ASSET CONTRIBUTION AND EXCHANGE AGREEMENT dated as of February 21, 2006 by and between NOVAMED ACQUISITION COMPANY, INC., NOVAMED OF DALLAS, INC., PRESTON PLAZA SURGERY CENTER, LLP AND ITS PARTNERS
FINAL
EXECUTION COPY
dated
as of February 21, 2006
by
and between
NOVAMED
ACQUISITION COMPANY, INC.,
NOVAMED
OF DALLAS, INC.,
PRESTON
PLAZA SURGERY CENTER, LLP
AND
ITS
PARTNERS
i
THIS ASSET
CONTRIBUTION AND EXCHANGE AGREEMENT
(this
“Agreement”)
is
dated effective as of 12:01 a.m. on February 21, 2006 (the
“Closing
Date”),
by and
among NovaMed
Acquisition Company, Inc., a Delaware corporation (“NovaMed”),
NovaMed of Dallas, Inc., a Delaware corporation (“NOD,”
together
with NovaMed, “Buyer”),
Preston Plaza Surgery Center, LLP, a Texas limited
liability partnership (“Seller”),
Cataract and Laser Center Partners, L.L.C., a Delaware limited liability company
d/b/a Ambulatory Surgical Centers of America, a partner of Seller (“ASCOA”),
and
each of the other partners of Seller listed on Exhibit
1
(the
“Physician
Partners,”
together
with ASCOA, the “Partners”).
Certain capitalized terms have the meanings provided in Section
13.1.
RECITALS
A. Seller
is
engaged in the business of owning and operating a licensed ambulatory surgery
center located at 00000
Xxxxxxx Xxxx, Xxxxx 00, Xxxxxx, Xxxxx 00000 (the
“Business”).
The
Partners own all of the equity interests in Seller.
B. Pursuant
to the terms hereof, immediately prior to the Closing (as defined herein),
Seller will transfer substantially all of its assets, and certain liabilities
described herein, to a newly formed Delaware limited partnership, NovaMed
Surgery Center of Dallas, LP (the “New
LP”)
in
exchange for a ninety-nine percent (99%) partnership interest in the New LP,
as
a limited partner. ASCOA, one of the Partners, after an exchange with Seller,
will initially own a one percent (1%) partnership interest in the New LP, as
general partner, and the Seller will own a ninety-nine percent (99%) interest
in
New LP as limited partner (such partnership interests in the New LP to be
referred to herein as the “Partnership
Interests”).
C. As
a
condition precedent to Closing, Seller must satisfy certain conditions as
described in this Agreement.
D. At
Closing, (i) Seller desires to transfer to NovaMed, and NovaMed desires to
acquire from Seller, sixty-four percent (64%) of the New LP’s Partnership
Interests in exchange for the LP Purchase Price (as defined herein) and (ii)
ASCOA desires to transfer to NOD, and NOD desires to acquire from ASCOA, ASCOA’s
one percent (1%) Partnership Interest in exchange for the GP Purchase Price
(as
defined herein), all on the terms and conditions hereinafter set forth.
NOW,
THEREFORE,
in
consideration of the mutual covenants of the parties as hereinafter set forth
and other good and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, the parties hereto hereby agree as
follows:
ARTICLE
I.
CONTRIBUTION
OF ASSETS
TO NEW LP AND OTHER
PRE-CLOSING COVENANTS
1.1. Formation
of the New LP.
Prior
to the Closing, the New LP shall be formed pursuant to the Certificate of
Limited Partnership in the form attached hereto as Exhibit
1.1-1.
1.2. Transfer
of Assets to New LP. Immediately
prior to the Closing, and as a condition precedent to the transactions
contemplated herein, Seller will transfer (the “New
LP Asset Transfer”)
to New
LP all of the Assets, free and clear of all
Liens,
in
exchange for its ninety-nine percent (99%) Partnership Interest as a limited
partner. As of the Closing, the assets
contributed into the New LP as set forth herein will consist of all of the
assets and property necessary to conduct the Business (the “Assets”),
including, without limitation, the following (except
to the extent that any of the following are designated as Excluded Assets in
Section
1.3
below):
(a)
all
inventory and supplies with respect to the Business (collectively, the
“Inventory”);
(b)
all
of
the tangible and intangible personal property with respect to the Business,
including, without limitation, machinery, equipment, fixtures, phone numbers
(to
the extent assignable), computer hardware and software that are listed on
Schedule
1.2(b)
(collectively, the “Personal
Property”);
(c)
all
prepaid expenses relating to the Business set forth on Schedule
1.2(c);
(d)
all
contract rights with respect to those Material Contracts identified as Assumed
Contracts on Schedule
4.9
(collectively, the “Assumed
Contracts”),
purchase orders, licenses and leases pertaining to the Business, including
all
leasehold improvements, rights under any restrictive covenants accruing to
the
benefit of the Business and any provider agreements relating to the operation
of
the Business;
(e)
all
names
and tradenames of Seller and the Business, including, without limitation,
“Preston Plaza Surgery Center” and all derivations thereof;
(f)
all
records, files and papers primarily pertaining to the Business, including
general business records, accounting records and Medical Records;
(g)
all
Permits, licenses and certificates of need (to the extent assignable) relating
to the operation of the Business;
(h)
all
causes of action, claims, warranties, guarantees, refunds, rights of recovery
and set-off of every kind and character, to the extent relating to the Assets
or
the Business;
(i)
all
casualty insurance and warranty proceeds of Seller received after the Closing
Date with respect to damage to, nonconformance of, or loss to, the
Assets;
(j)
to
the
extent permitted by law, all accounts receivable or other rights to receive
payment owing to Seller (the “Accounts
Receivable”);
(k)
all
rights to the security deposit of $26,026 being held by the lessor of the Leased
Real Property; and
(l)
all
of
the goodwill of and associated with the Business.
To
the
extent any personal property, inventory, supplies, equipment and contracts
owned
by a Partner or any of Seller and Partners’ respective Affiliates are primarily
used in, or are necessary for the continued conduct of the Business, and would
otherwise be deemed Assets, then Seller or such Partner will cause such party
to
contribute such assets and property to Seller for contribution to the New LP,
free and clear of all Liens, prior to the Closing Date.
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1.3. Excluded
Assets.
Notwithstanding anything to the contrary contained herein, the Assets do not
include the following (collectively, the “Excluded
Assets”):
(a)
Seller’s
rights under this Agreement, including the consideration paid to Seller pursuant
to this Agreement,
and
Physician Partners’ rights under the Partnership Agreement (as hereinafter
defined);
(b)
the
tax
records relating to the Business
and all
other records of the Seller not related to the development or operation of
the
Business;
(c)
Employee
Benefit Plans relating to the employees of the Business and any and all rights
therein or in the assets thereof;
(e)
all
Material Contracts not identified as Assumed Contracts on Schedule
4.9;
(f)
all
cash-on-hand and cash equivalents as of the Closing Date;
(g)
all
personal effects of Seller or any Partner not used in connection with the
operation of the Business as specified in Schedule
1.3(g);
(h)
all
rights under insurance policies and insurance payments covering insured
liabilities which are not New LP Assumed Liabilities (as defined in Section
1.4
below);
and
(i)
any
and
all refunds, rebates, or other amounts paid to Seller relating to the
termination or cancellation by Seller of any insurance policies owned by
Seller.
1.4. Excluded
Liabilities.
Notwithstanding anything to the contrary contained in this Agreement or in
any
Transaction Document, and regardless of whether such liability is disclosed
in
this Agreement, in any of the Transaction Documents or on any Schedule or
Exhibit hereto or thereto, the New LP will not assume, agree to pay, perform
and
discharge or in any way be responsible for any debts, liabilities or obligations
of the Business, Seller, Partners or any of their respective Affiliates of
any
kind or nature whatsoever, arising out of, relating to, resulting from, or
caused by any transaction, status, event, condition, occurrence or situation
relating to, arising out of or in connection with the Business, the Assets,
Seller or any Partner existing, arising or occurring on or prior to the Closing
Date, including, without limitation, any liabilities or obligations relating
to
or arising from the Excluded Assets (the “Excluded
Liabilities”).
Notwithstanding the foregoing, Seller will contribute into New LP, and New
LP
will assume and thereafter pay and fully satisfy when due, all liabilities
and
obligations: (a) which
arose prior to the New LP Asset Transfer and represent normal and current trade
payables incurred by Seller in connection with the operation of the Business
in
the ordinary course of business, consistent with past custom and practice,
and
are specifically set forth on Schedule
1.4(a)
(“Accounts
Payable”);
(b)
the other accrued liabilities of Seller which have been incurred in the ordinary
course of business, consistent with past custom and practice and which are
specifically set forth on Schedule
1.4(b)
(“Accrued
Liabilities”);
and
(c) first arising after the New LP Asset Transfer under any Assumed Contract
(except for any liability or obligation arising from any breach or failure
to
perform under any of the foregoing prior to the Closing Date) (all such
liabilities and obligations to be so contributed into, and assumed by, the
New
LP being collectively referred to herein as the “New
LP Assumed Liabilities”).
1.5. Satisfaction
of Liabilities.
Excluding the New LP Assumed Liabilities, Seller agrees to satisfy all
liabilities of Seller relating to the Business prior to the New LP Asset
Transfer or as soon as is reasonably practicable thereafter,
which
liabilities include, without limitation:
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(a)
all
payroll expense and other compensation due and owing Seller’s employees for the
period preceding the Closing Date (excluding any paid time off or other
employee-related accruals to the extent they are included in Accrued
Liabilities); and
(b)
all
Taxes, including payroll taxes, sales taxes and income taxes accrued up to
the
New LP Asset Transfer (but excluding any such Taxes to the extent they are
included in Accrued Liabilities).
ARTICLE
II.
SALE
OF PARTNERSHIP INTERESTS TO NOVAMED
AND NOD
2.1 Sale
of Limited Partnership Interests.
The
Partnership Interests held by Seller are as a limited partner of New LP. In
reliance upon the representations and warranties of NovaMed contained herein,
receipt of the LP Purchase Price (as defined in Section 3.1 below) and on the
terms and conditions hereinafter set forth, Seller hereby agrees to sell,
assign, transfer, convey and deliver to NovaMed at the Closing, free and clear
of all Liens, all of Seller’s right, title and interest in and to sixty-four
percent (64%) of the New LP’s issued and outstanding Partnership Interests (the
“Transferred
LP Interests”).
In
reliance upon the representations and warranties of Seller and
Partners contained
herein, and on the terms and conditions hereinafter set forth, NovaMed hereby
agrees to purchase the Transferred LP Interests from Seller for the LP Purchase
Price set forth in Article
III
hereof.
2.2 Sale
of General Partnership Interests.
The
Partnership Interests held by ASCOA are as a general partner of New LP. In
reliance on the representations and warranties of NOD contained herein, receipt
of the GP Purchase Price (as defined in Section 3.1 below) and on the terms
and
conditions hereinafter set forth, ASCOA hereby agrees to sell, assign, transfer,
convey and deliver to NOD at the Closing, free and clear of all Liens, all
of
ASCOA’s right, title and interest in and to one percent (1%) of the New LP’s
issued and outstanding Partnership Interests (the “Transferred
GP Interests,” together
with the Transferred LP Interests, the “Transferred
Interests”).
In
reliance upon the representations and warranties of Seller and
Partners contained
herein, and on the terms and conditions hereinafter set forth, NOD hereby agrees
to purchase the Transferred GP Interests from ASCOA for the GP Purchase Price
set forth in Article
III
hereof.
2.3 Ownership
of New LP following Transactions.
As a
result of the sales described in this Article II, NovaMed will own 64% of the
Partnership Interests in the New LP, as a limited partner, Seller will initially
own 35% of the Partnership Interests, as a limited partner, and NOD will own
1%
of the Partnership Interests, as the general partner of the New LP. Immediately
following this transaction, Seller will distribute its Partnership Interests
to
certain of the Partners, resulting in such individual Partners owning 35% of
the
overall Partnership Interests in the manner set forth on Schedule
2.3.
