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EXHIBIT 10.35
EXECUTION COPY
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STOCK PURCHASE AGREEMENT
BY AND AMONG
AMERIPATH, INC.,
COLAB INCORPORATED PROFESSIONAL CORPORATION,
ANATOMICAL PATHOLOGY SERVICES, P.C.,
MICRODIAGNOSTICS, P.C.,
AND
THE PERSONS SET FORTH ON EXHIBIT 1.1 HERETO
DATED AS OF AUGUST 15, 1997
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TABLE OF CONTENTS
PAGE NO.
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ARTICLE I
PURCHASE OF CAPITAL STOCK
1.1 Purchase and Sale of Capital Stock............................ 2
1.2 The Contingent Notes.......................................... 3
1.3 AmeriPath Stock............................................... 8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
AND THE COMPANIES
2.1 Organization, Qualification, etc.............................. 11
2.2 Subsidiaries.................................................. 11
2.3 Capital Stock................................................. 12
2.4 Record Books.................................................. 12
2.5 Title to Company Stock........................................ 12
2.6 Options and Rights............................................ 12
2.7 Authorization, Etc............................................ 12
2.8 No Violation.................................................. 12
2.9 Financial Statements.......................................... 13
2.10 Employees..................................................... 13
2.11 Absence of Certain Changes.................................... 14
2.12 Contracts..................................................... 14
2.13 True and Complete Copies...................................... 16
2.14 Title and Related Matters..................................... 17
2.15 Litigation.................................................... 17
2.16 Tax Matters................................................... 18
2.17 Compliance with Law and Applicable Government Regulations..... 19
2.18 ERISA and Related Matters..................................... 19
2.19 Intellectual Property......................................... 21
2.20 Environmental Matters......................................... 22
2.21 Dealings with Affiliates...................................... 23
2.22 Banking Arrangements.......................................... 23
2.23 Insurance..................................................... 23
2.24 Consents...................................................... 24
2.25 Investment Representations.................................... 24
2.26 Accounts Receivable; Inventories.............................. 25
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2.27 Brokerage..................................................... 26
2.28 Improper and Other Payments................................... 26
2.29 Participation in Audits....................................... 26
2.30 Health Care Laws.............................................. 26
2.31 Financial Condition........................................... 28
2.32 Disclosure.................................................... 28
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
3.1 Corporate Organization, etc................................... 29
3.2 Subsidiaries.................................................. 29
3.3 Authorization, Etc............................................ 29
3.4 No Violation.................................................. 29
3.5 Governmental Authorities...................................... 29
3.6 Issuance of AmeriPath Stock................................... 30
3.7 Financial Statements.......................................... 30
3.8 Litigation.................................................... 30
3.9 Disclosure.................................................... 31
3.10 Consents...................................................... 31
3.11 Senior Credit Facility........................................ 31
ARTICLE IV
COVENANTS OF THE SELLERS AND THE COMPANIES
4.1 Regular Course of Business.................................... 31
4.2 Amendments to Organizational Documents........................ 31
4.3 Capital Changes; Pledges...................................... 32
4.4 Dividends..................................................... 32
4.5 Capital and Other Expenditures................................ 32
4.6 Cash and Cash Equivalents..................................... 32
4.7 Borrowing..................................................... 32
4.8 Other Commitments............................................. 32
4.9 Interim Financial Information................................. 32
4.10 Full Access and Disclosure.................................... 33
4.11 Confidentiality............................................... 33
4.12 Breach of Agreement........................................... 33
4.13 Fulfillment of Conditions Precedent........................... 33
4.14 Banking Arrangements.......................................... 34
4.15 Termination of ERISA Plans.................................... 34
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ARTICLE V
COVENANTS OF THE PURCHASER
5.1 Confidentiality............................................... 34
5.2 Full Access and Disclosure.................................... 34
ARTICLE VI
OTHER AGREEMENTS
6.1 Further Assurances............................................ 35
6.2 Agreement to Defend........................................... 35
6.3 Consents...................................................... 35
6.4 No Solicitation or Negotiation................................ 35
6.5 No Termination of Sellers' Obligations by
Subsequent Incapacity, Etc.................................. 36
6.6 Employment Agreements......................................... 36
6.7 Public Announcements.......................................... 36
6.8 Deliveries After Closing...................................... 36
6.9 Non-Competition Covenant...................................... 36
6.10 Non-disclosure; Confidentiality............................... 38
6.11 Rule 144 Best Efforts......................................... 39
6.12 338(h)(10) Election........................................... 40
6.13 Assignment of Contracts....................................... 40
7.1 Representations and Warranties; Covenants and Agreements...... 41
7.2 No Injunction................................................. 41
7.3 Third Party Consents.......................................... 41
7.4 Regulatory Approvals.......................................... 41
7.5 No Material Adverse Change.................................... 41
7.6 Opinion of Seller's Counsel................................... 42
7.7 Employment Agreements......................................... 42
7.8 Delivery of Company Share Certificates........................ 42
7.9 Subordination Agreement....................................... 42
7.10 Shareholders' Agreement....................................... 42
7.11 Creditor Consents............................................. 42
7.12 Company Charter Amendments.................................... 42
7.13 Trust Agreement; Management Agreement......................... 42
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
8.1 Representations and Warranties; Performance................... 43
8.2 No Injunction................................................. 43
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8.3 Purchase Consideration........................................ 43
8.4 Employment Agreements......................................... 43
8.5 Trust Agreement; Management Agreement......................... 43
8.6 Opinion of Purchaser's Counsel................................ 43
ARTICLE IX
CLOSING
9.1 Closing....................................................... 44
9.2 Closing Deliveries............................................ 44
ARTICLE X
TERMINATION AND ABANDONMENT
10.1 Methods of Termination........................................ 45
10.2 Procedure Upon Termination.................................... 46
ARTICLE XI
SURVIVAL OF TERMS; INDEMNIFICATION
11.1 Survival...................................................... 46
11.2 Indemnification by the Sellers................................ 47
11.3 Indemnification by the Purchaser.............................. 48
11.4 Third-Party Claims............................................ 48
11.5 Deductible; Maximum Liability................................. 49
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Amendment and Modification.................................... 50
12.2 Entire Agreement.............................................. 50
12.3 Certain Definitions........................................... 50
12.4 Notices....................................................... 52
12.5 Waiver of Compliance; Consents................................ 53
12.6 Assignment.................................................... 53
12.7 Governing Law................................................. 54
12.8 Consent to Jurisdiction; Service of Process................... 54
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12.9 Injunctive Relief............................................. 54
12.10 Counterparts.................................................. 54
12.11 Headings...................................................... 54
12.12 Binding Effect................................................ 54
12.13 Delays or Omissions........................................... 54
12.14 Severability.................................................. 55
12.15 Expenses...................................................... 55
12.16 Attorneys' Fees............................................... 55
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SCHEDULES
1.1 Shareholders; Ownership of Company Shares; Consideration
1.2 Contingent Stock Payments
2.1 Jurisdictions of Qualification
2.2 Subsidiaries; Investments; Interests
2.3 Capital Stock of the Companies
2.8 Violations
2.9(a) Liabilities
2.9(b) Liabilities Covered by Insurance
2.9(c) Accounts Payable
2.12 Contracts
2.14 Real and Personal Property
2.17 Permits and Licenses
2.18 ERISA, Benefit Plans and Other Matters
2.19(a) Intellectual Property
2.19(d) Software
2.20 Environmental Matters
2.21 Affiliated Transactions
2.22 Banking Arrangements
2.23 Insurance
2.24 Consents
2.26 Accounts Receivable
2.29 Participation in Audits
2.30(a) Fraud and Abuse
2.30(b) Third-Party Payors
2.30(c) Medicare and Medicaid Compliance
2.30(d) Rate Limitations and Rates
3.2 Subsidiaries of AmeriPath
6.6 Employment Agreement Sellers
6.13 Contract Assignments
7.3 Third Party Consents
7.4 Regulatory Approvals
7.11 Creditor Consents
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EXHIBITS
1.1 Selling Shareholders
1.2 Form of 7% Contingent Subordinated Promissory Note
2.1 Organizational Documents of the Companies
2.9 Financial Statements
3.7 Purchaser's Financial Statements
6.6 Form of Employment Agreement
7.6 Opinion of Sellers' Counsel
7.9 Subordination Agreement
7.13(a) Form of Trust Agreement
7.13(b) Form of Management Agreement
8.6 Opinion of Purchaser's Counsel
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STOCK PURCHASE AGREEMENT (the "AGREEMENT"), dated as of August 15,
1997, by and among AMERIPATH, INC., a Delaware corporation, or its permitted
designees or assigns ("AMERIPATH" or the "PURCHASER"), COLAB INCORPORATED
PROFESSIONAL CORPORATION, an Indiana professional corporation ("COLAB"),
ANATOMICAL PATHOLOGY SERVICES, P.C., an Indiana professional corporation
("APS"), MICRODIAGNOSTICS, P.C., an Indiana professional corporation ("MICRO"
and, together with Colab and APS, collectively referred to herein as the
"COMPANY" or the "COMPANIES"), and the individuals set forth on EXHIBIT 1.1
hereto who together constitute the holders of all of the issued and outstanding
shares of capital stock of the Companies (such persons to be collectively
referred to herein as the "SELLERS" and individually as a "SELLER").
