision shall survive to the extent it is not so
declared, and all of the other provisions of this Agreement shall remain in full
force and effect.
Section 12.6 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is to be given; (ii) on the day of transmission if sent via
facsimile transmission to the facsimile number given below, and telephonic
confirmation of receipt is obtained promptly after completion of transmission;
(iii) on the day after delivery to Federal Express or similar overnight courier;
or (iv) on the fifth day after mailing, if mailed to the party to whom notice is
to be given, by first class mail, registered or certified, postage prepaid and
properly addressed, to the party as follows:
If to the Sellers and/or the Executive Shareholders
Allied Health Group, Inc.
Florida Specialty Network, Ltd.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Gut Management, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Sky Management Co.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Surginet, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Surgical Associates of South Florida, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Florida Specialty Network, Ltd.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D.
▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, M.D.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Copy to:
▇▇▇▇▇ ▇▇▇▇▇▇, M.D.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Broad and ▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, P.A.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Buyer and/or Parent:
Magellan Health Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Vice President-Mergers and Acquisitions
Copy to:
Magellan Health Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Any party may change its address for the purpose of this Section by
giving the other party written notice of its new address in the manner set forth
above.
Section 12.7 Amendments; Waivers. This Agreement may be amended or
modified, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties hereto, or in the case of a waiver, by the party waiving compliance. Any
waiver by any party of any condition, or of the breach of any provision, term,
covenant, representation or warranty contained in this Agreement, in any one or
more instances, shall not be deemed to be nor construed as further or continuing
waiver of any such condition, or of the breach of any other provision, term,
covenant, representation or warranty of this Agreement.
Section 12.8 Public Announcements. The parties agree that after the
signing of this Agreement, neither party shall make any press release or public
announcement concerning this transaction without the prior written approval of
the other party unless, in the opinion of such party's counsel, a press release
or public announcement is required by applicable law or stock exchange rules.
If, in the opinion of such party's counsel, any such announcement or other
disclosure is required by applicable law or stock exchange rules, the disclosing
party agrees to give then nondisclosing party prior notice and an opportunity to
comment on the proposed disclosure.
Section 12.9 Entire Agreement. This Agreement contains the entire
understanding between the parties hereto with respect to the transactions
contemplated hereby and supersedes and replaces all prior and contemporaneous
agreements and understandings, oral or written, with regard to such
transactions. All exhibits and schedules hereto and any documents and
instruments delivered pursuant to any provision hereof are expressly made a part
of this Agreement as fully as though completely set forth herein.
Section 12.10 Parties in Interest. Nothing in this Agreement is
intended to confer any rights or remedies under or by reason of this Agreement
on any persons other than the Sellers, and the Buyer and their respective
successors and permitted assigns. Nothing in this Agreement is intended to
relieve or discharge the obligations or liability of any third persons to the
Sellers or the Buyer. No provision of this Agreement shall give any third
persons any right of subrogation or action over or against the Sellers or the
Buyer.
Section 12.11 Scheduled Disclosures. Disclosure of any matter, fact
or circumstance in a Schedule to this Agreement shall not be deemed to be
disclosure thereof for purposes of any other Schedule hereto.
Section 12.12 Section and Paragraph Headings. The section and
paragraph headings in this Agreement are for reference purposes only and shall
not affect the meaning or interpretation of this Agreement.
Section 12.13 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same instrument.
Section 12.14 Post-Closing Survival. All covenants and agreements
which by their respective terms are intended to survive the consummation of the
transactions contemplated by this Agreement shall survive such consummation in
accordance with their respective terms and conditions.
Section 12.15 Confidentiality. After the Closing, the Sellers and
the Executive Shareholders hereby agree to hold in strict confidence all
business and other information relating to the Purchased Property and the
Business and, except as otherwise required by law or as to information which
becomes publicly available, not to disclose or otherwise reveal any such
confidential information to any other person or entity without in each instance
the prior written consent of the Buyer
Section 12.16 Litigation. It is recognized by the parties to this
Agreement that litigation may arise at some time in the future relating to the
Sellers, the Buyer, Parent, the Purchased Property or the Assumed Liabilities
which may be related directly or indirectly to the period prior to the Closing
or the period subsequent to the Closing, or both. Each of the parties to this
Agreement agrees, therefore, that to the extent reasonable under the
circumstances, it will fully cooperate with and provide information, records,
documents and assistance of employees to the other parties with respect to any
litigation or potential litigation in which the other party is or may be
involved.
Section 12.17 Specific Performance. Each of the Sellers and the
Executive Shareholders acknowledge that the Buyer will be irreparably harmed and
the Buyer will have no adequate remedy at law if any of the Sellers or the
Executive Shareholders fail to perform any of their obligations under this
Agreement. It is accordingly agreed that, in addition to any other remedies
which may be available to it, the Buyer will have the right to obtain injunctive
relief to restrain a breach or threatened breach of, or otherwise obtain
specific performance of, the Sellers'
and the Executive Shareholders' covenants and other agreements contained in this
Agreement.
Section 12.18 Retention of Independent Accounting Firms. If an
Independent Accounting Firm is retained pursuant to Section 3 of this Agreement,
the Buyer, the Sellers and the Executive Shareholders shall each execute such
accounting firm's retention agreement, if any, and shall each be bound by the
obligation, if any, contained therein to provide indemnification, contribution
and related expense reimbursement to such Independent Accounting Firm.
Section 12.19 Limited Obligations of Parent. Parent hereby
guarantees the full and prompt payment when due of the Purchase Price payable
pursuant to and in accordance with the provisions set forth in Section 3. The
parties expressly agree that, notwithstanding anything to the contrary contained
in this Agreement, Parent shall not be liable to any third parties in respect of
any of the Assumed Liabilities or in respect of any other matter not related to
Parent's express obligations as set forth in this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed either in an individual capacity or by their respective officers
"hereunto duly authorized, as the case may be, as of the date first above
written.
CMSF, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
ALLIED HEALS GROUP, INC,
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
GUT MANAGEMENT, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
SKY MANAGEMENT CO.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
- JI ~
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed either in an individual capacity or by their respective officers
"hereunto duly authorized, as the case may be, as of the date first above
written.
CMSF, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
AILIED HEALS GROUP, INC,
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
GUT MANAGEMENT, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
SKY MANAGEMENT CO.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
FLORIDA SPECIALTY NETWORK, LTD.,
BY ITS GENERAL PARTNER, FLORIDA
SPECIALTY NETWORK, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
SURGICAL ASSOCIATE. OF SOUTH
FLORIDA, INC.,
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
SURGINET, INC
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------