In
addition, Seller will distribute the LP Purchase Price to the Partners as agreed
to by the Partners and in the manner set forth on Schedule
2.3.
ARTICLE
III.
CONSIDERATION
AND MANNER OF PAYMENT
3.1. Purchase
Price.
The
purchase price for the Transferred LP Interests (the “LP
Purchase Price”)
shall
be Twelve Million and No/100 Dollars ($12,000,000), and the purchase price
for
Transferred GP Interests shall be Four Hundred Fifty Thousand and No/100 Dollars
($450,000) (the “GP
Purchase Price,” together
with the LP Purchase Price, the“Purchase
Price”).
3.2. Payment
of Purchase Price.
At the
Closing: (a) NovaMed will pay to Seller an amount equal to the LP Purchase
Price; and (b) NOD will pay to ASCOA an amount equal to the GP Purchase Price,
all by wire transfer of immediately available funds to Seller and ASCOA’s
respective designated bank accounts, according to the wire transfer instructions
attached as Exhibit
3.2.
4
ARTICLE
IV.
SELLER’S
AND PARTNERS’ REPRESENTATIONS AND WARRANTIES
Each
of
Seller and Partners hereby
represents and warrants, jointly and severally, to Buyer as of the Closing
Date,
as follows:
4.1. Seller’s
Organization, Good Standing and Authority.
Seller
is a limited liability partnership duly organized, validly existing and in
good
standing under Texas law.
Each of
Seller and Partners has full capacity, power, right and authority to enter
into
and perform their respective obligations under this Agreement and each of the
Transaction Documents to which each of them is a party. This Agreement and
each
of the Transaction Documents to which each is a party have been duly executed
and delivered by each of Seller and Partners, and constitute the valid and
binding obligations of Seller and Partners, enforceable against them in
accordance with their respective terms, except as the same may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the rights of creditors generally and the availability of
equitable remedies.
4.2. Assets.
Seller
has full power and authority to carry on the Business as it is now being
conducted and to own and hold under lease the properties and assets it now
owns
or holds under lease. The Assets constitute all tangible or intangible property,
rights and assets necessary for the conduct by Seller of the Business as
conducted during the twelve months preceding the Closing Date and, to the
knowledge of Seller, there is no immediate need to acquire or replace any
material assets, outside the ordinary course of business. Seller
has good and marketable title to the Assets, in each case free and clear of
any
and all Liens. Upon consummation of the transactions contemplated by this
Agreement, Seller will have conveyed, and the New LP will be vested with, good
and marketable title to the Assets, free and clear of all Liens. All
of
the Assets that are personal property are in operable condition and repair,
normal wear and tear expected, and none of such property requires any repair
or
replacement except for maintenance in the ordinary course of business. Except
as
set forth on Schedule
4.2,
none of
the Assets are held under any lease, security agreement, conditional sales
contract or other title retention or security agreement is located other than
at
the Facility or are encumbered by any other liens.
4.3. Approvals.
Except
as set forth on Schedule
4.3,
no
consent, approval, order or authorization of, or registration, declaration,
notice or filing with, any national, state, provincial, local, governmental,
judicial, public, quasi-public or administrative authority or agency
(collectively, “Governmental
Authority”)
or
other Person is required to be made or obtained by Seller or any Partner in
connection with the authorization, execution, delivery and performance of this
Agreement or any other Transaction Document, or the consummation of the
transactions contemplated hereby and thereby.
4.4. Partnership
Interests.
(a)
Transferred
LP Interests.
Immediately prior to the Closing Date, Seller will be the only record and
beneficial holder of the Transferred LP Interests. Seller has good and
marketable title to the Transferred LP Interests free and clear of all Liens,
and has full right, power and authority to transfer the Transferred LP Interests
to NovaMed as provided herein, without obtaining the consent of any third party
(other than the general partner of the New LP, as set forth in the terms and
conditions of the Partnership Agreement). Upon consummation of the transactions
contemplated herein, Seller shall have transferred good and marketable title
to
the Transferred LP Interests free and clear of all Liens. Immediately prior
to
Closing, the Partners own one hundred percent (100%) of the equity interests
of
Seller.
5
(b)
Transferred
GP Interests.
Immediately prior to the Closing Date, ASCOA
will be
the only record and beneficial holder of the Transferred GP Interests. ASCOA
has
good and marketable title to the Transferred GP Interests free and clear of
all
Liens, and has full right, power and authority to transfer the Transferred
GP
Interests to NOD as provided herein, without obtaining the consent of any third
party (other than the general partner of the New LP, as set forth in the terms
and conditions of the Partnership Agreement). Upon consummation of the
transactions contemplated herein, ASCOA shall have transferred good and
marketable title to the Transferred GP Interests free and clear of all
Liens.
4.5.
Financial
Statements.
Seller
has previously delivered to Buyer (a) audited financial statements of Seller
for
the years ending
December
31, 2003, December 31, 2004 and December 31, 2005, consisting of an income
statement and balance sheet
(“Financial
Statements”).
Except as set forth on Schedule
4.5,
each of
the Financial Statements (a) has
been
prepared
in accordance with GAAP; (b) is true, complete and correct in all material
respects as of the respective dates and for the respective periods above stated;
(c) fairly presents in all material respects the financial position of Seller
at
such dates and the results of its operations for the periods ended on such
dates; and (d) is consistent with Seller’s books and records.
4.6.
Absence
of Undisclosed Liabilities.
Neither
Seller nor any Partner, with respect to the Business, has any material debts,
liabilities or obligations of any nature (whether accrued, absolute, contingent,
direct, indirect, perfected, inchoate, unliquidated or otherwise and whether
due
or to become
due) arising out of transactions entered into at or prior to the Closing, or
any
transaction, series of transactions, action or inaction at or prior to the
Closing, or any state of facts or condition
existing at or prior to the Closing (regardless of when such liability or
obligation is asserted),
including but not limited to guarantees, liabilities or obligations on account
of Taxes or governmental charges or penalties, interest or fines thereon or
in
respect thereof, except (a) to the extent specifically reflected and accrued
for
or reserved against in the Financial Statements, or (b) for liabilities
specifically delineated on Schedule
4.6.
4.7.
Inventory.
All of
the Inventory is usable in the ordinary course of business, is fully paid for
and not subject to consignment or conditional sales arrangements and no material
portion of the Inventory is obsolete or damaged.
4.8.
Taxes.
Seller
has filed all Tax Returns on
a
timely basis that it is required to have filed (as of the Closing Date) in
connection with the operation of the Business, and such returns are true,
complete and correct. Seller
has paid
all Taxes, interest and penalties, if any, reflected on such Tax Returns or
otherwise due and payable by them, unless such taxes are being contested in
good
faith. Any deficiencies proposed as a result of any governmental audits of
such
Tax Returns have been paid or settled, and there are no present disputes as
to
Taxes payable by Seller in connection with the operation of the Business. With
respect to all amounts of Taxes imposed on Seller for which Seller is or could
be liable with respect to all
taxable periods or portions of periods ending on or before the Closing Date,
all
applicable Tax laws and agreements have been fully complied with, and all such
amounts required to be paid by Seller to taxing authorities or others on or
before the Closing Date have been paid, or have been fully accrued for or fully
reserved against on the Financial Statements, unless such taxes are being
contested in good faith. No issues have been raised and are currently pending
by
any taxing authority in connection with any of the Tax Returns. No waivers
of
statutes of limitations with respect to the Tax Returns have been given by
or
requested from the Partners or
Seller. There are no Liens for Taxes (other than current taxes not yet due
and
payable) upon any asset of Seller. Seller is not a party to any Tax-indemnity,
Tax-sharing, Tax allocation or other similar agreements or
arrangements.
4.9.
Material
Contracts.
Schedule
4.9
is a
correct and complete list of every material written contract, agreement,
relationship or commitment, every material oral contract, commitment, agreement
or relationship, to which Seller or any Partner is a party or by which Seller
or
any Partner is bound, as they relate to the Business (the “Material
Contracts”),
correct and complete copies of which previously have been furnished to Buyer.
Except as set forth on Schedule
4.9,
neither
Seller nor any Partner is in default, and no event has occurred which with
the
giving of notice or the passage of time or both would constitute a default
by
such party, under any Material Contract and,
to
the knowledge of Seller or any Partner, no event has occurred which with the
giving of notice or the passage of time or both would constitute such a default
by any party to any such Material Contract.
6
4.10.
Real
Property.
As it
relates to the Business, Seller does not own any real property. Seller has
a
valid leasehold interest in the real property which it holds
under
the lease described in Schedule
4.10
(collectively, the “Leased
Real Property”),
free
and clear of all Liens, except for Liens for current property taxes not yet
due
and payable. The Leased Real Property constitutes all real properties used
or
occupied by Seller in connection with the Business or reflected on the Financial
Statements.
Upon
execution of the Lease Assignment (as hereinafter defined), the New LP will
have
a valid leasehold interest in the Leased Real Property, which leasehold interest
will be free and clear of all Liens, except for Liens created by the New LP.
With respect to the Leased Real Property: (a) Seller has all easements
and rights necessary to conduct the Business; (b) no portion thereof is subject
to any pending or, to the knowledge of Seller or any Partner, threatened
condemnation proceeding or proceeding by any public
authority; (c) the buildings, plants and structures, including
heating, ventilation
and air conditioning systems, roof, foundation and floors, are in good operating
condition and repair, subject only to ordinary wear and tear, and are not in
violation of any zoning or other Rules; (d) to the knowledge of Seller or any
Partner, there are no leases, subleases, licenses, concessions or other
agreements, written or oral, granting to any party or parties the right of
use
or occupancy of any portion of any parcel of Leased
Real Property; and (e) the Leased Real Property is supplied with utilities
and
other services necessary for the operation of the Business.
4.11. Litigation.
Except
as
set forth on Schedule
4.11,
there
are no claims, counterclaims, actions, suits, orders, proceedings (arbitration,
mediation or otherwise), investigations or judgments pending or, to the
knowledge of Seller or any Partner, threatened against or involving Seller,
the
Business or, with respect to the Business, any Partner, or relating to the
transactions contemplated hereby, at law or in equity, in any court or agency,
or before or by any Governmental Authority, nor, to the knowledge of Seller
or
any Partner, are there any facts, conditions or incidents that could be
reasonably expected to result in any such actions, suits, proceedings
(arbitration, mediation or otherwise) or investigations.
Except
as set forth on Schedule
4.11,
neither
Seller nor any Partner is subject to any judgment, order or decree of any court
or Governmental Authority.
None of
the matters set forth on Schedule
4.11 could
result in any Material Adverse Effect on Seller, the Assets, the Business or
New
LP.
4.12. Compliance
with Applicable Laws; Permits.
(a)
Each
of
Seller and Partners, in their conduct of the Business, has complied, in all
material respects, with applicable federal, state and local laws and the rules
and regulations of all Governmental Authorities having authority over them,
including, without limitation, agencies concerned with occupational safety,
environmental protection, employment practices, Fraud and Abuse Laws and
Medicare and Medicaid requirements applicable to the Partners’ and
Seller's
billing procedures (except denials of claims in the ordinary course of
business). Neither Seller nor any Partner has received any notice of Seller’s
violation of any such rules or regulations, whether corrected or not, within
the
last five (5) years. Seller is eligible to receive payment under Titles XVIII
and XIX of the Social Security Act.