WHEREAS, the Sellers together own all of the issued and outstanding
shares of capital stock of the Companies, each of which is organized as a
professional service corporation under Section 23-1.5-1-1 of the Indiana
Professional Corporations Act;
WHEREAS, AmeriPath desires to purchase and acquire from the Sellers,
and the Sellers desire to sell, transfer and deliver to AmeriPath, all of the
issued and outstanding shares of capital stock of the Companies upon the terms
and subject to the conditions set forth herein;
WHEREAS, in the case of APS and Micro, an election shall be made in
accordance with Sections 338(g) and 338(h)(10) of the Internal Revenue Code of
1986, as amended, and the regulations thereunder (the "CODE");
WHEREAS, each of the Companies, although presently organized as
professional service corporations, will immediately prior to the closing of the
transactions contemplated by this Agreement, upon the terms and subject to the
conditions set forth herein, amend their respective Articles of Incorporation in
order to convert themselves to regular business corporations organized under the
Indiana Business Corporations Law;
WHEREAS, immediately following the closing of the transactions
contemplated by this Agreement, APS and Micro will be merged with and into
Colab, which, upon consummation of the transactions contemplated by this
Agreement, shall be and have become a wholly-owned subsidiary of AmeriPath, and
Colab shall change its name to AmeriPath Indiana, Inc. ("AMERIPATH INDIANA");
WHEREAS, in order to comply with Indiana State Health Care Laws,
AmeriPath shall form a grantor trust (the "TRUST"), with AmeriPath as its sole
beneficiary and an Indiana physician as the trustee, and the Trust shall form
and become the sole member of an Indiana Limited Liability Company ("AMERIPATH
INDIANAPOLIS");
WHEREAS, in connection with the transactions contemplated by this
Agreement, AmeriPath Indianapolis shall enter into an employment agreement with
certain of the Sellers and a management agreement with AmeriPath Indiana; and
WHEREAS, although the parties hereto have agreed as to the minimum
value of the Companies, they are not able to agree as to the total value of the
Companies, and thus the parties
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hereto have agreed to certain additional contingent purchase price consideration
based upon the results of operations of the Companies as more fully set forth
herein;
NOW, THEREFORE, for and in consideration of the mutual benefits to be
derived hereby and the premises, representations, warranties, covenants and
agreements herein contained, AmeriPath, each Seller and the Companies hereby
agree, intending to be legally bound, as follows:
ARTICLE I
PURCHASE OF CAPITAL STOCK
1.1 PURCHASE AND SALE OF CAPITAL STOCK.
(a) Subject to the terms and conditions of this Agreement,
each Seller agrees to sell, transfer and deliver to the Purchaser, and
the Purchaser agrees to purchase, acquire and accept delivery from each
Seller, all of the issued and outstanding shares of capital stock (the
"COMPANY SHARES") of each of the Companies owned or held by such
Seller, which Company Shares to be sold and purchased hereunder is set
forth opposite each Seller's name on SCHEDULE 1.1 attached hereto.
(b) Upon the sale, transfer and delivery to the Purchaser by
the Sellers of the Company Shares at the Closing (as such term is
defined in SECTION 9.1 hereof), and in consideration therefor,
Purchaser shall deliver to the Sellers the following consideration in
the aggregate (which aggregate consideration shall be divided between
the Sellers in the amounts and as indicated on SCHEDULE 1.1 attached
hereto):
(i) TWENTY-FOUR MILLION THIRTY-SEVEN THOUSAND SIX
HUNDRED DOLLARS ($24,037,600.00), by cashier's check or by
wire transfer;
(ii) 850,390 shares of AmeriPath common stock, par
value $.01 per share (the "AMERIPATH STOCK"), issuable at
Closing but subject to vesting over five years, in accordance
with SECTION 1.3 hereof;
(iii) 7% Non-Negotiable Contingent Subordinated
Promissory Notes, due on December 31, 2002, each in the form
attached hereto as EXHIBIT 1.2 (the "CONTINGENT NOTES"), in
the aggregate maximum principal amount of FOURTEEN MILLION
NINE HUNDRED SIXTY-SEVEN THOUSAND DOLLARS ($14,967,000.00),
the issuance and certain terms and conditions of which
Contingent Notes are set forth in SECTION 1.2 below; and
(c) ADDITIONAL PURCHASE PRICE. The parties hereto agree to
increase the Purchase Price by the amount by which the Net Working
Capital (as defined in SECTION 2.31) of the Companies at and as of the
Closing Date (as defined in SECTION 9.1) exceeds
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$1,000,000. Such amount shall be additional Purchase Price and shall be
paid to the Sellers pro rata in accordance with SCHEDULE 1.1 hereto.
1.2 THE CONTINGENT NOTES.
(a) PRINCIPAL AMOUNTS; ISSUANCE. The aggregate maximum
principal amount of the Contingent Notes to be issued and delivered by
the Purchaser to the Sellers pursuant to SECTION 1.1(B)(III) hereof at
the Closing shall be FOURTEEN MILLION NINE HUNDRED SIXTY-SEVEN THOUSAND
DOLLARS ($14,967,000.00). As additional purchase price consideration,
at the Closing, the Purchaser shall deliver to each Seller a Contingent
Note, due on December 31, 2002, in the maximum stated principal amount
as set forth on SCHEDULE 1.2 hereof, which Contingent Notes shall be in
the form of EXHIBIT 1.2 hereto. Each Contingent Note shall be due and
payable in the applicable principal amount specified in or calculated
pursuant to such Contingent Note and the Annexes to such Contingent
Note (the "APPROPRIATE PRINCIPAL AMOUNT") corresponding to a target
range of Operating Earnings (as defined below) or Cumulative Operating
Earnings (as defined below), as the case may be, specified in such
Contingent Note and the Annexes thereto, with respect to each of the
five (5) twelve-month periods ending September 30, 1998 through
September 30, 2002, if, and only if, (i) with respect to the period
ending September 30, 1998, Operating Earnings for such year equal or
exceed the specified minimum target amount of $5,080,000.00 (the
"YEAR-1 MINIMUM TARGET") or, (ii) with respect to each of the next four
(4) periods ending September 30, 1999, 2000, 2001 and 2002, Cumulative
Operating Earnings for such year equal or exceed $10,160,000.00,
$15,240,000.00, $20,320,000.00 and $25,400,000.00, respectively
(together with the Year-1 Minimum Target, as relevant to the applicable
year, the "MINIMUM TARGETS"). For each of the periods ending September
30, 1998 through 2002 for which Operating Earnings or Cumulative
Operating Earnings, as the case may be, are less than the applicable
Minimum Target, no principal payment(s) shall be required, due or made
under the Contingent Notes, or under any Contingent Note, with respect
to that year, and any and all interest with respect thereto or accrued
thereon, which otherwise would have become due or payable had the
applicable Minimum Target been achieved for such year, shall be
canceled and voided. Notwithstanding anything to the contrary herein or
in the Contingent Notes, the aggregate maximum principal amount due or
payable under all the Contingent Notes shall not exceed $14,967,000.
(b) "OPERATING EARNINGS"; "CUMULATIVE OPERATING EARNINGS".
(i) DEFINITION OF "OPERATING EARNINGS". For purposes
hereof (and the Contingent Notes), the term "OPERATING
EARNINGS", with respect to any year or period, shall mean the
income of or attributable to the Business (as defined below)
for such year or period, BEFORE deduction for (in each case,
with respect to the Business) (i) interest paid in such year,
(ii) income tax payable for such year, (iii) charges for
amortization of goodwill, including without limitation any
amortization of goodwill recorded in connection with this
transaction or amortization of any
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payments made under the Contingent Notes, (iv) any fees or
expenses incurred by the Business in connection with the
transactions contemplated by this Agreement, (v) allocations
of corporate overhead of the Purchaser or AmeriPath Indiana
that is unrelated to the Business, and (vi) amounts payable to
the Managing Director or other administrators of the Companies
(provided that such amounts shall not exceed $50,000 in the
aggregate in any 12 month period). All such calculations shall
be determined in accordance with GAAP (as defined in SECTION
12.3 hereof). For purposes hereof (and the Contingent Notes),
the "Business" shall include the business, operations,
contracts, assets and liabilities of the Companies (as
constituted immediately prior to the Closing), which Business
following the Closing shall consist of the business,
operations, contracts, assets and liabilities of, and the
results of operations, revenues and expenses associated with,
(i) the Companies, (ii) the contracts with hospitals, medical
facilities and other entities, including, but not limited to
Mid America Clinical Laboratories, L.L.C., in effect from time
to time, to which the Companies, prior to the Closing, and the
Companies and/or AmeriPath Indiana and/or AmeriPath
Indianapolis, following the Closing, are a party, and which
are serviced by the physicians who from time to time are
employed by the Companies and/or AmeriPath Indiana and/or
AmeriPath Indianapolis and who report to the medical director
for AmeriPath Indiana and/or AmeriPath Indianapolis
(collectively, such physicians being referred to herein as the
"INDIANA-BASED PATHOLOGISTS"), and (iii) AmeriPath
Indianapolis' employment of, and employment agreements with,
any and all Indiana-Based Pathologists.
(ii) CALCULATION OF OPERATING EARNINGS. A statement
of the Operating Earnings, prepared by AmeriPath senior
management, will be delivered to the Sellers as soon as
practicable following the end of each twelve month period, but
in all events within 80 days after the end of each such
period. If a majority of the holders of Contingent Notes (the
"HOLDERS") wish to challenge the calculation of Operating
Earnings, they may do so by giving written notice of such
objection (the "OBJECTION NOTICE") to AmeriPath, signed by
such Holders, within 20 days after receipt of such statement
of Operating Earnings. The Objection Notice shall set forth in
reasonable detail the Holders' calculation of Operating
Earnings (or Cumulative Operating Earnings, as the case may
be). If an Objection Notice is so timely delivered to
AmeriPath, AmeriPath and the Holders shall use their best
efforts to resolve as soon as practicable any difference of
opinion. If they are unable to resolve such difference within
20 days after receipt by AmeriPath of the Objection Notice
from the Holders, the matter shall be referred to the
independent public accounting firm who then audits the annual
financial statements of AmeriPath, whose decision shall be
final and binding on all parties. If an Objection Notice is
not timely delivered to AmeriPath, and if the statement of
Operating Earnings prepared by AmeriPath senior management
indicates that the Minimum Target has been met for a given
period, then the appropriate Applicable Payment Amount of the
Contingent Notes with respect to such period shall be paid
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within ten (10) days after the earlier of the end of the 20
day period within which the Holders are entitled to deliver an
Objection Notice, or receipt by AmeriPath of notice from all
the Holders that they accept the calculation of Operating
Earnings. If the Holders object to the calculation of
Operating Earnings for the purpose of determining compliance
with this Section, the Applicable Payment Amount of the
Contingent Notes for such year shall be paid within ten (10)
days after resolution of the dispute with respect to such
calculation to the extent, and solely to the extent, that such
resolution indicates that the Minimum Target has been exceeded
for such period.
(iii) CUMULATIVE OPERATING EARNINGS. For purposes
hereof (and the Contingent Notes), the term "CUMULATIVE
OPERATING EARNINGS" shall mean and include, with respect to
the 24 month period ending September 30, 1999, the 36 month
period ending September 30, 2000, the 48 month period ending
September 30, 2001 and the 60 month period ending September
30, 2002,the Operating Earnings of the Business, on a
cumulative basis, from October 1, 1997 through the end of such
period (E.G., the Cumulative Operating Earnings for the period
ending September 30, 2000 shall equal the Operating Earnings,
on a cumulative basis, from October 1, 1997 through September
30, 2000 (I.E., three full cumulative years of Operating
Earnings would be included)).
(iv) REGULATORY ADJUSTMENTS. Notwithstanding anything
to the contrary contained herein, if, in the judgment of a
majority of the full Board of Directors of AmeriPath, in their
sole and absolute discretion acting in good faith, it is
determined that (A) the inclusion of certain income, from
referrals or otherwise, in the calculation of Operating
Earnings or Cumulative Operating Earnings, as the case may be,
may cause the Contingent Notes, or the holding of the
Contingent Notes by any Holder, to violate any Regulation or
Order of any Authority (as such terms are defined in SECTION
12.3), or (B) any income was derived or the result of a
violation of the policies and procedures of AmeriPath adopted
from time to time by the Board of Directors of AmeriPath,
then, such income shall not be included in Operating Earnings
or Cumulative Operating Earnings, as the case may be, and
shall not be taken into account in determining the payments to
be made under the Contingent Notes; PROVIDED, HOWEVER, that
Sellers shall be given prompt notice of any such determination
by the Board of Directors and shall have an opportunity to
review the basis for such determination with the Board of
Directors.
(c) EFFECT OF SALE ON CONTINGENT NOTES. Should any Person (as
such term is defined in SECTION 12.3 hereof) acquire AmeriPath, whether
by means of a merger with or into AmeriPath in which AmeriPath does not
survive or the acquisition of all or substantially all of the stock or
assets of AmeriPath (an "AMERIPATH ACQUISITION"), then, with respect to
such Contingent Notes, as a condition to consummation of the AmeriPath
Acquisition, the acquiring Person shall be required either to
acknowledge and guarantee
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AmeriPath's on-going obligations under the Contingent Notes or to
assume the obligations under the Contingent Notes.
(d) EFFECT OF ACQUISITIONS ON CONTINGENT NOTES. In the event
that AmeriPath or an Affiliate of AmeriPath acquires one or more
Persons or businesses after the Closing Date (an "AMERIPATH
ACQUISITION"), other than in the ordinary course of business and upon
agreement of the Purchaser and the Sellers, Operating Earnings will be
calculated without including (i) the income generated by, or expenses
incurred in connection with, the AmeriPath Acquisition, and (ii) any
selling, general or administrative expenses which do not relate to the
Company or its Business; PROVIDED, HOWEVER, with respect to an
AmeriPath Acquisition whose income the Purchaser and the Sellers have
agreed to include in the Operating Earnings or Cumulative Operating
Earnings, as the case may be, of the Business, interest, amortization
and depreciation with respect to such AmeriPath Acquisition shall be
deducted from the Operating Earnings or Cumulative Operating Earnings,
as the case may be, of the Business.
(e) INTEREST. Each Contingent Note shall bear interest from
the date of issuance until maturity, computed on the basis of a 360-day
year and the actual number of days elapsed, on the unpaid Appropriate
Principal Amount thereof at the rate of seven percent (7.0%) per annum.
Simple interest shall accrue and be payable only upon payment of
principal, if any. In the event Operating Earnings or Cumulative
Operating Earnings are less than the applicable Minimum Target for any
given year, interest on the principal amount of all Contingent Notes
for such year shall be canceled and voided.
(f) MATURITY, REDEMPTION AND PREPAYMENTS. For each year for
which Operating Earnings or Cumulative Operating Earnings, as the case
may be, equal or exceed the applicable Minimum Target, the Appropriate
Principal Amount of the Contingent Notes, together with interest
accrued on such Appropriate Principal Amount, shall become due and
payable and shall be paid as provided in subparagraph (a) above. If, in
the judgment of a majority of the full Board of Directors of AmeriPath
(which judgment is made based upon the advice of counsel), it is
determined that the Contingent Notes, or the holding of the Contingent
Notes by any Seller, may violate any Regulation or Order of any
Authority (as such terms are defined in SECTION 12.3), then, at
AmeriPath's sole discretion (as recommended by counsel to Ameripath),
upon written notice to Sellers, the Contingent Notes may be canceled
and voided and the parties hereto agree to endeavor in good faith to
arrive at a reasonably equivalent economic and financial substitute
consideration therefor. In its sole and absolute discretion, AmeriPath
may prepay the Contingent Notes by paying (in the aggregate, for all
Contingent Notes) $1,496,700 for each year remaining under the
Contingent Notes, such amount to be divided among the Sellers pro rata
according to the maximum principal amounts of the Contingent Notes.
AmeriPath shall give the holders of the Contingent Notes irrevocable
written notice of any prepayment permitted hereunder not less than
three (3) business days prior to the prepayment date, specifying such
prepayment and the amount of the Contingent Notes proposed to be
prepaid on such date, whereupon such principal amount
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of the Contingent Notes specified in such notice, together with accrued
interest thereon, shall become due and payable on the prepayment date;
PROVIDED, HOWEVER, that if the prepayment is to be made during the
month of December in any year, then the written notice shall be given
not less than two (2) weeks prior to the prepayment date. The aggregate
amount of each partial prepayment shall be allocated among each of the
holders of the Contingent Notes at the time outstanding PRO RATA in
proportion to the unpaid principal amounts of the Contingent Notes held
by each of such holders.
(g) GENERAL TERMS OF CONTINGENT NOTES.
(1) PAYMENTS. All payments of principal
(including any prepayments or redemptions),
and interest under the Contingent Notes
shall be made by AmeriPath in lawful money
of the United States of America in
immediately available funds (or at the
written request of the holders thereof, by
certified or bank check) not later than 5:00
P.M. Indianapolis, Indiana time, on the date
each such payment is due. To the extent
calculation of any payment amounts (whether
principal, interest or otherwise) results in
fractions of a cent, the amount shall be
rounded down to the nearest whole cent.
(2) SUBORDINATION; SUBORDINATION AGREEMENT. The
Contingent Notes shall be subordinate and
junior in right of payment to certain senior
indebtedness pursuant to a subordination
agreement, to be dated as of the Closing
Date (the "SUBORDINATION AGREEMENT"), by and
among AmeriPath, its Subsidiaries, senior
lenders and the Sellers. As a condition to
AmeriPath's obligations under the Contingent
Notes, each Seller agrees to execute and
deliver appropriate documents and agreements
evidencing the subordination of the
Contingent Notes to senior indebtedness of
AmeriPath.
(3) NOTES NON-NEGOTIABLE. The Contingent Notes
shall be non-transferable and
non-negotiable.
(4) RIGHT OF SET-OFF ON SELLERS' CONTINGENT
NOTES. With respect to all Contingent Notes
issued to the Sellers, AmeriPath shall have
the right, following prior written notice to
the holder, to set-off against principal or
interest payable to such Seller under a
Contingent Note held by such Seller the
amount of any indemnification payment owed
by such Seller under ARTICLE XI hereof. Such
notice shall state with reasonable
specificity the good faith basis for
AmeriPath's right to such indemnification
payment, and a copy of such notice shall
also be sent to each director of AmeriPath.
The Seller shall have the right to respond
to such notice, and if the
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Seller requests that the exercise of such
right of set-off be considered and approved
by the Board of Directors, then such right
shall not be exercised unless considered and
approved by a majority of the full Board of
Directors. If within 10 days after receipt
of such notice of set-off, the Seller
against whom AmeriPath intends to assert
such right of set-off contests in writing
(sent to AmeriPath) AmeriPath's claim that
the Seller is obligated to pay such amount
as indemnification under ARTICLE XI hereof,
then the amount which AmeriPath would
otherwise have paid to the Seller but for
the exercise of such right of set-off shall
be paid into an interest bearing escrow
account maintained by a bank selected by
AmeriPath, to be held in such account until
AmeriPath and the Seller have reached
agreement as to the amount, if any, of such
indemnification payment and set-off, or
until there has been a judicial resolution
of such matter, at which time the amount
held in such segregated account, together
with any interest accrued thereon, shall be
released to the prevailing party, as
appropriate and/or instructed. AmeriPath and
the Seller agree that they will use their
best efforts to resolve any such dispute
within 30 days of receipt of notice by
AmeriPath of the Seller's objection to the
set-off.