Seller
has timely and accurately filed all requisite reports, returns, data, and other
information required by all Governmental Authorities which control, directly
or
indirectly, any of Seller’s activities to be filed with any commissions, boards,
bureaus, and agencies and has paid all sums heretofore due with respect to
such
reports and returns, unless such sums are being disputed in good faith. No
such
report or return has been inaccurate, incomplete or misleading. Seller has
timely and accurately filed all requisite reimbursable claims and other reports
required to be filed or otherwise filed in connection with all state and federal
Medicare and Medicaid programs in which Seller participates that are due on
or
before the Closing Date and which relate to services provided on or before
the
Closing Date, and Seller has not billed for any services that were not provided
at the Facility. There are no claims pending or, to the knowledge of Seller
or
any Partner, threatened before any authority, including without limitation
any
intermediary, carrier, or other state or federal agency with respect to any
Medicare and Medicaid claim filed by Seller on or before the Closing Date,
or
program compliance matters. Except for routinely scheduled Medicare and Medicaid
program participation and certification surveys pursuant to Seller’s Medicare
and Medicaid contracts and filings, no valid program integrity review related
to
Seller has been conducted by any authority in connection with the Medicare
or
Medicaid programs and no such review is scheduled, pending, or to the knowledge
of Seller or any Partner, threatened against or affecting Seller, the Business,
the Facility, or the consummation of the transactions contemplated
hereby.
7
(b)
Seller
holds all the permits, licenses, certificates of need and other approvals of
Governmental Authorities necessary or material for the current conduct,
ownership, use, occupancy and operation of the Business and the Leased Real
Property, including, without limitation, those identified on Schedule
4.12(b)
(“Permits”).
Seller is in compliance in all material respects with such Permits, all of
which
are in full force and effect, and Seller has not received any notices (written
or oral) to the contrary. All of the Permits are in good standing, and to
Seller’s knowledge, no suspension, cancellation or adverse action is threatened
against the Permits, and there is no basis for believing that any Permits will
not be renewed upon expiration.
4.13. Transaction
Not a Breach.
Except
as set forth on Schedule
4.13,
the
execution, delivery and performance by Seller and Partners of this Agreement
and
the Transaction Documents will not:
(a)
Result
in
a breach of any of the terms or conditions of, or constitute a default under,
or
in any manner release any party thereto from any obligation under any mortgage,
note, bond, indenture, contract, agreement, license or other instrument or
obligation of any kind or nature by which Seller or Business may be bound or
affected;
(b)
violate
or conflict with any order, writ or injunction of any court, administrative
agency or Governmental Authority to which Seller or any Partner is subject;
(c)
Constitute
an event which would permit any party to terminate any agreement or accelerate
the maturity of any indebtedness or other obligation;
(d)
Violate
any provision of the organizational documents of Seller;
(e)
Result
in
the creation or imposition of any Lien upon any property of Seller;
or
(f)
Require
any authorization, consent, approval, exemption or other action by or notice
to
any court, Governmental Authority or any other Person.
4.14. Conduct
of Business.
Since
the Review Date (as defined in Article XIII), Seller has conducted the Business
in the ordinary course of business, consistent with past custom and practice,
and has incurred no material liabilities other than in the ordinary course
of
business, consistent with past custom and practice, and there has been no
Material Adverse Effect on the assets, financial condition, operating results,
employee or patient relations, business activities or business prospects of
Seller or the Business. Without limitation of the foregoing, since the Review
Date, Seller has not, except in the ordinary course of business, consistent
with
past custom and practice, or as otherwise set forth on Schedule
4.14:
8
(a)
Incurred
any obligation or liability, absolute, accrued, contingent or otherwise, whether
due or to become due, whether individually or in the aggregate, that has had
or
could be reasonably expected to result in a Material Adverse Effect on the
Business;
(b)
Pledged
or subjected any of its assets to any Lien or restriction;
(c)
Voluntarily
or involuntarily sold, transferred, abandoned, surrendered, leased or otherwise
disposed of any of its assets material to the Business;
(d)
Canceled
or compromised any material debt or claim, or waived or released any right
of
substantial value;
(e)
Received
any notice of termination of any contract, lease or other agreement, or suffered
any damage, destruction or loss that, individually or in the aggregate, has
had
or could be reasonably expected to result in a Material Adverse Effect on the
Business;
(f)
Instituted,
settled or agreed to settle any litigation, action, proceeding or arbitration;
(g)
Made
a
purchase commitment in excess of $20,000, other than in the ordinary course
of
business, consistent with past custom and practice;
(h)
Modified
the timing, course of conduct or other cash management activities with respect
to the collection of accounts receivable of the Business;
(i)
Failed
to
pay any accounts or notes payable or any other obligations consistent with
past
practices, except for bona fide disputes arising in the ordinary course of
business;
(j)
Entered
into any material transaction, contract or commitment other than in the ordinary
course of business, consistent with past custom and practice, other than the
transactions contemplated by the Transaction Documents;
(k)
Suffered
any event or events, whether individually or in the aggregate, that has had
or
could be reasonably expected to result in a Material Adverse Effect on the
Business; or
(l)
Issued
any equity interests in Seller or entered into any agreement or understanding
to
do so.
4.15. Health,
Safety and Environment.
Seller
has never generated, transported, treated, stored, disposed of or otherwise
handled any Hazardous Materials at any site, location or facility in connection
with its business or any of its assets in violation of any applicable
Environmental and Safety Requirements (as hereinafter defined). Seller: (i)
is
in material compliance with all applicable federal, state and local laws, rules,
regulations, ordinances and requirements relating to public health and safety,
worker health and safety and pollution and protection of the environment, all
as
amended or hereafter amended (“Environmental
and Safety Requirements”),
and
(ii) possesses all required permits, licenses, certifications and approvals
and
has filed all notices or applications required thereby or pertaining thereto.
Seller has never received any written notice of, any private, administrative
or
judicial inquiry, investigation, order or action, or any written notice of
any
intended or threatened private, administrative, or judicial inquiry,
investigation, order or action relating to the presence or alleged presence
of
Hazardous Materials in, under or upon any property leased or owned by Seller,
nor is Seller aware of any such inquiry, investigation, order, action or notice.
There are no pending, or to the knowledge of Seller or any Partner, threatened,
investigations, actions, orders or proceedings (or written notices of potential
investigations, actions, orders or proceedings) from any Governmental Authority
or any other entity regarding any matter relating to Environmental and Safety
Requirements.
9
4.16. Employees.
Schedule
4.16
is a
true, complete and correct list setting forth as of the Review Date the names
and current compensation rate and compensation of all individuals employed
by
Seller. There
has
been no material increase, other than in the ordinary course of business,
consistent with past custom and practice, in the compensation or rate of
compensation payable to any employees of Seller since the Review Date, nor
since
that date has there been any promise to any employee listed on Schedule
4.16,
orally
or in writing, of any bonus or increase in compensation, except for increases
in
the ordinary course of business consistent with Seller’s past compensation
practices and listed on Schedule 4.16,
and
obligations incurred under existing bonus, insurance, pension or other Employee
Benefit Plans described on Schedule
4.19
or
Schedule
4.20.
Except
as set forth on Schedule
4.16,
there
has been no promise to any employee listed on Schedule
4.16,
orally
or in writing, of any guaranty of employment following the Closing
Date.
4.17. Insurance.
Seller
has obtained and maintained in full force and effect commercially reasonable
amounts of insurance to protect it and the Business against the types of
liabilities, including medical malpractice, customarily insured against by
Persons operating a business of similar size and nature to the Business, and
all
premiums due as of the Closing Date on such policies have been paid. Seller
has
complied in all material respects with the provisions of all such policies.
Seller has previously delivered to Buyer complete and correct copies of all
such
policies, together with all riders and amendments thereto in the possession
of
Seller. Except as set forth on Schedule
4.17,
there
are no claims or asserted claims reported to insurers under such policies,
including all medical malpractice claims and similar types of claims, actions
or
proceedings asserted against any of Seller and the Partners (with respect to
the
Business only) at any time within the past five (5) years.
4.18. Affiliate
Transactions.
Excluding ordinary course distributions to its equity holders, there are no
transactions involving the transfer of any cash, property or rights to or from
Seller from, to or for the benefit of any Affiliate or former Affiliate of
Seller (“Affiliate
Transactions”)
during
the period commencing, January 1, 2004 through the date hereof or any existing
commitments of Seller to engage in the future in any Affiliate Transactions.
4.19. Employee
Benefit Plans.
Except
as set forth in Schedule
4.19,
neither
Seller nor any Plan Affiliate has maintained, sponsored, adopted, made
contributions to or obligated itself to make contributions to or to pay any
benefits or grant rights under or with respect to any “Employee Pension Benefit
Plan” (as defined in Section 3(2) of ERISA), “Employee Welfare Benefit Plan” (as
defined in Section 3(1) of ERISA), “multi-employer plan” (as defined in Section
3(37) of ERISA), any collective bargaining agreement, plan of deferred
compensation, medical plan, life insurance plan, long-term disability plan,
dental plan or other plan providing for the welfare of any of Seller’s employees
or former employees or beneficiaries thereof, personnel
policy (including but not limited to vacation time, holiday pay, bonus programs,
moving expense reimbursement programs and sick leave), material fringe benefit,
excess benefit plan,
bonus or incentive plan (including but not limited to stock options, restricted
stock, stock bonus and deferred bonus plans), severance agreement, salary
reduction agreement, top hat plan or deferred compensation plan,
change-of-control agreement, employment agreement, consulting agreement or
any
other benefit, program, policy, arrangement, agreement or contract
(collectively, “Employee
Benefit Plans”),
whether or not written or terminated, which could give rise to or result in
Seller or such Plan Affiliate having any debt, liability, claim or obligation
of
any kind or nature, whether accrued, absolute, contingent, direct, indirect,
known or unknown,
perfected or inchoate or otherwise and whether or not due or to become due.
Correct and complete copies of all Employee Benefit Plans previously have been
furnished to Buyer. The Employee
Benefit Plans are in compliance in all material respects with governing
documents and agreements and with applicable laws.
Seller
acknowledges that it will be solely responsible for administering and/or
terminating its Employee Benefit Plans following the Closing.
10
4.20. Personnel
Agreements, Plans and Arrangements.
Except
as listed in Schedule
4.20,
Seller
is not obligated to any outstanding contract with any current or former
employees, agents, consultants,
or advisers.
4.21. Certain
Payments.
None of
Seller (including, without limitation, its officers, directors, agents or
employees) or the Partners (acting for or on behalf of Seller) has, directly
or
indirectly, made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) for securing patients
or
referrals, (ii) for patients or referrals secured, (iii) to obtain special
concessions or for special concessions already
obtained, for or in respect of Seller, or (iv) in violation of any
law.
4.22. Workers
Compensation.
Schedule
4.22
sets
forth all expenses, obligations, duties and liabilities relating to any pending,
to the knowledge of Seller or any Partner, threatened or ongoing claims by
employees and former employees (including dependents and spouses) of Seller
(or
its predecessors),
and the extent of any specific accrual on or reserve therefor set forth on
the
Financial Statements, for costs, expenses and other liabilities under any
workers compensation laws, regulations, requirements or programs. Except as
set
forth on Schedule
4.22,
to the
knowledge of Seller or any Partner, no claim, injury, fact, event or condition
exists which would give rise to a material claim by any employees or
former
employees (including dependents and spouses) of Seller under any workers
compensation laws, regulations, requirements or programs.
4.23. Accounts
Receivable/Accounts Payable.
(a)
Accounts
Receivable.
Except
as set forth on Schedule
4.23(a),
the
Accounts Receivable are valid, binding and legally enforceable obligations
and
are owned by Seller free and clear of all Liens, and, except for contractual
allowances, reserves for bad debts and other adjustments that are consistent
with those adjustments made in preparing the Financial Statements, will not
be
subject to any offset, counterclaim or other adverse claim or defense, and
may
be transferred to the New LP to the extent permitted by law. The Accounts
Receivable arose in the ordinary and usual course of the business, and the
Accounts Receivable are set forth on the books and records of
Seller. Schedule
4.23(a)
contains
a complete and accurate list of all Accounts Receivable as of the date stated
thereon, which list represents the Accounts Receivable after adjusting for
contractual allowances and bad debt reserves.