(5) DEFAULTS. The holders of the Contingent
Notes shall be entitled to the benefit of
the Events of Default set forth in the
applicable form of Contingent Note.
(6) CONFLICT. To the extent there is any
conflict or inconsistency between the terms
of this Agreement and the terms specified in
any Contingent Note the terms specified in
the Contingent Note shall govern and
prevail.
1.3 AMERIPATH STOCK. As additional purchase price consideration, the
Purchaser shall issue to the Sellers, subject to the conditions and restrictions
set forth in this SECTION 1.3 (the "STOCK RIGHTS"), the AmeriPath Stock (to be
divided among the Sellers as set forth on SCHEDULE 1.1 hereof).
(a) RESTRICTIONS ON TRANSFER; VESTING.
(1) Except as is specifically permitted by the
provisions of this SECTION 1.3, the sale, assignment,
transfer, conveyance, pledge, margin, hypothecation, gift,
bequest, devise, levy, execution or other disposition
(hereinafter, each, a "transfer") of the AmeriPath Stock,
either directly or indirectly, by operation of law or
otherwise, to any person (including any individual, trust,
corporation, partnership,
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company, association, syndicate, venture, special purpose
vehicle or other entity) is strictly prohibited.
(2) In furtherance and not in limitation of the
foregoing, no Seller shall transfer any shares of the
AmeriPath Stock at any time if such transfer would constitute
a breach of any shareholders agreement with AmeriPath, or a
violation of any federal or state securities or "blue sky"
laws, rules or regulations (collectively, "SECURITIES LAWS"),
or a breach of the conditions to any exemption from
registration of the AmeriPath Stock under any such Securities
Laws, or a breach of any undertaking or agreement of such
Seller entered into with AmeriPath pursuant to such Securities
Laws or in connection with obtaining an exemption thereunder,
and AmeriPath shall not transfer upon its books any shares of
AmeriPath Stock unless prior thereto AmeriPath shall have
received an opinion, in form and substance satisfactory to
AmeriPath, of counsel, reasonably satisfactory to AmeriPath,
that such transfer is in compliance with this SECTION 1.3.
(3) For purposes of this Agreement (and the
restrictions set forth in this SECTION 1.3), the term
"AmeriPath Stock" shall mean and include (i) the shares of
AmeriPath Stock issued, granted, conveyed and delivered to
each Seller pursuant to SECTION 1.1 hereof (the "Primary
Shares"), and (ii) any and all other or additional shares of
capital stock of AmeriPath issued or delivered by AmeriPath
with respect to the shares of AmeriPath Stock described in
clause (i) hereof, including without limitation any shares of
capital stock of AmeriPath issued or delivered with respect to
such shares as a result of any stock split, stock dividend,
stock distribution, recapitalization or similar transaction
(the "Additional Shares").
(4) VESTING. Notwithstanding the provisions of
SECTION 1.3(A)(1), commencing on September 1, 1998, and on
each of the four one-year anniversaries of such date, 20% of
the shares of AmeriPath Stock (including both the Primary
Shares and any Additional Shares issued with respect to such
Primary Shares) owned by each Seller shall be free of the
restrictions set forth in SECTION 1.3(A)(1), such restrictions
at such time having lapsed and no longer being applicable to
such percentage of the AmeriPath Stock, so that after five (5)
years none of the shares of AmeriPath Stock (including Primary
Shares and Additional Shares) shall be subject to the
restrictions set forth in SECTION 1.3(A)(1) hereof.
(b) PERMITTED CONDITIONAL TRANSFER UPON DEATH. Notwithstanding
the provisions of this SECTION 1.3, upon a Seller's death, the
AmeriPath Stock owned by such Seller shall be transferable solely
pursuant to the Seller's will or in accordance with the laws of descent
and distribution, if, and only if, the descendants or devisees, as
applicable, of the AmeriPath Stock execute and deliver to AmeriPath an
agreement, in form and substance satisfactory to AmeriPath, evidencing
their agreement to the restrictions contained in this SECTION 1.3.
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18
(c) TRANSFERABILITY; SHAREHOLDERS' AGREEMENT. Any shares of
AmeriPath Stock issued pursuant to the Stock Rights shall be subject to
the Purchaser's Shareholders' Agreement (as defined in SECTION 7.10)
relating to the AmeriPath Stock and related and other matters,
including, but not limited to, any restrictions on transferability, any
rights of first refusal and any option of the Purchaser to "call" or
purchase such shares. As a condition to the issuance of shares of
AmeriPath Stock in connection with any Stock Right (and at AmeriPath's
option, at each issuance), the Sellers shall execute and deliver to the
Purchaser a counterpart to the Shareholders' Agreement, in form and
substance satisfactory to AmeriPath, and the Sellers shall make such
representations and execute such certificates as AmeriPath may
reasonably require, including representations similar to those made in
SECTION 2.25 hereof. In addition, each Seller agrees that, upon the
request of the managing underwriter in connection with an underwritten
public offering of any of the Purchaser's securities, each Seller will
execute and deliver to such managing underwriter a lock-up agreement,
in form and substance acceptable to such underwriter and in a form that
is substantially the same as the lock-up agreements to be executed by
the other stockholders of the Purchaser, whereby the Seller agrees to
refrain from selling, transferring, pledging or otherwise conveying its
securities for a certain period.
(d) LEGEND(S) ON STOCK CERTIFICATES. Each Seller understands
and agrees that any and all stock certificates evidencing the AmeriPath
Stock shall contain appropriate restrictive legends indicating, in form
satisfactory to AmeriPath, the restrictions to which the AmeriPath
Stock is subject, as provided under this Agreement, including, but not
limited to, the following:
"The shares represented by this certificate (the
"Shares") are subject to each and every one of the
terms, conditions and restrictions set forth in the
Shareholders' Agreement dated February 29, 1996 (the
"Shareholders' Agreement"), as amended, including,
but not limited to, any restrictions on
transferability, any rights of first refusal and any
option of the Purchaser to "call" or purchase such
Shares, and may not, in whole or in part, be sold,
transferred, pledged, gifted, hypothecated or
otherwise disposed of in any manner other than in
accordance with the terms of the Shareholders'
Agreement, a copy of which is on file and available
for inspection at the principal offices of the Issuer
presently located at 0000 Xxxxxx Xxxx, Xxxxx 000,
Xxxxxxx Xxxxx, Xxxxxxx 00000."
(e) REPRESENTATIONS. Each Seller understands that, in
connection with the issuance of the AmeriPath Stock, AmeriPath is
relying upon the representations and warranties being made by Sellers
to AmeriPath in SECTION 2.25 hereof.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
AND THE COMPANIES
Each of the Sellers, Colab, APS and Micro, jointly and severally, make
the following representations and warranties to the Purchaser, each of which
shall be deemed material (and the Purchaser, in executing, delivering and
consummating this Agreement, has relied and will rely upon the correctness and
completeness of each of such representations and warranties notwithstanding any
independent investigation):
2.1 ORGANIZATION, QUALIFICATION, ETC.
(a) Each of Colab, APS and Micro are corporations duly
organized, validly existing under the laws of the State of Indiana with
full corporate power and authority to carry on its business as it is
now being conducted and proposed to be conducted, and to own, operate
and lease its properties and assets. Colab's articles of incorporation
have not been amended or supplemented since November 28, 1994, and are
in full force and effect as of the date hereof. APS's articles of
incorporation have not been amended or supplemented since May 25, 1994,
and are in full force and effect as of the date hereof. Micro's
articles of incorporation have not been amended or supplemented since
April 27, 1995, and are in full force and effect as of the date hereof.
True, complete and correct copies of the articles of incorporation and
by-laws, as presently in effect, of Colab, APS and Micro are
collectively attached hereto as EXHIBIT 2.1.
(b) Each of Colab, APS and Micro is duly qualified or licensed
to do business and is in good standing in the jurisdictions set forth
on SCHEDULE 2.1 attached hereto, those being every jurisdiction in
which the conduct of the Company's business, the ownership or lease of
its properties, the proposed conduct of the Company's business, the
ownership or lease of its properties, or the transactions contemplated
by this Agreement, require it to be so qualified or licensed and the
failure to be so qualified or licensed would have a Material Adverse
Effect (as defined in SECTION 12.3).
2.2 SUBSIDIARIES. Except as set forth on SCHEDULE 2.2, none of the
Companies has any Subsidiaries (as defined in SECTION 12.3) nor any investment
or other interest in, or any outstanding loan or advance to or from, any Person
(as defined in SECTION 12.3), including any officer, director or shareholder.
2.3 CAPITAL STOCK. The authorized capital stock, as of the date hereof,
of each of Colab, APS and Micro is set forth on SCHEDULE 2.3. The stock record
books of each of the Companies have been delivered to the Purchaser for
inspection prior to the date hereof and are complete and correct, and all
requisite Federal and State documentary stamps have been affixed thereon and
canceled. The Company Shares constitute all of the issued and outstanding shares
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of capital stock of the Companies; and all of the Company Shares are owned
beneficially and of record by the Sellers.
2.4 RECORD BOOKS. The corporate minute books of the Companies have been
made available to the Purchaser, are complete and correct and contain all of the
proceedings of the shareholders and directors of the Companies.
2.5 TITLE TO COMPANY STOCK. All of the issued and outstanding shares of
the capital stock of the Companies are and at the Closing will be owned by the
Sellers (in the amounts and as set forth in SCHEDULE 1.1 hereto), are duly
authorized, validly issued and fully paid, nonassessable, and are free of all
Liens (as defined in SECTION 12.3). Upon delivery of the purchase price to the
Sellers at the Closing, each Seller will convey, and the Purchaser will own and
hold, good and marketable title to the Company Shares immediately prior to the
Closing owned by such Seller, free and clear of all Liens or contractual
restrictions or limitations whatsoever.
2.6 OPTIONS AND RIGHTS. There are no outstanding subscriptions,
options, warrants, rights, securities, contracts, commitments, understandings or
arrangements under which any of the Companies is bound or obligated to issue any
additional shares of its capital stock, or rights to purchase shares of its
capital stock. There are no agreements, arrangements or understandings between
any Seller and/or any of the Companies and any other Person (as defined in
SECTION 12.3) regarding the Company Shares (or the transfer, disposition,
holding or voting thereof).
2.7 AUTHORIZATION, ETC. Each of the Companies has full power and
authority and each of the Sellers has full power, authority or capacity, as the
case may be, to enter into this Agreement and the agreements and documents
contemplated hereby and perform their respective obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and all
other agreements and transactions contemplated hereby have been duly authorized
on behalf of the Companies by the appropriate parties and no other proceedings
on the part of the Companies are necessary to authorize this Agreement and the
transactions contemplated hereby. Each of the Sellers is entering into this
Agreement on such Seller's own volition, free from any undue influence or
coercion. Upon execution and delivery of this Agreement by the parties hereto
this Agreement and all other agreements contemplated hereby shall constitute the
legal, valid and binding obligation of each of the Companies and each Seller
party hereto, enforceable against each such party in accordance with their
respective terms.
2.8 NO VIOLATION. The execution and delivery by the Companies and the
Sellers of this Agreement, and any and all other agreements contemplated hereby,
and the fulfillment of and compliance with the respective terms hereof and
thereof by the Companies and the Sellers do not and will not, except as set
forth on SCHEDULE 2.8 attached hereto, (a) conflict with or result in a breach
of the terms, conditions or provisions of, (b) constitute a default or event of
default under (with due notice, lapse of time or both), (c) result in the
creation of any Lien upon the capital stock or assets of the Companies pursuant
to, (d) give any third party the right to accelerate any obligation under, (e)
result in a violation of, or (f) require any material authorization, consent,
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approval, exemption or other action by or notice to any court or Authority (as
defined in SECTION 12.3) pursuant to, the organizational documents of the
Companies or any Regulation (as defined in SECTION 12.3), Order (as defined in
SECTION 12.3) or Contract (as defined in SECTION 12.3) to which any of the
Companies or any Seller is subject. The Companies and the Sellers will comply
with all applicable Regulations and Orders in connection with the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby.
2.9 FINANCIAL STATEMENTS. Attached as EXHIBIT 2.9 hereto are the
following financial statements of each of the Companies: (i) balance sheets
(prepared on a cash basis) for the fiscal years ended December 31, 1995 and
December 31, 1996 (the "BALANCE SHEETS"), (ii) statements of revenues and
expenses and related schedules thereto (prepared on a cash basis) for the fiscal
years ended December 31, 1993, December 31, 1994, December 31, 1995 and December
31, 1996 (the "STATEMENTS OF REVENUES AND EXPENSES"), and (iii) balance sheet,
statement of revenues and expenses and related schedules thereto (prepared on a
cash basis) for the six months ended June 30, 1997 (collectively, together with
the Balance Sheets and the Statements of Revenues and Expenses, the "FINANCIAL
STATEMENTS"). The balance sheets (and the schedules thereto) included in the
Financial Statements fairly present the financial position of the Companies on a
cash basis as at the respective dates thereof, and the statements of revenues
and expenses (and the schedules thereto) included in the Financial Statements
(x) fairly present the results of operations for the periods therein referred
to, on a cash basis (except as stated therein or in the notes or schedules
thereto) applied on a consistent basis, and (y) fairly present the financial
condition of the Companies at the respective date of on a cash basis, and for
the period covered by, such statements. Except as set forth on SCHEDULE 2.9(A)
attached hereto, the Companies have no liability, whether accrued, absolute or
contingent, of a type required to be reflected on a balance sheet or described
in the notes thereto in accordance with GAAP (as defined in SECTION 12.3), other
than (i) liabilities which have been reflected or reserved against in the
Financial Statements, (ii) liabilities incurred since December 31, 1996, and
(iii) liabilities covered by insurance or reinsurance (a complete and detailed
description of which is provided in SCHEDULE 2.9(B)). SCHEDULE 2.9(C) sets forth
a complete list of the Companies' accounts payable.
2.10 EMPLOYEES. As of the date hereof, the Companies have an aggregate
of approximately 20 employees. The Companies have been for the past four years,
and currently is, in compliance with all Federal, State and local Regulations
and Orders affecting employment and employment practices of the Companies
(including those Regulations promulgated by the Equal Employment Opportunity
Commission), including terms and conditions of employment and wages and hours.
2.11 ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, there has not
been (a) any Material Adverse Change (as defined in SECTION 12.3) in the
business, prospects, financial condition, revenues, expenses, accounts
receivable, accounts payable or operations of the Companies; (b) any damage,
destruction or loss, whether covered by insurance or not, having a Material
Adverse Effect, with regard to the Companies' properties and business; (c) any
payment by the Companies to, or any notice to or acknowledgment by the Companies
of any amount due or owing to, the Companies' self-insured carrier, if any, in
connection with any self-insured
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amounts or liabilities under health insurance covering employees of the
Companies, in each case, in excess of a reserve therefor on the balance sheet
for the fiscal year ended December 31, 1996 included in the Financial
Statements; (d) any declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) in respect of the Companies'
capital stock, or any redemption or other acquisition of such capital stock by
the Companies; (e) any increase in the rate of compensation or in the benefits
payable or to become payable by the Companies to their respective directors,
officers, employees or consultants; (f) any amendment, modification or
termination of any existing, or entering into any new, contract, agreement,
arrangement or plan relating to any salary, bonus, insurance, pension, health or
other employee welfare or benefit plan for or with any directors, officers,
employees or consultants of the Companies; (g) any entry into any material
Contract not in the ordinary course of business, including without limitation
relating to any borrowing or capital expenditure; (h) any disposition by the
Companies of any asset; or (i) any change by the Companies in their respective
accounting methods or principles.
2.12 CONTRACTS.
(a) Except as set forth in SCHEDULE 2.12 hereto, none of the
Companies is either a party to or subject to any written or oral:
(i) pension, profit sharing, bonus, retirement, stock
option, stock purchase or other plan providing for deferred or
other compensation to employees or any other employee benefit
plan (other than as set forth in SCHEDULE 2.18 hereto), or any
Contract with any labor union;
(ii) employment or consultation agreement, or other
compensation Contract, commitment or arrangement, which is not
terminable on notice of 30 days' or less by the Company
without penalty or other financial obligation (and, except as
set forth on SCHEDULE 2.12, no officer or employee of a
Company receives total salary, bonus and other compensation
from such Company of $35,000.00 or more per annum).
(iii) Contract containing covenants or agreements
limiting the freedom of a Company or any of its employees to
compete in any line of business presently conducted by the
Companies with any Person or to compete in any such line of
business in any area;
(iv) Contract with any Seller or with any affiliate
or relative of any Seller (except for any Contract disclosed
in SCHEDULE 2.12 pursuant to clauses (ii) or (iii) of this
SECTION 2.12);
(v) Contract relating to or providing for loans to
officers, directors, employees or Affiliates;
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(vi) Contract under which a Company has advanced or
loaned, or is obligated to advance or loan, funds to any
Person;
(vii) Contract relating to the incurrence, assumption
or guarantee of any indebtedness, obligation or liability (in
respect of money or funds borrowed), or otherwise pledging,
granting a security interest in or placing a Lien on any asset
of the Companies;
(viii) guarantee or endorsement of any obligation;
(ix) Contract under which a Company is lessee of or
holds or operates any property, real or personal, owned by any
other party, except for any lease of real or personal property
under which the aggregate annual rental payments do not exceed
$10,000.00;
(x) Contract pursuant to which a Company is lessor of
or permits any third party to hold or operate any property,
real or personal, owned or controlled by any of the Companies;
(xi) assignment, license, indemnification or Contract
with respect to any intangible property (including, without
limitation, any Proprietary Rights);
(xii) warranty Contract with respect to its services
rendered (or to be rendered) or its products sold or leased;
(xiii) Contract which prohibits, restricts or limits
in any way the payment of dividends or distributions by the
Companies;
(xiv) Contract under which it has granted any Person
any registration rights (including piggyback rights) with
respect to any securities;
(xv) Contract for the purchase, acquisition or supply
of inventory and other property and assets, whether for resale
or otherwise in excess of $10,000.00;
(xvi) Contracts with independent agents, brokers,
dealers or distributors;
(xvii) sales, commissions, advertising or marketing
Contracts;
(xviii) Contracts providing for "take or pay" or
similar unconditional purchase or payment obligations;
(xix) Contracts with Persons with which, directly or
indirectly, any Seller also has a Contract;
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(xx) Contract with a hospital, physician or other
health care provider or Person pursuant to which the cost of
providing health care services to the patients covered by such
Contract is assumed in whole or in part by Sellers, the
Companies or such provider; or
(xxi) any other Contract which is material to the
Companies' operations or business prospects, except those
which (x) were made in the ordinary course of business, (y)
are terminable on 30 days' or less notice by the respective
Company without penalty or other financial obligation, and (z)
in each case, involve aggregate payments by or to a Company of
$10,000.00 or less.
(b) Except as set forth on SCHEDULE 2.8, no consent of any
party to any Contract is required in connection with the execution,
delivery or performance of this Agreement, or the consummation of the
transactions contemplated hereby.