Although Seller does not know of any reason why the Accounts Receivable would
not be collectible according to approximately the same ratios as accounts
receivable have been historically collectible, Seller is not guaranteeing the
collectibility of such accounts receivable.
(b)
Accounts
Payable and Accrued Liabilities.
Schedule
1.4(a)
and
Schedule
1.4(b)
sets
forth a complete and correct list of the Accounts Payable and Accrued
Liabilities. Each of the Accounts Payable and Accrued Liabilities are valid
and
have been incurred in connection with the operation of the Business in the
ordinary course of business, consistent with Seller’s past custom and practice.
4.24. Brokers.
All
negotiations relating to this Agreement and the Transaction Documents, and
the
transactions contemplated hereby and thereby, have been carried on without
the
intervention of any Person acting on behalf of any of Seller or any Partner
in
such a manner as to give rise to any valid claim for any broker’s or finder’s
fee or similar compensation against Buyer.
11
4.25. HIPAA.
(a) All
of the Assets being sold and/or provided by Seller to New LP under this
Agreement, including without limitation, any computer hardware and/or software,
are in compliance with the Health Insurance Portability and Accountability
Act
of 1996 (Public Law 104-91, 42 U.S.C. 1301 et.
seq.)
and
regulations promulgated thereunder (collectively, “HIPAA”),
and
applicable state laws having similar subject matter to HIPAA (“State
HIPAA”),
and
(b) Seller has conducted its business and activities, including, without
limitation, its billing and collection activities, its medical records
management activities, and its general practice management activities, in a
manner that complied with HIPAA and State HIPAA.
4.26. Rates
and Reimbursement Policies.
Seller
does not have any rate appeal currently pending before any Governmental
Authority or any administrator of any third-party payor program. Seller has
no
knowledge of any applicable state or local law, which affects rates or
reimbursement procedures which has been enacted, promulgated or issued within
the eighteen (18) months preceding the Closing Date or any such legal
requirement proposed or currently pending in the applicable state or at the
federal level which has resulted or may result in any reductions in rates and
reimbursement.
4.27. Physicians.
None of
the physicians who utilize the center (collectively, the “Physicians”)
have,
to the knowledge of Seller or any Partner, threatened to discontinue or to
terminate his or her relationship with the Seller and the provision of services
at the Facility. To the knowledge of Seller or any Partner, none of the
Physicians have expressed plans to retire from the practice of medicine in
the
next five (5) years or to be involved in the development or operations of
another ambulatory surgery center. During the three (3) years preceding the
Closing Date, each of the Physicians:
(a)
Has
been
duly licensed and registered, and is in good standing by their state to engage
in the practice of medicine, and said license and registration have not been
suspended, revoked or restricted in any manner; and
(b)
Has
had
valid professional liability insurance in place in amounts not less than
commercially reasonable levels and has not indicated any intent to terminate
or
reduce his or her professional liability coverage.
4.28. Certain
Representations With Respect to the Facility.
(a)
The
Facility is qualified for participation in the Medicare program. Complete and
accurate copies of the Facility’s existing Medicare contracts have been
furnished to Buyer. Seller is presently in compliance with all of the terms,
conditions and provisions of such contracts.
(b)
The
Facility is qualified for participation in the Medicaid program. Complete and
accurate copies of Seller’s existing Medicaid contracts have been furnished to
Buyer. Seller is presently in compliance with all of the terms, conditions
and
provisions of such contracts.
4.29. No
Misrepresentation.
None of
the representations and warranties of Seller and Partners set forth in this
Agreement, in any of the certificates, schedules, lists, documents, exhibits,
or
other instruments delivered, or to be delivered, to Buyer as contemplated by
any
provision hereof
(including the Transaction Documents), contain any untrue statement of a
material fact or omit
to
state a material fact necessary to make the statements contained herein or
therein not misleading.
To the
knowledge of Seller or any Partner, there are no material facts which have
not
been disclosed to Buyer which have a Material Adverse Effect, or could
reasonably be anticipated to have a Material Adverse Effect, on the Business
or
Seller’s or any Partner’s ability to consummate the transactions contemplated
hereby.
12
ARTICLE
V.
BUYERS’
REPRESENTATIONS AND WARRANTIES
Each
of
NovaMed and NOD hereby represents and warrants, jointly and severally, to Seller
as of the Closing Date as follows:
5.1. Organization.
Each of
NovaMed and NOD is duly organized, validly existing and in good standing under
the laws of the State of Delaware. NOD is qualified to do business in the State
of Texas.
5.2. Authorization.
Each of
NovaMed and NOD has full power, right and authority to enter into and perform
its obligations under this Agreement and each of the Transaction Documents
to
which it is a party. The execution, delivery and performance by each of NovaMed
and NOD of this Agreement and each of the Transaction Documents to which it
is a
party have been
duly
and properly authorized by all requisite corporate action in accordance with
applicable law and with each of NovaMed’s and NOD’s Certificate of
Incorporation.
This
Agreement and each of the Transaction Documents to which NovaMed and NOD are
a
party have been duly executed and delivered by them and are the valid and
binding obligation of Buyer and are enforceable against
Buyer in accordance with their respective terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the rights of creditors generally and the
availability of equitable remedies.
5.3. Transaction
Not a Breach.
The
execution, delivery and performance of this Agreement and the Transaction
Documents by NovaMed and NOD will not violate and conflict with,
or
result in the breach of any of the terms, conditions, or provisions of NovaMed’s
and NOD’s Certificate of Incorporation or of any contract, agreement, mortgage,
or other instrument or obligation of any nature to which NovaMed or NOD is
a
party or by which NovaMed or NOD is bound.
5.4. Acquisition
of Transferred Interests.
NovaMed
and NOD acknowledge that the Transferred Interests will be sold to NovaMed
and
NOD pursuant to exemptions from registration under the Federal Securities Act
of
1933 and the state securities laws of the State of Texas. NovaMed and NOD are
acquiring the Transferred Interests for their own accounts and not with a view
to the distribution or resale thereof. Each of NovaMed and NOD has no intention
of selling the Transferred Interests in a public distribution in violation
of
federal securities laws or any applicable state securities laws.
5.5. Broker.
All
negotiations relating to this Agreement and the Transaction Documents, and
the
transactions contemplated hereby and thereby, have been carried on without
the
intervention of any Person acting on behalf of Buyer in such a manner as to
give
rise to any valid claim for any broker’s or finder’s fee or similar compensation
against Seller.
5.6. Litigations
and Proceedings.
There
are no claims counterclaims, actions, suits, orders, proceedings (arbitration,
mediation or otherwise), investigations or judgments pending or, to the
knowledge of NovaMed or NOD, threatened relating to the transactions
contemplated hereby, at law or in equity, in any court or agency, or before
or
by any Governmental Authority.
5.7. No
Misrepresentation.
None of
the representations and warranties of Buyer set forth in this Agreement or
in
any of the certificates, schedules, lists, documents, exhibits, or other
instruments delivered, or to be delivered, to Seller as contemplated by any
provision hereof (including the Transaction Documents), contain any untrue
statement of a material
fact or omit
to
state a material fact necessary to make the statements contained herein or
therein not misleading.
To the
knowledge of NovaMed and NOD, there are no material facts which have not been
disclosed to Seller and the Partners which have a Material Adverse Effect,
or
could reasonably be anticipated to have a Material Adverse Effect, on NovaMed’s
or NOD’s ability to consummate the transactions contemplated
hereby.
13
ARTICLE
VI.
ADDITIONAL
AGREEMENTS
6.1. Release
of Liens and Lien Searches.
Seller
shall procure all applicable release of liens with respect to those Liens set
forth on Schedule
4.2,
prior
to the New LP Asset Transfer. Seller shall provide Buyer with all information
and other assistance required for the parties to file all applicable UCC
termination statements (in form and manner required by NovaMed or its lenders).
Following the filing of all such UCC termination statements, there shall be
no remaining
financing statements, judgments, taxes or other Liens outstanding against Seller
or any of its assets as of the Closing Date.
6.2. Employees;
Labor Relations.
(a)
Continuing
Employees.
New LP
shall offer to employ the employees of Seller listed on Schedule
6.2(a)
(the
“Continuing
Employees”)
as of
the Closing Date, on the terms and conditions established by New LP in its
sole
discretion. Such offer of employment by New LP shall not be deemed to create
a
continuing right to employment for any Continuing Employees. Seller shall be
solely responsible for all liabilities relating, directly or indirectly, to
any
of Seller’s employees who do not accept New LP’s offer of employment. Seller
shall be solely responsible for any employment-related claims filed by any
employees of Seller which relate to facts and circumstances existing on and
prior to the Closing Date, or arise from or relate to completion of the
transactions contemplated by this Agreement or the Transaction Documents,
regardless of when filed.
(b)
COBRA
Notice.
Seller
represents that it has complied, in all material respects, with the applicable
requirements of COBRA through the Closing Date and shall be responsible for
all
liabilities arising under COBRA with respect to any event occurring prior to
and
on the Closing Date.
(c)
Noncompetition
Agreements.
Each of
Seller and ASCOA hereby waives any noncompetition provision that may apply
to
the Continuing Employees with respect to New LP’s hiring of the Continuing
Employees.
6.3. Post-Closing
Remittances; New LP’s Appointment as Attorney-In-Fact.
If,
after the Closing Date, Seller shall receive any remittance from any account
debtors with respect to the Accounts Receivable, Seller shall endorse such
remittance to the order of the New LP and forward it to the New LP promptly
following receipt thereof.
Seller
hereby irrevocably constitutes and appoints New LP and any officer or agent
of
New LP as Seller’s true and lawful attorney-in-fact, with full power and
authority, in the place and stead of Seller for the limited purposes of
receiving, collecting, indorsing, negotiating and cashing any and all cash,
checks, drafts, payments, accounts receivable and other instruments
(collectively the “Items”)
which
are payable to Seller and which represent Items related to payment on Accounts
Receivable, and which in accordance with the terms of this Agreement, have
been
sold, conveyed, assigned or transferred to New LP or are otherwise for the
account of New LP hereby. Seller further agrees to execute all documents and
take such other action as New LP may reasonably request to confirm the power
granted to New LP by this Section
6.3.
Notwithstanding the foregoing, in no event shall New LP receive, collect,
indorse, negotiate or cash such Items pursuant to the above authority if to
do
so would be to violate the laws, regulations or other written guidance of any
state or federal health program. In such event, New LP and Seller agree to
take
such actions as necessary to convey such payments to New LP consistent with
applicable laws and regulations.
14
6.4. Further
Assurances.
The
parties hereto shall execute such further documents, and perform such further
acts, as may be reasonably necessary to transfer and convey the Assets to the
New LP, the Transferred LP Interests to NovaMed, and the Transferred GP
Interests to NOD, all on the terms contained herein, and to otherwise comply
with the terms of this Agreement and consummate the transactions contemplated
herein.
6.5.
Professional
Liability Tail Coverage.
To the
extent Seller’s professional liability insurance policy for the Facility is on a
claims-made basis (rather than an occurrence basis), Seller shall obtain an
extended reporting (“tail”) professional liability insurance policy covering
acts and omissions occurring at the Facility prior to the Closing Date, in
an
amount equal to the professional liability insurance carried immediately prior
to the Closing Date, or such other amount, and for such period of time, as
determined by mutual agreement of NovaMed and Seller. Upon NovaMed’s request,
Seller shall provide New LP with proof of such tail professional liability
coverage. The cost and expense of such tail coverage shall be borne solely
by
Seller.
6.6.
Credentialing.
As of
the Closing Date, the Partners who are physicians, and other physicians
credentialed by the Facility immediately prior to the Closing Date, shall
receive provisional privileges to perform surgical procedures at the Facility
that will be owned and operated by the New LP from and after the Closing Date.
As a condition to receiving these provisional privileges, each of the Partners
hereby agrees, and shall cause all of such other credentialed physicians to
agree, that following the Closing Date he or she will comply with all of the
New
LP’s credentialing requests (including, without limitation, providing New LP
with any reasonably requested information and completing any applicable
credentialing forms) so that the New LP may complete its credentialing review
process for each physician by the expiration date of the provisional privileges.
ARTICLE
VII.
CLOSING
7.1.
Time
and Place.
The
closing of the transactions that are the subject of this Agreement (the
“Closing”)
shall
occur via facsimile effective as of the Closing Date, with original documents
to
be exchanged by nationally recognized overnight courier for delivery on the
next
business day after the Closing Date.
7.2.
Contribution
of Assets to New LP.
As a
condition precedent to the consummation of the transactions contemplated herein,
Seller shall have consummated the New LP Asset Transfer in accordance with
the
terms and conditions of Article
I
hereof.
7.3.
Deliveries
of Seller and Partners.
At the
Closing, Seller and Partners will execute and deliver or cause to be executed
and delivered to NovaMed:
(a)
a
Contribution Agreement to evidence the New LP Asset Transfer and to effectively
vest the New LP with full, complete and marketable right, title and interest
in
and to the Assets, in
substantially the form of attached Exhibit
7.3(a) (the
“Contribution
Agreement”);
(b)
the
Limited Partnership Agreement of the New LP, in the form attached hereto as
Exhibit
7.3(b)
(the
“Partnership
Agreement”);
(c)
(i)
amended and restated certificate of limited partnership of New LP reflecting
ASCOA as general partner, executed by ASCOA, and (ii) second amended and
restated certificate of limited partnership evidencing change in general partner
from ASCOA to NOD, to be filed with the Secretary of States of Delaware and
Texas immediately following the Closing;
15
(d)
a
certificate of the Secretary of Seller as to (i) copies of resolutions of its
managing partner and partners authorizing the execution, delivery and
performance of this Agreement and the Transaction Documents; (ii) a Certificate
of Good Standing of Seller issued by the Secretary of State of Texas; (iii)
its
partnership agreement; (iv) incumbency and specimen signatures with respect
to
its authorized representatives executing this Agreement and any Transaction
Documents; and (v) its certificate of limited liability partnership certified
by
the Secretary of State of Texas.
(e)
any
required third party consents, filings, and certificates from Seller or any
third party (including, any Governmental Authority) relating to the transfer
of
the Assets, including without limitation, all consents from the State of Texas
regarding the transfer of all Permits and licenses relating to the ownership
and
operation of the Facility, and copies of all written consents obtained in
connection with the transfer of the Material Contracts;
(f)
intentionally
omitted;
(g)
the
Assignment of Partnership Interests, substantially in the form attached as
Exhibit
7.3(g) (the
“Assignment
of Partnership Interests”),
duly
executed by Seller;
(h)
intentionally
omitted;
(i)
all
applicable documentation releasing Liens covering, concerning or relating to
the
Assets, in form and substance reasonably acceptable to NovaMed;
(j)
Redemption
Agreement pursuant to which Seller redeems certain Partners’ ownership interests
in Seller in exchange for Seller’s interests in the New LP, all in accordance
with Schedule
2.3
and
effective immediately following the Closing Date;
(k)
Intentionally
omitted;
(l)
A
third
party payor contract between New LP and United Healthcare, at reimbursement
rates equivalent to at least 200% of Medicare rates, duly executed by United
Healthcare;
(m)
Evidence
of Assumed Name filing on behalf of New LP for “Preston Plaza Surgery Center,
certified by the Secretaries of State of Delaware and Texas;
(n)
Amendment
to Certificate of Limited Liability Partnership of Seller changing its name
from
“Preston Plaza Surgery Center, LLP” to “PPSC, LLP;”
(o)
Power
of
Attorney with respect to DEA and state controlled substance registration, duly
executed by the Medical Director of Seller;
(p)
such
other documents and instruments as Buyer or its counsel reasonably shall deem
necessary to consummate the transactions contemplated hereby.
All
documents delivered to Buyer shall be in form and substance reasonably
satisfactory to counsel for Buyer.
7.4.
Deliveries
of Buyer.
At the
Closing, NovaMed and NOD will deliver, or will cause the New LP to deliver,
to
Seller simultaneously with the delivery of the items referred to in Section
7.3
above:
16
(a)
the
payment of the Purchase Price;
(b)
the
Partnership Agreement;
(c)
certificate
of the Secretary of each of NovaMed and NOD as to (i) copies of resolutions
of
its board of directors authorizing the execution, delivery and performance
of
this Agreement and the Transaction Documents; and (ii) incumbency and specimen
signatures with respect to its officers executing this Agreement and any
Transaction Documents;
(d)
intentionally
omitted;
(e)
a
duly
executed Management Agreement (the “Management
Agreement”)
between NovaMed Management Services, LLC and the New LP, substantially in the
form of attached Exhibit
7.4(e).
(f)
the
Assignment of Partnership Interests, duly executed by NovaMed and
NOD;
(g)
intentionally
omitted; and
(h)
such
other documents and instruments as Seller or its counsel reasonably shall deem
necessary to consummate the transactions contemplated hereby.
All
documents delivered to Seller shall be in form and substance reasonably
satisfactory to the counsel for Seller.
7.5
Change
of Ownership Process; Further Assurances.
To the
extent from and after the Closing there are any actions necessary to confirm
or
effect all reasonably necessary licensure and regulatory approvals required
in
connection with the New LP’s ownership and operation of the Business, Seller,
Partners and their respective agents and representative agree to cooperate
with
Buyer and New LP in connection these approvals, and will use commercially
reasonable efforts to respond in a timely manner to any information or signature
requests reasonably required in connection with these approvals.
ARTICLE
VIII
INTENTIONALLY
OMITTED
ARTICLE
IX.
INTENTIONALLY
OMITTED
ARTICLE
X.
INTENTIONALLY
OMITTED
ARTICLE
XI.
RESTRICTIVE
COVENANTS
11.1. Acknowledgment.
Each of
Seller and Partners acknowledges and agrees that in order to assure that the
Business will retain its value as a “going concern,” it is necessary that Seller
and Partners undertake not to utilize their present special knowledge of the
Business to compete with NovaMed, New LP and the Business during the Restricted
Period after the acquisition of Transferred Interests; provided
that
Buyer acknowledges that certain Partners will continue to have an interest
in
the Business through their ownership of a minority interest in the New LP.
Each
of Seller and Partners further acknowledges that (a) Buyer has been and/or
will
be engaged in the Business; (b) each of Seller and Partners possesses extensive
knowledge and a unique understanding of the Business, as well as (subsequent
to
the transactions contemplated by this Agreement) the proprietary and
confidential information
concerning the Business; (c) the agreements and covenants
contained in this Section 11.1
are
essential to protect Buyer and the value of the Business and are a condition
precedent to Buyer’s willingness to pay for the Transferred Interests; (d) Buyer
would be irreparably damaged if Seller and/or any Partner were to violate the
terms and conditions of this Article
XI;
and (e)
the
geographic, temporal and business scope of the restrictive covenants in this
Article
XI
are
reasonable.
17
11.2. Restrictive
Covenant.
11.2.1
Physician
Partners.
Each of
Seller and Physician Partners hereby agrees that for the five-year period
beginning on the Closing Date (the “Restricted
Period”;
provided,
that
in the
event that any such party is determined to have violated the covenants set
forth
in this Article
XI,
the
Restricted Period shall be extended day for day for the time period that such
party is in violation of any such covenant), he, she or it shall not, directly
or indirectly, act
as a
director, officer, member or partner of, or own any equity or other financial
interest in, any Person that owns and/or operates an ambulatory surgery center,
licensed surgical facility or any other outpatient surgical facility that is
located within a thirty (30) mile radius of the location of the
Business.
Notwithstanding
the foregoing, and without limiting the terms of the Partnership Agreement,
Seller and/or any Physician Partner may
(a)
be a director on the Board of Trustees of a hospital, (b) serve on the medical
staff or committees of any hospital, (c) own an interest in the New LP in
accordance with the terms of the Partnership Agreement; (d) practice medicine
in
his or her own office or the office of the professional entity in which
he
or she
is an employee or owner
even if
such practice utilizes a competing facility, (e) perform surgery at any
competing facility, and (f) own no more than 1% of the shares of any publicly
held corporation. In
addition, and notwithstanding the restrictions set forth in this Section
11.2.1:
(I)
the
Physician Partners listed on Schedule
11.2.1(I)
may
continue to own their equity interests in the facilities set forth across from
their names on Schedule
11.2.1(I),
provided at no time during the Restricted Period may they increase their
ownership interests in such listed facilities; and (II) the Physician Partners
listed on Schedule
11.2.1(II)
may
continue to own the Competitive Equipment to perform procedures within their
medical practice offices as described across from their names on Schedule
11.2.1(II)).
11.2.2
ASCOA.
ASCOA
hereby agrees that during the Restricted Period, neither it nor any of its
Affiliates shall, directly or indirectly, act as a director, officer, member
or
partner of, or own any equity or other financial interest in, any Person: (a)
that owns and/or operates an ambulatory surgery center, licensed surgical
facility or any other outpatient surgical facility that is located within a
ten
(10) mile radius of the location of the Business (the “ASCOA
Restricted Territory”);
or (b)
subject to Schedule
11.2.2,
that
solicits or encourages, or attempts to solicit or encourage, the Physician
Partners or any surgeon utilizing the Facility to become an owner or user of
another surgical facility within the Dallas metropolitan statistical area.
11.3. Property
of the Business.
All
memoranda, notes, lists, records and other documentation or papers (and all
copies thereof), including such items stored in computer memories, or microfiche
or by any other means, which will become the New LP’s property (after
the consummation
of transactions contemplated by this Agreement), are and shall be the New LP’s
property and shall be delivered to the New LP promptly on the request of
Buyer.
11.4. Blue-Pencil.
If any
court of competent jurisdiction shall at any time deem the term of this
Agreement or any particular restrictive covenant contained in this Article
XI
too
lengthy or the territory too extensive, the other provisions of this
Article
XI shall
nevertheless stand, the Restricted Period herein shall be deemed to be the
longest period permissible by law under the circumstances and the territory
described in Section
11.2
shall be
deemed to comprise the largest territory permissible by law under the
circumstances. The court in each case shall reduce the Restricted Period and/or
territory described in Section
11.2
to
permissible duration or size.
18
11.5. Remedies.
Each of
Seller and Partners acknowledges and agrees that the covenants set forth in
this
Article
XI
are
reasonable and necessary for the protection of Buyer and the New LP’s business
interests, that irreparable
injury will result if Seller or any Partner breaches any of the terms of said
restrictive covenants,
and that in the event of actual or threatened breach of any such restrictive
covenants, Buyer will have no adequate remedy at law. Each of Seller and
Partners accordingly agrees that in the event of any actual or threatened breach
by any of them of any of the covenants set forth in this Article XI,
Buyer
shall be entitled to immediate temporary injunctive and other equitable relief,
without bond and without the necessity of showing actual monetary damages,
subject to hearing as soon thereafter as possible. Nothing contained herein
shall be construed as prohibiting Buyer from pursuing any other remedies
available to it for such breach or threatened breach, including the recovery
of
any damages which it is able to prove.
Notwithstanding the foregoing, any breach of this Article
XI
by any
Partner shall not be deemed a violation of this Article
XI
by any
non-breaching Partner and shall not subject any non-breaching Partner to
liability under this Agreement. The parties also agree that the existence of
any
claim or cause of action by Seller or the Partners against Buyer, whether
predicated upon this Agreement or otherwise, shall not constitute a defense
to
the enforcement of the restrictive covenants set forth herein, but shall be
litigated separately. Seller and the Partners agree that the rights granted
in
this Article
XI
may be
assigned by Buyer at its sole and absolute discretion. All of the provisions
of
this Article
XI
shall
inure to any successors of Buyer, all of which are specifically third-party
beneficiaries of this Article
XI
with
full rights hereunder. In addition, the parties hereto agree that any assignee
of the rights hereunder is an intended, direct third-party beneficiary of this
Article
XI
and may
enforce such rights in its own name in addition to or in lieu of
Buyer.