(c) the Companies have performed in all material respects all
obligations required to be performed by it and is not in default in any
respect under or in breach of nor in receipt of any claim of default or
breach under any material Contract to which the a Company is subject
(including without limitation all performance bonds, warranty
obligations or otherwise); no event has occurred which with the passage
of time or the giving of notice or both would result in a default,
breach or event of non-compliance under any material Contract to which
a Company is subject (including without limitation all performance
bonds, warranty obligations or otherwise); the Companies do not have
any present expectation or intention of not fully performing all such
obligations; the Companies do not have any knowledge of any breach or
anticipated breach by the other parties to any such Contract to which
it is a party.
2.13 TRUE AND COMPLETE COPIES. Copies of all Contracts and documents
delivered and to be delivered hereunder by the Sellers or the Companies are and
will be true and complete copies of such agreements, contracts and documents.
2.14 TITLE AND RELATED MATTERS.
(a) The Companies have good and marketable title to all of the
properties and assets reflected in the balance sheet for the fiscal
year ended December 31, 1996 included in the Financial Statements or
acquired after the date thereof and for properties sold or otherwise
disposed of since the date thereof in the ordinary course of business,
free and clear of all Liens, except (i) statutory Liens not yet
delinquent, (ii) such imperfections or irregularities of title, Liens,
easements, charges or encumbrances as do not detract from or interfere
with the present use of the properties or assets subject thereto or
affected thereby, otherwise impair present business operations at such
properties; or do not detract from the value of such properties and
assets, taken as a whole, or (iii) as reflected in the balance sheet
for the fiscal year ended December 31, 1996 included in Financial
Statements or the notes thereto.
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(b) The Companies own, and will on the Closing Date own, good
and marketable title to all the personal property and assets, tangible
or intangible, used in its business except as to those assets leased
all of which leases are in good standing and no party is in default
thereunder. None of the assets belonging to or held by the Companies is
or will be on the Closing Date subject to any (i) Contracts of sale or
lease, or (ii) Liens. Except for normal breakdowns and servicing
requirements, all machinery and equipment regularly used by the
Companies in the conduct of its business is in good operating condition
and repair, ordinary wear and tear excepted.
(c) There has not been since December 31, 1996, and will not
be prior to the Closing Date, any sale, lease, or any other disposition
or distribution by the Companies of any assets or properties and any
other assets now or hereafter owned by it, except transactions in the
ordinary and regular course of business or as otherwise consented to by
the Purchaser. After the Closing, the Companies, as wholly-owned
subsidiaries of the Purchaser, will own, or have the unrestricted right
to use, all properties and assets that are currently used in connection
with the business of the Sellers.
(d) SCHEDULE 2.14 attached hereto sets forth a description of
all real and personal property owned or leased by the Companies.
2.15 LITIGATION. There is no Claim (as defined in SECTION 12.3) pending
or, to the best knowledge of each Seller and the Companies, threatened against
any of the Sellers or the Companies which, if adversely determined, would have a
Material Adverse Effect on the Companies. Nor is there any Order outstanding
against any of the Sellers or the Companies having, or which, insofar as can
reasonably be foreseen, in the future may have, a Material Adverse Effect on the
Companies.
2.16 TAX MATTERS.
(a) The Companies have filed all federal, state, and local tax
reports, returns, information returns and other documents
(collectively, the "TAX RETURNS") required to be filed with any
federal, state, local or other taxing authorities (each a "TAXING
AUTHORITY", collectively, the "TAXING AUTHORITIES") in respect of all
relevant taxes, including without limitation income, premium, gross
receipts, net proceeds, alternative or add-on minimum, ad valorem,
value added, turnover, sales, use, property, personal property
(tangible and intangible), stamp, leasing, lease, user, excise, duty,
franchise, transfer, license, withholding, payroll, employment, fuel,
excess profits, occupational and interest equalization, windfall
profits, severance, and other charges (including interest and
penalties) (collectively, the "TAXES") and in accordance with all tax
sharing agreements to which the Sellers or a Company may be a party.
All Taxes on the Tax Returns required or anticipated to be paid for all
periods prior to and including the Closing Date have been paid, and all
of the Companies' Taxes that may be due or claimed to be due as a
result of the consummation of the transactions contemplated by this
Agreement will be paid. All Taxes which are required to be withheld or
collected by the Companies have
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been duly withheld or collected and, to the extent required, have been
paid to the proper Taxing Authority or properly segregated or deposited
as required by applicable laws. There are no Liens for Taxes upon any
property or assets of the Companies except for liens for Taxes not yet
due and payable. Neither the Sellers nor the Companies has executed a
waiver of the statute of limitations on the right of the Internal
Revenue Service or any other Taxing Authority to assess additional
Taxes or to contest the income or loss with respect to any Tax Return.
The basis of any depreciable assets, and the methods used in
determining allowable depreciation (including cost recovery), is
correct and in compliance with the Internal Revenue Code of 1986, as
amended and the regulations thereunder (the "CODE").
(b) No audit of the Companies or the Companies' Tax Returns by
any Taxing Authority is currently pending or threatened, and no issues
have been raised by any Taxing Authority in connection with any Tax
Returns. No material issues have been raised in any examination by any
Taxing Authority with respect to the Companies which reasonably could
be expected to result in a proposed deficiency for any other period not
so examined, and there are no unresolved issues or unpaid deficiencies
relating to such examinations. The items relating to the business,
properties or operations of the Companies on the Tax Returns filed by
or on behalf of the Companies for all taxable years (including the
supporting schedules filed therewith), available copies of which have
been supplied to the Purchaser, state accurately the information
requested with respect to the Companies and such information was
derived from the books and records of the Companies.
(c) The Companies have not made nor has become obligated to
make, nor will as a result of any event connected with the Closing
become obligated to make, any "excess parachute payment" as defined in
Section 280G of the Code (without regard to subsection (b)(4) thereof).
(d) The Sellers shall cause the Companies to file all Tax
Returns and reports with respect to Taxes which are required to be
filed for Tax periods ending on or before the Closing Date (a
"PRE-CLOSING TAX RETURN"), and the Companies shall pay all Taxes due in
respect of such Pre-closing Tax Returns to the appropriate Taxing
Authority; and the Companies shall pay all costs associated with the
preparation thereof.
2.17 COMPLIANCE WITH LAW AND APPLICABLE GOVERNMENT REGULATIONS. The
Companies are presently complying in respect of their operations, equipment,
practices, real property, plants, laboratories, structures, and other property,
and all other aspects of its business and operations, with all applicable
Regulations and Orders, including, but not limited to, Health Care Laws (as
defined in SECTION 12.3), all Regulations relating to the safe conduct of
business, environmental protection, quality and labeling, antitrust, Taxes,
consumer protection, equal opportunity, discrimination, health, sanitation,
fire, zoning, building and occupational safety where such failure or failures
would individually or in the aggregate have a Material Adverse Effect. There are
no Claims pending, nor to the best knowledge of the Companies are there any
Claims threatened,
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nor have the Sellers received any written notice, regarding any violations of
any Regulations and Orders enforced by any Authority claiming jurisdiction over
the Companies, including any requirement of OSHA or any pollution and
environmental control agency (including air and water).
(a) SCHEDULE 2.17 attached hereto sets forth all permits,
licenses, provider numbers, orders, franchises and approvals
(collectively, "PERMITS") from all Federal, state, local and foreign
governmental regulatory bodies held by the Companies. The Permits
listed on SCHEDULE 2.17 are the only Permits that are required for the
Companies to conduct its business as presently conducted, except for
those the absence of which would not have any Material Adverse Effect
on the assets, financial condition, results of operations or future
prospects of the Companies. Each such Permit is in full force and
effect and, to the best of the knowledge of the Companies, no
suspension or cancellation of any such Permit is threatened and there
is no basis for believing that such Permit will not be renewable upon
expiration.
(b) The Companies have licenses to provide health care
services in the jurisdictions set forth in (or in the Permits set forth
in) SCHEDULE 2.17 hereto, which such licenses are all those necessary
to conduct the business of the Companies in the jurisdictions in which
the Companies presently operate. SCHEDULE 2.17 also sets forth a true
and complete description of the status of each such license. Except as
set forth on SCHEDULE 2.17, neither the Sellers nor the Companies is
aware of any event, transaction, correspondence or circumstance which
would have, or could foreseeably have, a Material Adverse Effect on one
or more of such licenses.
2.18 ERISA AND RELATED MATTERS.
(a) BENEFIT PLANS; OBLIGATIONS TO EMPLOYEES. Except as set
forth in SCHEDULE 2.18 hereto, neither the Companies, nor any ERISA
Affiliate of the Companies, is a party to or participates in or has any
liability or contingent liability with respect to:
(i) any "employee welfare benefit plan" or "employee
pension benefit plan" or "multi-employer plan" (as those terms
are respectively defined in Sections 3(1), 3(2) and 3(37) of
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"));
(ii) any retirement or deferred compensation plan,
incentive compensation plan, stock plan, unemployment
compensation plan, vacation pay, severance pay, bonus or
benefit arrangement, insurance or hospitalization program or
any other fringe benefit arrangements for any employee,
director, consultant or agent, whether pursuant to contract,
arrangement, custom or informal understanding, which does not
constitute an "employee benefit plan" (as defined in Section
3(3) of ERISA); or
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(iii) any employment agreement not terminable on 30
days' or less written notice, without further liability.
For purposes of this Section, the term "ERISA AFFILIATE" shall
mean any trade or business, whether or not incorporated, that together
with the Companies would be deemed a "SINGLE EMPLOYER" within the
meaning of Section 4001(b)(i) of ERISA.
(b) PLAN DOCUMENTS AND REPORTS. A true and correct copy of
each of the Benefit Plans listed on SCHEDULE 2.18, and all contracts
relating thereto, or to the funding thereof, including, without
limitation, all trust agreements, insurance contracts, investment
management agreements, subscription and participation agreements and
record keeping agreements, each as in effect on the date hereof, has
been supplied to the Purchaser. In the case of any Benefit Plan that is
not in written form, the Purchaser has been supplied with an accurate
description of such Benefit Plan as in effect on the date hereof. A
true and correct copy of the three most recent annual reports and
accompanying schedules, the three most recent actuarial reports, and
the most recent summary plan description and Internal Revenue Service
determination letter with respect to each such Benefit Plan, to the
extent applicable, and a current schedule of assets (and the fair
market value thereof assuming liquidation of any asset which is not
readily tradeable) held with respect to any funded Benefit Plan has
been supplied to the Purchaser by the Companies, and there have been no
material changes in the financial condition in the respective Plans
from that stated in the annual reports and actuarial reports supplied.
(c) COMPLIANCE WITH LAWS; LIABILITIES. As to all Benefit
Plans, except as otherwise specified on SCHEDULE 2.18, the Companies,
to their knowledge, are in compliance in all material respects with the
terms of all Benefit plans and every Benefit Plan is in compliance with
all of the requirements and provisions of ERISA and all other laws and
regulations applicable thereto, including without limitation the timely
filing of all annual reports or other filings required with respect to
such Benefit Plans. None of the assets of any Benefit Plan are invested
in employer securities or employer real property, as those terms are
defined in Section 407(d) of ERISA. To the knowledge of the Companies
and the Sellers, there have been no "prohibited transactions" (as
described in Section 406 of ERISA or Section 4975 of the Code) with
respect to any Benefit Plan and neither the Companies nor any ERISA
Affiliate of the Companies has otherwise engaged in any prohibited
transaction. There has been no "accumulated funding deficiency" as
defined in Section 302 of ERISA, nor has any reportable event as
defined in Section 4043(b) of ERISA occurred with respect to any
Benefit Plan. Actuarially adequate accruals for all obligations or
contingent obligations under the Benefit Plans are reflected in the
Companies' balance sheets for the fiscal year ended December 31, 1996
included in Financial Statements provided to the Purchaser and such
obligations include a pro rata amount of the contributions which would
otherwise have been made in accordance with past practices for the plan
years which include the closing date.
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2.19 INTELLECTUAL PROPERTY.
(a) Except as set forth on SCHEDULE 2.19(A), none of the
Companies has any trade name, service xxxx, patent, copyright or
trademark related to its business.
(b) The Companies have the right to use each Proprietary Right
(as defined in SECTION 12.3) listed in SCHEDULE 2.19(A), and except as
otherwise set forth therein, each of such Proprietary Rights is, and
will be on the Closing Date, free and clear of all royalty obligations
and Liens. There are no Claims pending, or to the best knowledge of the
Sellers, threatened, against the Sellers that its use of any of the
Proprietary Rights listed on SCHEDULE 2.19(A) infringes the rights of
any Person. The Sellers has no knowledge of any conflicting use of any
of such Proprietary Rights.
(c) None of the Companies is a party in any capacity to any
franchise, license or royalty agreement respecting any Proprietary
Right and there is no conflict with the rights of others in respect to
any Proprietary Right now used in the conduct of its business.
(d) INTERNAL SOFTWARE APPLICATIONS.
(i) OWNED SOFTWARE. The current software applications
used by the Companies in the operation of its business, as set
forth and described on SCHEDULE 2.19(D) hereto (the
"SOFTWARE"), to the extent it has been designed or developed
by the Companies' management information or development staff
or by consultants on the Companies' behalf, is original and
capable of copyright protection in the United States, and the
Companies have complete rights to and ownership of such
Software. No part of any such Software is an imitation or copy
of, or infringes upon, the software of any other Person or
violates or infringes upon any common law or statutory rights
of any other Person, including, without limitation, rights
relating to defamation, contractual rights, copyrights, trade
secrets, and rights of privacy or publicity. The Companies
have not sold, assigned, licensed, distributed or in any other
way disposed of or encumbered the Software.
(ii) LICENSED SOFTWARE. The Software, to the extent
it is licensed from any third party licensor or constitutes
"off-the-shelf" software, is held by the Companies
legitimately and is fully transferable to the Purchaser
without any third party consent. All of the Companies'
computer hardware has legitimately-licensed software installed
therein.
(iii) NO ERRORS; NONCONFORMITY. The Companies warrant
that the Software is free from any significant software defect
or programming or documentation error, operates and runs in a
reasonable and efficient business manner, conforms to the
specifications thereof, and, with respect to owned Software,
the applications can be recreated from their associated source
code.
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2.20 ENVIRONMENTAL MATTERS. Except as disclosed in SCHEDULE 2.20: (a)
to the knowledge of the Companies and the Sellers, neither the Companies'
business nor the operation thereof violates any applicable Environmental Law (as
defined in SECTION 12.3) and no condition or occurrence (any accident, happening
or event which occurs or has occurred at any time prior to the Closing Date,
which results in or could result in a claim against a Company or the Purchaser
or creates or could create a liability or loss for such Company or the
Purchaser) which, with notice or the passage of time or both, would constitute a
violation of any Environmental Law; (b) to the knowledge of the Companies and
the Sellers, the Companies are in possession of all Environmental Permits (as
defined in SECTION 12.3) required under any applicable Environmental Law for the
conduct or operation of the Companies' business (or any part thereof), and the
Companies are in full compliance with all of the requirements and limitations
included in such Environmental Permits; (c) the Companies have not stored or
used any pollutants, contaminants or hazardous or toxic wastes, substances or
materials on or at any property or facility now or previously owned, leased or
operated by the Companies except for inventories of chemicals which are used or
to be used in the ordinary course of the Companies' business (which inventories
have been sorted or used in accordance with all applicable Environmental Permits
and all Environmental Laws, including all so-called "Right to Know" laws); (d)
the Companies have not received any notice from any Authority or any private
Person that the Companies' business or the operation of any of its facilities is
in violation of any Environmental Law or any Environmental Permit or that it is
responsible (or potentially responsible) for the cleanup of any pollutants,
contaminants, or hazardous or toxic wastes, substances or materials at, on or
beneath any property or facility now or previously owned, leased or operated by
the Companies, or at, on or beneath any land adjacent thereto or in connection
with any waste or contamination site; (e) the Companies are not the subject of
any Federal, state, local, or private Claim involving a demand for damages or
other potential liability with respect to a violation of Environmental Laws or
under any common law theories relating to operations or the condition of any
facilities or property (including underlying groundwater) owned, leased, or
operated by the Companies; (f) the Companies have not buried, dumped, disposed,
spilled or released any pollutants, contaminants or hazardous or wastes,
substances or materials on, beneath or adjacent to any property or facility now
or previously owned, leased or operated by the Companies or any property
adjacent thereto; (g) no by-products of any manufacturing or mining process
employed in the operation of the Companies' business which may constitute
pollutants, contaminants or hazardous or toxic wastes, substances or materials
under any Environmental Law are currently stored or otherwise located on any of
the Companies' property; (h) no property or facility now or previously owned,
leased or operated by the Companies, is listed or proposed for listing on the
National Priorities List pursuant to CERCLA, on the CERCLIS or on any other
federal or state list of sites requiring investigation or clean-up; (i) there
are no underground storage tanks, active or abandoned, including petroleum
storage tanks, on or under any property or facility now or previously owned,
leased or operated by the Companies; (j) the Companies have not directly
transported or directly arranged for the transportation of any Hazardous
Material to any location which is listed or proposed for listing on the National
Priorities List pursuant to CERCLA, on the CERCLIS or on any federal or state
list or which is the subject of federal, state or local enforcement actions or
other investigations which may lead to material Claims against the Companies for
any remedial work, damage to natural resources or personal injury, including
claims under CERCLA; and (k)
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there are no polychlorinated biphenyls, radioactive materials or friable
asbestos present at any property or facility now or previously owned or leased
by the Companies. The Companies have timely filed all reports required to be
filed with respect to all of its property and facilities and has generated and
maintained all required data, documentation and records under all applicable
Environmental Laws.
2.21 DEALINGS WITH AFFILIATES. SCHEDULE 2.21 hereto sets forth a
complete list, including the parties, of all oral or written agreements and
arrangements to which any of the Companies is, will be or has been a party, at
any time from January 1, 1992 to the Closing Date, and to which any one or more
Affiliates is also a party.
2.22 BANKING ARRANGEMENTS. SCHEDULE 2.22 attached hereto sets forth the
name of each bank in or with which any of the Companies has an account, credit
line or safety deposit box, and a brief description of each such account, credit
line or safety deposit box, including the names of all Persons currently
authorized to draw thereon or having access thereto. The Companies have no
liability or obligation relating to funds or money borrowed by or loaned to the
Companies (whether under any credit facility, line of credit, loan, indenture,
advance, pledge or otherwise).
2.23 INSURANCE. SCHEDULE 2.23 attached hereto sets forth a list and
brief description, including dollar amounts of coverage, of all policies of
fire, liability, professional liability and other forms of insurance held by the
Companies as of the date hereof, as well as a schedule of Claims filed with each
Company's current insurance carrier, including a history of such Claims and a
description and estimated dollar amount of any unresolved Claims. Such policies
are valid, outstanding and enforceable policies, as to which premiums have been
paid currently. Neither the Companies nor the Sellers know of any state of
facts, or of the occurrence of any event which might reasonably (a) form the
basis for any claim against the Companies not fully covered by insurance for
liability on account of any express or implied warranty or tortious omission or
commission, or (b) result in material increase in insurance premiums of the
Companies.