11.6. Patient
Freedom.
The
parties hereto agree that the benefits afforded either party hereunder are
not
payment for, and are not in any way contingent upon the referral, admission
or
any other arrangement for, the provision of any item or service offered by
any
party hereto. Nothing in this Agreement shall be construed to limit the freedom
of any patient of Seller or any Partner to choose the facility
or physician from whom any patient shall receive health care services or limit
or interfere with Seller or any Physician’s ability to exercise professional
judgment in treating patients or their ability to provide medical services
to
patients.
11.7. Texas
Business and Commerce Code Section 15.50.
The
parties hereto agree that each Physician Partner is free to provide professional
services at any facility such Physician Partner or his or her patients or payors
select, and such Physician Partner is able to maintain a professional physician
practice (but not an ambulatory surgery center or any other outpatient surgical
facility) at any location, including within the geographic radius prescribed
in
Section
11.2
hereof.
Accordingly, the parties hereto acknowledge and agree that Section 15.50(b)
of
the Texas Business and Commerce Code should not apply to the restrictive
covenants set forth in this Agreement. As such, each Physician Partner hereby
agrees to waive any rights to challenge the restrictive covenants set forth
herein on the basis that such covenants are subject to Section 15.50(b) of
the
Texas Business and Commerce Code, and neither the Physician Partners nor any
of
their agents or representatives shall commence, participate in or be a party
to
any litigation or any other type of action which challenges, directly or
indirectly, the restrictive covenants set forth herein on the basis that such
covenants are subject to Section 15.50(b) of the Texas Business and Commerce
Code.
19
ARTICLE
XII.
POST-CLOSING
COVENANTS
12.1.
Indemnification
by Seller and Partners.
From
and after the Closing, Seller and each of the Partners (on a Pro Rata Basis
(as
defined in Section
13.1))
agrees
to severally (and not jointly as more specifically described in Section
12.5
below)
indemnify, defend and save NovaMed, NOD and its respective Affiliates
(including, without limitation, the New LP) and each of its respective officers,
directors, employees, agents and fiduciaries (each, a “NovaMed
Indemnified Party”),
forever harmless from and against, and to pay to a NovaMed
Indemnified Party
or reimburse
a NovaMed Indemnified Party for (in either case within ten business days of
its
receipt of notice in accordance with the terms of this Article from any NovaMed
Indemnified Party), any and all liabilities (whether contingent, fixed or
unfixed, liquidated or unliquidated, or otherwise), obligations, deficiencies,
demands, claims, suits, actions, or causes of action, assessments,
losses, costs, expenses, interest, fines, penalties, actual or punitive damages
or costs or expenses of any and all investigations, proceedings, judgments,
environmental analyses, remediations,
settlements and compromises (including reasonable fees and expenses of
attorneys, accountants
and
other experts) (individually and collectively, the “Losses”)
actually sustained or incurred by any
NovaMed Indemnified Party relating to, resulting from, arising out of or
otherwise by virtue of any of the following:
(a)
any
misrepresentation or breach of a representation or warranty contained in this
Agreement or in the Transaction Documents by Seller or any Partner, or
non-compliance with or breach by Seller or any Partner of any of the covenants
or agreements contained in this Agreement or the Transaction Documents to be
performed by any of Seller, Partners or any of their respective Affiliates;
provided, however than any misrepresentation, breach of warranty or
non-fulfillment of any covenant or agreement that relates only to a particular
Partner under this Agreement shall not create liability or responsibility for
any other Party with respect thereto notwithstanding the joint and several
representations.
(b)
the
operation of the Business, including the use of the Assets and the Excluded
Assets, on or prior to the Closing Date;
(c)
any
Tax
liability of Seller or any Partner;
(d)
any
violations of or obligations under Environmental and Safety Requirements
relating to acts, omissions, circumstances or conditions to the extent existing
or arising on or prior to the Closing Date;
(e)
any
liabilities relating to or arising from the provision of (or failure to provide)
professional medical services, including any liabilities relating to the
failure, prior to the Closing Date, to adhere to or comply with any Medicare
and
Medicaid requirements or Fraud and Abuse Laws;
(f)
any
action, demand, proceeding, investigation or claim (whenever made) by any third
party (including Governmental Authorities) against or affecting Buyer or its
Affiliates which evidences the existence of a misrepresentation or breach of
any
of the representations, warranties or covenants contained in this Agreement
or
the Transaction Documents of Seller;
(g)
the
Excluded Assets or Excluded Liabilities; or
(h)
any
claim
for payment of fees and/or expenses as a broker or finder in connection with
the
origin, negotiation, execution or consummation of this Agreement based upon
any
alleged agreement between the claimant and Seller or any Partner.
20
12.2.
Indemnification
by Buyer.
From
and after the Closing, each Buyer agrees to indemnify, defend and save Seller,
Partners and their respective Affiliates, and their respective employees,
trustees, agents, representatives, heirs and executors other than the New LP
(each, a “Seller
Indemnified Party”)
forever harmless from and against, and to pay to a Seller Indemnified Party
or
reimburse a Seller Indemnified Party for (in either case within 10 business
days
of its receipt of notice in accordance to the terms of this Article from any
Seller Indemnified
Party), any and all Losses actually sustained or incurred by any Seller
Indemnified Party relating to, resulting from, arising out of or otherwise
by
virtue of any of the following:
(a)
any
misrepresentation or breach of a representation or warranty contained in this
Agreement or in the Transaction Documents by Buyer, or non-compliance with
or
breach by Buyer of any of the covenants or agreements contained in this
Agreement or in the Transaction Documents to be performed by Buyer;
(b)
any
action, demand, proceeding, investigation or claim (whenever made) by any third
party (including Governmental Authorities) against or affecting Seller, Partners
or their respective Affiliates which evidences the existence of a
misrepresentation or breach of any of the representations, warranties or
covenants contained in this Agreement or the Transaction Documents of Buyer;
or
(c)
any
claim
for payment of fees and/or expenses as a broker or finder in connection with
the
origin, negotiation, execution or consummation of this Agreement based upon
any
alleged agreement between the claimant and Buyer.
12.3.
Indemnification
Procedure for Third Party Claims.
In the
event that subsequent to the Closing any Person entitled to indemnification
under this Agreement (an “Indemnified Party”)
asserts a claim for indemnification or receives notice of the assertion of
any
claim or of the
commencement of any action or proceeding by any entity that is not a party
to
this Agreement or an Affiliate of a party to this Agreement (including, but
not
limited to any domestic or foreign court or Governmental Authority, federal,
state or local) (a “Third
Party Claim”)
against such Indemnified Party, against which a party to this Agreement is
required to provide indemnification under this Agreement (an “Indemnifying
Party”),
the
Indemnified Party shall give written notice together with a statement of any
available information regarding such claim to the Indemnifying Party within
60
days after learning of such claim (or within such shorter time as may be
necessary to give the Indemnifying Party a reasonable opportunity to respond
to
such claim). The Indemnifying Party shall have the right, upon written notice
to
the Indemnified Party (the “Defense
Notice”)
within
30 days after receipt from the Indemnified Party of notice of such claim, which
notice by the Indemnifying Party shall specify the counsel it will
appoint to defend such claim (“Defense
Counsel”),
to
conduct at its expense the defense against such claim in its own name, or if
necessary in the name of the Indemnified Party; provided,
however,
that
the Indemnified Party shall have the right to approve the Defense Counsel,
which
approval shall not be unreasonably withheld, and in the event the Indemnifying
Party and the Indemnified Party cannot agree upon such counsel within 10 days
after the Defense Notice is provided, then the Indemnifying Party shall propose
an alternate Defense Counsel, which shall be subject again to the Indemnified
Party’s approval. If the parties still fail to agree on Defense Counsel, then,
at such time, they shall mutually agree in good faith on a procedure to
determine the Defense Counsel. The delivery of a Defense Notice shall not
constitute an admission with respect to the claim for
indemnification.
(a)
In
the
event that the Indemnifying Party shall fail to give the Defense Notice, it
shall be deemed to have elected not to conduct the defense of the subject claim,
and in such event the Indemnified Party shall have the right to conduct such
defense in good faith and to compromise and settle the claim without prior
consent of the Indemnifying Party and the Indemnifying Party will be liable
for
all costs, expenses, settlement amounts or other Losses paid or incurred in
connection therewith.
21
(b)
In
the
event that the Indemnifying Party does deliver a Defense Notice and thereby
elects to conduct the defense of the subject claim, the Indemnified Party will
cooperate with and make available to the Indemnifying Party such assistance
and
materials as it may reasonably request, all at the expense of the Indemnifying
Party, and the Indemnified Party shall have the right at its expense to
participate in the defense assisted by counsel of its own choosing, provided
that the
Indemnified Party shall have the right to compromise and settle the claim only
with the prior written consent of the Indemnifying Party, which consent shall
not be unreasonably withheld or delayed.
(c)
Without
the prior written consent of the Indemnified Party, the Indemnifying Party
will
not enter into any settlement of any Third Party Claim or cease to defend
against such claim, if pursuant to or as a result of such settlement or
cessation, (i) injunctive or other equitable relief would be imposed against
the
Indemnified Party, or (ii) such settlement or cessation would lead to liability
or create any financial or other obligation on the part of the Indemnified
Party
for which the Indemnified Party is not entitled to indemnification
hereunder.
(d)
The
Indemnifying Party shall not be entitled to control, and the Indemnified Party
shall be entitled to have sole control over, the defense or settlement of any
claim to the extent that claim seeks an order, injunction or other equitable
relief against the Indemnified Party which, if successful, could materially
interfere with the business, operations, assets, condition (financial or
otherwise) or prospects of the Indemnified Party (and the cost of such defense
shall constitute an amount for which the Indemnified Party is entitled to
indemnification hereunder).
(e)
If
a firm
decision is made to settle a Third Party Claim, which offer the Indemnifying
Party is permitted to settle under this Section
12.3,
and the
Indemnifying Party desires to accept and agree to such offer, the Indemnifying
Party will give written notice to the Indemnified Party to that effect. If
the
Indemnified Party fails to consent to such firm offer within 15 calendar days
after its receipt of such notice, the Indemnified Party may continue to contest
or defend such Third Party Claim and, in such event, the maximum liability
of
the Indemnifying Party as to such Third Party Claim will not exceed the amount
of such settlement offer, plus costs and expenses paid or incurred by the
Indemnified Party through the end of such 15-day period.
(f)
Any
judgment entered or settlement agreed upon in the manner provided herein shall
be binding upon the Indemnifying Party, and shall conclusively be deemed to
be
an obligation with respect to which the Indemnified Party is entitled to prompt
indemnification hereunder.
12.4. Failure
to Give Timely Notice.
A
failure by an Indemnified Party to give timely, complete or accurate notice
as
provided in Section
12.3
will not
affect the rights or obligations of any
party
hereunder except and only to the extent that, as a result of such failure,
any
party entitled to receive such notice was deprived of its right to recover
any
payment under its applicable insurance coverage or was otherwise directly and
materially damaged as a result of such failure to give timely
notice.
12.5. Limitations.
(a)
Notwithstanding
anything contained to the contrary in this Agreement, all representations and
warranties of the parties hereto contained in or arising out of the Transaction
Documents, or in any schedule or certificate given in connection herewith and
therewith, shall survive the Closing and shall continue in effect until the
24-month anniversary of the Closing Date; provided,
however,
that
the representations and warranties set forth in Sections 4.2,
4.4, 4.6, 4.8, 4.12(b), 4.15 and
4.19 shall
survive until the expiration of all applicable statutes of limitation;
provided
further
that
notwithstanding
the foregoing, the rights and obligations with respect to indemnification as
provided in this Article
XII shall
continue with respect to any matter for which indemnification has been properly
sought in writing pursuant to the terms and conditions of this Agreement prior
to the expiration of any such survival period. Unless
a
specified period is set forth in this Agreement (in which event such specified
period will control),
all covenants and indemnities contained in this Agreement will survive the
Closing and remain in effect indefinitely.
22
(b)
The
aggregate amount of the Losses required to be paid by Seller and Partners
pursuant to Section
12.1(a)
and
Section
12.1(f)
hereof
shall not exceed the amount of the Purchase Price; provided,
however,
that no
Partner shall be liable, in the aggregate, for such Losses pursuant to
Section
12.1(a)
and
Section
12.1(f)
that are
in excess of such Partner’s allocation of the Purchase Price as set forth on
Schedule
2.3.
(c)
The
NovaMed Indemnified Parties shall be entitled to indemnification under
Section
12.1(a)
and
Section
12.1(f)
only if
the aggregate amount of all Losses thereunder (on a cumulative basis) exceeds
$100,000 (the “Basket
Amount”),
in
which case the Seller and Partners shall be obligated to indemnify the NovaMed
Indemnified Parties only for the excess of the aggregate amount of all such
Losses over the Basket Amount.
(d)
Seller
Indemnified Parties shall be entitled to indemnification under Section
12.2(a)
and
Section
12.2(b)
only if
the aggregate amount of all Losses thereunder (on a cumulative basis) exceeds
the Basket Amount, in which case Buyer shall be obligated to indemnify the
Seller Indemnified Parties only for the excess of the aggregate amount of all
such Losses over the Basket Amount.
(e)
Subject
to Section
13.12
hereof,
the rights set forth in this Article
XII
shall be
each party’s sole and exclusive remedy for any claim or dispute relating to any
breach of a representation, warranty or covenant by the other parties under
this
Agreement; provided,
however,
that in
the case of (i) fraud or intentional misrepresentation by a party hereto or
(ii)
any claim or dispute arising under or relating to Article
XI
hereof,
the limitations set forth in this Section
12.5
shall
not apply, and the aggrieved party shall have all remedies available at law
and
in equity.
(f)
Notwithstanding
anything to the contrary herein, nothing in this Section
12.5
shall be
deemed to limit or impair Buyer’s rights under Article
XI
hereof.
In addition, for purposes of this Section
12.5,
in no
event shall Losses be construed to include any remedies paid to NovaMed or
NOD
under Article
XI.
12.6. Right
of Offset.
12.6.1
Set-Off.
If any
Physician Partner is the Indemnifying Party and fails to make any payment as
contemplated by this Article XII, or shall fail to make any payment when due
under the terms of any of the Transaction Documents, then Buyer may elect to
offset such amount against any amount due and owing by the New LP to such
Physician Partner pursuant to the terms of the Partnership Agreement
(including, without limitation, any distributions payable to such Physician
Partner).
12.6.2
Set-Off
Procedure.
If
Buyer believes it has the right to offset the amount of any Losses against
a
party hereto, Buyer shall notify such party(ies) (the “Off-set
Party”)
of the
amount of the Losses and the dollar amount to be offset as determined by Buyer
in good faith (such notice being deemed a “Notice
of Claim”).
Such
Notice of Claim shall be given to the Off-set Party as soon as reasonably
practicable after Buyer incurred the Losses or learned of its right to offset
and shall include an explanation of Buyer’s rationale underlying such belief.
The Off-set Party shall have 30 days from his receipt of the Notice of Claim
in
which to accept or dispute same, which if disputed, shall include an explanation
of the Off-set Party’s rationale underlying such belief. If the Off-set Party
fails to respond in writing within such 30-day period, the Notice of Claim
shall
be deemed approved by the Off-set Party. If the Off-set Party timely disputes
the Notice of Claim in writing, Buyer on the one hand, and the Off-set Party,
on
the other hand, shall attempt in good faith to agree on the rights of the
respective parties with respect to such claim. If the parties agree on the
amount to be offset, then Buyer shall have the right to offset or cause the
Company to offset such amount against any amounts owed to the Off-set Party
in
accordance with this Section
12.6.
23
12.6.3
Set-Off
Dispute.
If the
parties cannot agree on the offset amount, Buyer shall have the right to deposit
or cause the Company to deposit any sums owed or to be paid by Buyer or the
Company to the Off-set Party that equal the offset amount into an
interest-bearing escrow which shall be established at an escrow agent (the
“Escrow
Agent”)
mutually acceptable to Buyer, on the one hand, and the Off-set Party, on the
other hand. The terms and conditions of such escrow account shall be acceptable
to Buyer and the Off-set Party and the Escrow Agent. The Escrow Agent shall
hold
such funds pending its receipt of instructions from either (i) Buyer and the
Off-set Party, or (ii) an arbitrator or a court of competent jurisdiction,
directing it as to the disposition of such funds.
ARTICLE
XIII.
MISCELLANEOUS
13.1. Definitions. For
purposes of this Agreement, the following terms have the meaning set forth
below:
“Affiliate”
means
an affiliate as defined in Rule 405 under the Securities Act of 1933, as
amended, and includes any past and present Affiliate of a Person; provided
that
with respect to determining any Affiliate of Buyer, such Affiliates shall
include, without limitation, NovaMed, Inc. and any of its
subsidiaries.
“Code”
means
the Internal Revenue Code of 1986, as amended.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended.
“Facility”
means
the Medicare-certified, state-licensed ambulatory surgery center located at
00000 Xxxxxxx Xxxx, Xxxxx 00, Xxxxxx, Xxxxx 00000.
“Fraud
and Abuse Laws”
means
all fraud and abuse laws promulgated under Section 1128(b) of the Social
Security Act, 42 U.S.C. Section 1320a-7(b) and Section 1877 of the Social
Security Act, 42 U.S.C. Section 1877, and all rules and regulations promulgated
thereunder; any other federal, state or local law relating to the referral
of
patients to medical facilities owned by providers of medical services; and
all
federal statutes (whether set forth in Title XVIII of the Social Security Act
or
elsewhere) affecting the health insurance program for the aged and disabled
established by Title XVIII of the Social Security Act and any statues succeeding
thereto, together with all rules and regulations promulgated
thereunder.
“Hazardous
Materials”
means
(a) hazardous materials, hazardous substances, extremely hazardous substances
or
hazardous wastes, as those terms are defined by the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. §9601 et seq., the Resource
Conservation and Xxxxxxxx Xxx, 00 X.X.X. §0000 et seq., and any other
Environmental and Safety Requirements; (b) petroleum, including crude oil or
any
fraction thereof which is liquid at standard conditions of temperature and
pressure (60 degrees Fahrenheit and 14.7 pounds per square inch absolute);
(c)
any radioactive material, including any source, special nuclear, or by-product
material as defined in 42 U.S.C. §2011 et seq.; and (d) asbestos in any form or
condition.
24
“Liens”
means
any claims, liens, charges, restrictions, options, preemptive rights, mortgages,
hypothecations, assessments, pledges, encumbrances or security interests of
any
kind or nature whatsoever.
“Material
Adverse Effect”
means,
with respect to any Person, a material adverse effect on the business,
prospects, financial condition or results of operations of such Person or any
of
its subsidiaries, taken as a whole.
“Medical
Records”
shall
mean all medical records of patients treated at the Facility, including, without
limitation, any and all medical charts, files, notes, transcripts, x-ray files,
lab reports, other diagnostic information or materials, insurance information,
billing and payment statements or records of any kind, explanations of benefits,
and other information of or relating to any patient treated at the Facility,
of
any kind and in any form whatsoever; provided
that
Medical Records shall be limited to the records of the Facility and will not
include records of the provider of professional medical services.
“Person”
means
any individual, sole proprietorship, partnership, joint venture, trust,
undertaking, unincorporated association, corporation, entity, organization
or
Governmental Authority.
“Pro
Rata Basis”
shall
mean each Partner’s percentage interest in Seller as set forth on Schedule
2.3.
“Review
Date”
means
December 31, 2004.
“Tax”
means
any federal, state, local or foreign income, gross receipts, franchise,
estimated, alternative minimum, add-on minimum, sales, use, transfer,
registration, value added, excise, natural resources, severance, stamp,
occupation, premium, windfall profit, environmental, customs, duties, real
property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax,
of
any kind whatsoever, including any interest, penalties or additions to tax
or
additional amounts in respect of the foregoing; the foregoing shall include
any
transferee or secondary liability for a Tax and any liability assumed by
agreement or arising as a result of being (or ceasing to be) a member of any
Affiliated Group, as defined in Section 1504 of the Code (or being included,
or
required to be included, in any Tax Return relating thereto).
“Tax
Returns”
means
returns, declarations, reports, claims for refund, information returns or other
documents (including any related or supporting Schedules, statements or
information) filed or required to be filed in connection with the determination,
assessment or collection of any Taxes of any party or the administration of
any
laws, regulations or administrative requirements relating to any
Taxes.
“Transaction
Documents”
means
this Agreement and all agreements and instruments contemplated by and being
delivered pursuant to or in connection with this Agreement.
13.2.
Notices,
Consents, etc.
Any
notices, consents or other communication required to be sent or given hereunder
by any of the parties shall in every case be in writing and shall be deemed
properly served if (a) delivered personally, (b) sent by registered or certified
mail, in all such
cases with first class postage prepaid, return receipt requested, (c) delivered
by a nationally recognized overnight courier service, or (d) sent by facsimile
transmission to the parties at the addresses as set forth below or at such
other
addresses as may be furnished in writing.
25
(i) If
to
Seller:
|
PPSC,
LLP
x/x
Xxxxxxxxxx Xxxxxxx Xxxxxxx xx Xxxxxxx, LLC
000
Xxxxxxxxxx Xxxxxx, Xxxxx #0
Xxxxxxx,
Xxxxxxxxxxxxx 00000
Attention:
uke
X. Xxxxxxx
Tel: (000)
000-0000
Fax: (000)
000-0000
with
a copy to:
McGuireWoods
LLP
00
Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxxx 00000-0000
Attention:
Xxxxx
Xxxxxx, Esq.
Tel: (000)
000-0000
Fax: (000)
000-0000
And
Xxxxxx,
Xxxx & McGraw, PC
4100
Thanksgiving Tower
0000
Xxx Xxxxxx
Xxxxxx,
Xxxxx 00000
Attenton: Xxxxxx
X. Xxxxxxxxx, Esq.
Tel: (000)
000-0000
Fax: (000)
000-0000
|
(ii) If
to
Partners:
| (A) |
ASCOA:
Ambulatory
Surgery Centers of America, LLC
000
Xxxxxxxxxx Xxxxxx, Xxxxx #0
Xxxxxxx,
Xxxxxxxxxxxxx 00000
Attention: Xxxx
X. Xxxxxxx
Tel: (000)
000-0000
Fax: (000)
000-0000
with
a copy to:
McGuireWoods
LLP
00
Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxxx 00000-0000
Attention:
Xxxxx
Xxxxxx, Esq.
Tel: (000)
000-0000
Fax: (000)
000-0000
|
| (B) |
Physician
Partners (excluding Xxxxxxx Xxxxxxxx, M.D.):
To
the address listed on Schedule A to the
Partnership Agreement (or such other address on file with New
LP)
|
26
|
with
a copy to:
Xxxxxx,
Xxxx & McGraw, PC
4100
Thanisgiving Tower
0000
Xxx Xxxxxxx/X xxx
Xxxxxx,
Xxxxx 00000
Attenton: Xxxxxx
X. Xxxxxxxxx, Esq.
Tel: (000)
000-0000
Fax: (000)
000-0000
|
| (C) |
Xxxxxxx
Xxxxxxxx, M.D., one of the Physician Partners:
Xxxxxxx
Xxxxxxxx, M.D.
c/o
Xxxx Xxxxxxxx
0000
Xxxxx Xxxx
Xxx
Xxxxxxx, Xxxxx 00000
|
(iii) If
to
NovaMed or NOD:
|
NovaMed
Acquisition Company, Inc.
000
Xxxxx Xxxxxxxx Xxxxxx
Xxxxx
0000
Xxxxxxx,
Xxxxxxxx 00000
Attention: Xxxxxx
X. Xxxx
Xxxx
X. Xxxxxxxx, Xx.
|
Date
od service of such notice shall be (A) the date such noti#e is personally
delivered, (B) three days after the date of mailing if sent by certified or
registered mail, (C) one day after date of delivery to the overnight courier
if
sent by overnight courier or (D) the next succeeding business day after
transmission by facsimile.
13.3.
Certain
Taxes.
Seller
and Partners will pay all transfer taxes and other taxes and charges, if any
(except for any sales taxes and income tax of Buyer and its Affiliates),
which may become payable in connection with the transactions contemplated by
this Agreement.
13.4.
Remedies
Not Exclusive.
Except
as set forth in Section
12.5,
no
remedy conferred by any of the specific provisions of this Agreement or the
Transaction Documents is intended to be exclusive of any other remedy. Each
such
remedy shall be cumulative, and in addition to every other such remedy or any
other remedy existing at law or in equity.
13.5.
Severability
and Reformation.
The
unenforceability or invalidity of any provision of this Agreement shall not
affect the enforceability or validity of any other provision. If any
of the
transactions contemplated herein or provisions hereof violates any applicable
law, then the parties
hereto agree to negotiate in good faith such changes to the structure and terms
of the transactions provided for in this Agreement or the Transaction Documents
as may be necessary to make these transactions, as restructured, lawful under
applicable laws and regulations, without materially disadvantaging either party.
The parties to this Agreement shall execute and deliver all documents or
instruments necessary to effect or evidence the provisions of this Section
13.5.
27
13.6.
Amendment
and Waiver.
This
Agreement may be amended, or any provision of this Agreement may be waived,
provided
that
any
such amendment or waiver will be binding on a party hereto only if such
amendment or waiver is set forth in a writing executed by such
party.
The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any other breach.
13.7.
Counterparts.
This
Agreement may be executed simultaneously via facsimile or otherwise in two
or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the parties hereto
and
delivered to the other.
13.8.
Expenses.
Except
as otherwise specifically provided herein, each of the parties shall pay all
costs and expenses incurred or to be incurred by it,
him
or her, as the case may be, in negotiating and preparing this Agreement and
in
closing and carrying out the transactions contemplated by this
Agreement.
13.9.
Construction.
This
Agreement shall be construed and enforced in accordance with, and all questions
concerning the construction, validity, interpretation and performance
of this
Agreement shall be governed by, the laws of the State of Texas, without giving
effect to provisions thereof regarding conflict of laws.
13.10.
Headings.
The
subject headings of Articles and Sections of this Agreement are included for
purposes of convenience only and shall not affect the construction or
interpretation of any of its provisions.
13.11.
Assignment.
This
Agreement may not be assigned by Seller or any Partner without the prior written
consent of Buyer.
13.12.
Mediation
and Arbitration.
Except
as expressly set forth herein, the parties hereto agree that any and all
controversies, disputes or claims arising out of or in connection with this
Agreement shall be solely and exclusively resolved in accordance with this
Section
13.12
and not
in any court of law or equity. The parties hereto shall first try in good faith
to settle the dispute by mediation under the Commercial Mediation Rules of
the
American Arbitration Association (“AAA”)
(such
mediation session to be held in Dallas, Texas, and to commence within thirty
(30) days after the appointment of the mediator by the AAA). If the controversy,
claim or dispute cannot be settled by mediation, then by arbitration
administered by the AAA under its Commercial Arbitration Rules (such arbitration
to be held in Dallas, Texas before a single arbitrator mutually agreed upon
by
Seller and Buyer and to commence within thirty (30) days after the appointment
of the arbitrator by the AAA), and judgment on the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
Notwithstanding the foregoing, nothing herein shall limit Buyer’s rights to seek
and obtain injunctive relief, specific performance or other equitable relief
in
any proceeding commenced in a federal or state court which may be brought to
enforce any provision in Article
XI
hereof.
13.13.
Entire
Agreement.
This
Agreement, the Preamble and all the Schedules attached to this Agreement (all
of
which shall be deemed incorporated in the Agreement and made a part hereof)
set forth the entire understanding of the parties with respect to the subject
matter hereof, and shall not be modified or affected by any offer, proposal,
statement or representation, oral or written, made by or for any party in
connection with the negotiation of the terms hereof, and may be modified only
by
instruments signed by all of the parties hereto.
13.14.
Third
Parties.
Nothing
herein expressed or implied is intended or shall be construed to confer upon
or
give to any Person, other than the parties to this Agreement and
their respective
permitted successors and assigns, any rights or remedies under or by reason
of
this Agreement.
13.15.
No
Strict Construction.
The
language used in this Agreement will be deemed to be the language chosen by
the
parties hereto to express their mutual intent, and no rule of strict
construction will be applied against any party hereto.
13.16.
Public
Announcement.
Seller
and Partners acknowledge that Buyer intends to publicly announce the
transactions contemplated herein, whether through a press release, a filing
with
the Securities and Exchange Commission, or some other form or medium selected
by
Buyer.
*
*
*
28
IN
WITNESS WHEREOF,
the
parties have executed this Agreement as of the date first above written.
|
SELLER:
PRESTON
PLAZA SURGERY CENTER, LLP
By:
/s/
Xxxx Xxxxx, MD
|
NOVAMED:
NOVAMED
ACQUISITION COMPANY, INC.
By:/s/
Xxxxxx X. Xxxx
Xxxxxx X. Xxxx, President
|
|
NOD:
NOVAMED
OF DALLAS, INC.
By:/s/
Xxxxxx X. Xxxx
Xxxxxx
X. Xxxx, President
|
|
|
PARTNERS:
CATARACT
AND LASER CENTER PARTNERS, L.L.C., d/b/a Ambulatory Surgical Centers
of
America
By:
/s/
Xxxx Xxxxxxx
|
/s/
Xxxx X. Xxxxx, MD
Xxxx
X. Xxxxx, M.D.
|
|
/s/
Xxxx X. Xxxxx, M.D.
Xxxx
X. Xxxxx, M.D.
|
/s/
T. Al West, M.D.
T.
Al West, M.D.
|
|
/s/
Xxxxxxx X. Xxxxxx, M.D.
Xxxxxxx
X. Xxxxxx, M.D.
|
/s/
Xxxxxxx X. Troop, M.D.
Xxxxxxx
X. Troop, M.D.
|
|
/s/
Xxxx X. Xxxx, M.D.
Xxxx
X. Xxxx, M.D.
|
/s/
Xxxxxxx Xxxxx, III, M.D.
Xxxxxxx
Xxxxx, III, M.D.
|
|
/s/
Xxxx X. Crates, M.D.
Xxxx
X. Crates, M.D.
|
/s/
Xxxxxxx X. Xxxx, M.D.
Xxxxxxx
X. Xxxx, M.D.
|
|
/s/
Xxxx X. Xxxxx, M.D.
Xxxx
X. Xxxxx, M.D.
|
/s/
Xxxx X. Xxxxxx, M.D.
Xxxx
X. Xxxxxx, M.D.
|
|
/s/
Warrett Xxxxxxx, M.D.
Warrett
Xxxxxxx, M.D.
|
/s/
Xxxxxx X. Xxxxxx, III, M.D.
Xxxxxx
X. Xxxxxx, III, M.D.
|
|
/s/
Xxxxxx X. Xxxxx, M.D.
Xxxxxx
X. Xxxxx, M.D.
|
/s/
Xxxxxx X. Xxxxx, M.D.
Xxxxxx
X. Xxxxx, M.D.
|
|
/s/
Xxxxxx X. Xxxxxx, M.D.
Xxxxxx
X. Xxxxxx, M.D.
|
/s/
Xxxxxxxxxx X. Co, M.D.
Xxxxxxxxxx
X. Co, M.D.
|
|
/s/
Xxxxxxx Xxxxxxxx, M.D.
Xxxxxxx
Xxxxxxxx, M.D.
|
EXHIBITS
|
Exhibit
1
|
—
|
Physician
Partners
|
|
Exhibit
1.1-1
|
—
|
Certificate
of Limited Partnership
|
|
Exhibit
3.2
|
—
|
Wire
Transfer Instructions
|
|
Exhibit
7.3(a)
|
—
|
Contribution
Agreement
|
|
Exhibit
7.3(b)
|
—
|
Partnership
Agreement
|
|
Exhibit
7.3(g)
|
—
|
Assignment
of Partnership Interests
|
|
Exhibit
7.4(e)
|
—
|
Management
Agreement
|
|
SCHEDULES*
|
||
|
Schedule
1.2(b)
|
—
|
Personal
Property
|
|
Schedule
1.2(c)
|
—
|
Prepaid
Business Expenses
|
|
Schedule
1.3(g)
|
—
|
Excluded
Assets/Personal Effects
|
|
Schedule
1.4(a)
|
—
|
Accounts
Payable
|
|
Schedule
1.4(b)
|
—
|
Accrued
Liabilities
|
|
Schedule
2.3
|
—
|
Ownership
|
|
Schedule
4.1
|
—
|
Notifications
and Approvals
|
|
Schedule
4.2
|
—
|
Liens
and Encumbered Assets
|
|
Schedule
4.3
|
—
|
Approvals
|
|
Schedule
4.5
|
—
|
Financial
Statements
|
|
Schedule
4.6
|
—
|
Liabilities
|
|
Schedule
4.9
|
—
|
Material
Contracts/Assumed Contracts
|
|
Schedule
4.10
|
—
|
Leased
Real Property
|
|
Schedule
4.11
|
—
|
Litigation
|
|
Schedule
4.12(b)
|
—
|
Licenses
and Permits
|
|
Schedule
4.13
|
—
|
Transaction
Not a Breach
|
|
Schedule
4.14
|
—
|
Conduct
of Business
|
|
Schedule
4.16
|
—
|
Salaries
|
|
Schedule
4.17
|
—
|
Insurance
|
|
Schedule
4.19
|
—
|
Employee
Benefit Plans
|
|
Schedule
4.20
|
—
|
Personnel
Agreements
|
|
Schedule
4.22
|
—
|
Workers
Compensation
|
|
Schedule
4.23(a)
|
—
|
Accounts
Receivable
|
|
Schedule
6.2(a)
|
—
|
Continuing
Employees
|
|
Schedule
11.2.1(I)
|
—
|
Ownership
in Other Facilities
|
|
Schedule
11.2.1(II)
|
—
|
In-Office
Procedure
|
*
NovaMed, Inc. agrees to furnish supplementally a copy of any omitted schedule
to
the Securities and Exchange Commission upon request.
EXHIBIT
1
Physician
Partners
Xxxx
X.
Xxxxx, M.D.
Xxxx
X.
Xxxxx, M.D.
T.
Al
West, M.D.
Xxxxxxx
X. Xxxxxx, M.D.
Xxxxxxx
X. Troop, M.D.
Xxxx
X.
Xxxx, M.D.
Xxxxxxx
Xxxxx, III, M.D.
Xxxx
X.
Crates, M.D.
Xxxxxxx
X. Xxxx, M.D.
Xxxx
X.
Xxxxx, M.D.
Xxxx
X.
Xxxxxx, M.D.
Warrett
Xxxxxxx, M.D.
Xxxxxx
X.
Xxxxxx, III, M.D.
Xxxxxx
X.
Xxxxx, M.D.
Xxxxxx
X.
Xxxxx, M.D.
Xxxxxx
X.
Xxxxxx, M.D.
Xxxxxxxxxx
X. Co, M.D.
Xxxxxxx
Xxxxxxxx, M.D.