2.24 CONSENTS. SCHEDULE 2.24, annexed hereto, sets forth a complete
list of consents of governmental and other regulatory agencies or authorities,
foreign or domestic, required to be received by or on the part of the Companies
and the Sellers to enable the Companies or the Sellers to enter into and carry
out this Agreement in all material respects. All such requisite consents have
been, or prior to the Closing will have been, obtained.
2.25 INVESTMENT REPRESENTATIONS. Each Seller hereby represents and
warrants to AmeriPath as follows:
(a) Each Seller has been offered, and up to the Closing Date
shall be offered, the opportunity to ask questions of, and receive
answers from, AmeriPath and its Subsidiaries, and the Sellers have been
given full and complete access to all available information and data
relating to the business and assets of AmeriPath and its Subsidiaries,
have obtained such additional information about AmeriPath and its
Subsidiaries which the
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Sellers have deemed necessary in order to evaluate the opportunities,
both financial and otherwise, with respect to AmeriPath and, except as
set forth herein, have not relied on any representation, warranty or
other statement concerning the Purchaser and its Subsidiaries in their
evaluation of the decision to consummate the transactions contemplated
herein. On the basis of the foregoing, each Seller is familiar with the
operations, business plans and financial condition of AmeriPath.
(b) Each Seller understands that he must bear the economic
risk of the AmeriPath Stock, if and when issued to such Seller, for an
indefinite period of time because, except as provided in this
Agreement, (i) each Seller understands that AmeriPath proposes to issue
and deliver the shares of AmeriPath Stock issuable in accordance with
this Agreement, without compliance with the registration requirements
of the Securities Act, that for such purpose AmeriPath will rely upon
the representations, warranties, covenants and agreements contained
herein, as well as any additional representations, warranties,
covenants, agreements and certifications requested by AmeriPath to be
delivered by the Sellers at such time(s) of issuance of the AmeriPath
Stock; and that such noncompliance with registration is not permissible
unless such representations and warranties are correct and such
covenants and agreements are performed at and as of the time of
issuance; (ii) each Seller understands that, under existing rules of
the SEC, there are substantial restrictions in the transferability of
his shares of AmeriPath Stock; his shares of AmeriPath Stock may be
transferred only if registered under the Securities Act or if an
exemption from such registration is available; Sellers may not be able
to avail themselves of the provisions of Rule 144 promulgated by the
SEC under the Securities Act with respect to the transfer of such
shares; (iii) the AmeriPath Stock may not be sold, transferred,
pledged, or otherwise disposed of without the consent of AmeriPath and
an opinion of counsel for or satisfactory to AmeriPath that
registration under the Securities Act or any applicable state
securities laws is not required; and (iv) AmeriPath neither has an
obligation to register a sale of the AmeriPath Stock held by any Seller
nor has it agreed to do so in the future.
(c) Each Seller is an "accredited investor", as such term is
defined in Rule 501 of Regulation D promulgated under the Securities
Act.
(d) Each Seller is a sophisticated investor familiar with the
type of risks inherent in the acquisition of securities such as the
shares of AmeriPath Stock and such Seller's financial position is such
that such Seller can afford to retain his shares of AmeriPath Stock for
an indefinite period of time without realizing any direct or indirect
cash return on such Seller's investment.
(e) Each Seller is acquiring his shares of AmeriPath Stock for
such Seller's own account and not with a view to, or for sale in
connection with, the distribution thereof within the meaning of the
Securities Act.
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(f) Each Seller understands that the certificates evidencing
his shares of AmeriPath Stock, when and if issued, will bear
appropriate restrictive legends.
2.26 ACCOUNTS RECEIVABLE; INVENTORIES. The accounts receivable of the
Companies reflected on SCHEDULE 2.26 attached hereto on the date hereof are good
and collectible in the ordinary course of business consistent with past
practices of the Companies regarding the collection of accounts receivable. Such
accounts receivable are valid, genuine and subsisting, arise out of bona fide
sales and deliveries of goods, performance of services or other business
transactions and are not subject to defenses, set-offs or counterclaims (except
those in the ordinary course of business consistent with past practices). The
inventories reflected on the balance sheets included in the Financial
Statements, and the inventories held by the Companies on the date hereof, (i) do
not include any items which are not usable or saleable in the ordinary course of
business of the Companies, and (ii) have been reflected on such balance sheets
at the lower of cost or market value (taking into account the usability or
salability thereof), in accordance with GAAP. All such inventories are owned
free and clear and are not subject to any Lien except to the extent reserved
against or reflected in the Financial Statements. Since December 31, 1996,
inventories of raw materials and supplies have been purchased by the Companies
in the ordinary course of business, consistent with anticipated seasonal
requirements, and the volumes of purchases thereof and orders therefor have not
been reduced or otherwise changed in anticipation of the transactions
contemplated by this Agreement. The Companies are not aware of any material
adverse conditions affecting the supply of materials available to the Companies,
and, to the best knowledge of the Companies, the consummation of the
transactions contemplated hereby will not adversely affect any such supply.
2.27 BROKERAGE. Neither any Seller nor the Companies has employed any
broker, finder, advisor, consultant or other intermediary in connection with
this Agreement or the transactions contemplated by this Agreement who is or
might be entitled to any fee, commission or other compensation from any Seller
or the Companies, or from the Purchaser or its Affiliates, upon or as a result
of the execution of this Agreement or the consummation of the transactions
contemplated hereby.
2.28 IMPROPER AND OTHER PAYMENTS. Neither the Companies nor the Sellers
nor, to the Companies' knowledge, any director, officer, employee, agent or
representative of the Companies nor any Person acting on behalf of any of them,
has (a) made, paid or received any unlawful bribes, kickbacks or other similar
payments to or from any Person or Authority, (b) made, directly or indirectly,
any contributions to a domestic or foreign political party or candidate, nor (c)
made any improper foreign payment (as defined in the Foreign Corrupt Practices
Act). The internal accounting controls of the Companies are believed by the
Companies' management to be adequate to detect any of the foregoing under
current circumstances.
2.29 PARTICIPATION IN AUDITS. Except as set forth in SCHEDULE 2.29, the
Companies have not been informed of any Recoupment Claims (as hereinafter
defined) arising in connection with audits or reviews conducted by Medicaid,
Medicare or private insurance companies. To the best of the knowledge of the
Companies and the Sellers there is no basis for any Recoupment Claims
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based upon cost reports, claims or bills submitted or to be submitted in
connection with services rendered by the Companies. For purposes of this SECTION
2.29 the term "RECOUPMENT CLAIM" shall mean any recoupment or overpayment,
set-off, penalty or fine pending or, to the knowledge of the Companies and the
Sellers, threatened by any third-party payor or governmental authority having
jurisdiction over the Companies for amounts arising from or related to payments
to the Companies for services rendered prior to the Closing.
2.30 HEALTH CARE LAWS & REGULATIONS.
(a) FRAUD AND ABUSE. Except as set forth on SCHEDULE 2.30(A),
to the best of each Seller's and the Companies' knowledge, the
Companies and its officers, directors, employees, shareholders and
providers, have not engaged in any activities which are prohibited
under federal Medicaid statues, 42 U.S.C. Section 1320a-7a and 7b, or
the regulations promulgated pursuant to such statutes or related state
or local statutes or regulations or which are prohibited by rules of
professional conduct or which otherwise could constitute fraud,
including but not limited to the following: (i) making or causing to be
made a false statement or representation of a material fact in any
application for any benefit or payment; (ii) making or causing to be
made any false statement or representation of a material fact for use
in determining rights to any benefit or payment; (iii) failing to
disclose knowledge by a claimant of the occurrence of any event
affecting the initial or continued right to any benefit or payment on
its behalf or on behalf of another, with intent to secure such benefit
or payment fraudulently; and (iv) soliciting, paying or receiving any
remuneration (including any kickback, bribe, or rebate), directly or
indirectly, overtly or covertly, in cash or in kind or offering to pay
such enumeration (a) in return for referring an individual to a Person
for the furnishing or arranging for the furnishing of any item or
service for which payment may be made in whole or in part by Medicare
or Medicaid, or (b) in return for purchasing, leasing, or ordering or
arranging for or recommending purchasing, leasing, or ordering any
good, facility, service, or item for which payment may be made in whole
or in part by Medicaid; subject, in the case of (iv) to the lack of
clarity in the law relating to the marketing of Medicare risk products
by brokers.
(b) THIRD-PARTY PAYORS. All Contracts with third-party payors
were entered into by the Companies in the ordinary course of business.
The Companies will have made available to the Purchaser, as of the
Closing Date, an accurate and complete list of all third-party payors
which have agreements with the Companies (as set forth on SCHEDULE
2.30(B)), together with accurate and complete copies of all such
Contracts. Except as set forth on SCHEDULE 2.30(B), the Companies are
in compliance with each third-party payor's Contract, and the Companies
have properly charged and billed in accordance with the terms of those
Contracts, including, where applicable, billing and collection of all
deductibles and co-payments.
(c) COMPLIANCE WITH MEDICARE AND MEDICAID PROGRAMS. The
Companies have timely and accurately filed all requisite claims and
other reports required to be filed in
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connection with all state and federal Medicare and Medicaid programs in
which the Companies participate due on or before the Closing Date
except to the extent that the failure to file such claims and reports
would not result in a Material Adverse Effect on the Companies, either
individually or as a whole. Except as set forth on SCHEDULE 2.30(C)
hereto, there are no Claims pending or, to the Companies' knowledge,
threatened or scheduled before any Authority, including without
limitation, any intermediary, carrier, the Administrator of the Health
Care Financing Administration, [the Indiana Department of Health and
Rehabilitative Services], the Agency for Health Care Administration or
any other state or federal agency with respect to any Medicare and
Medicaid claim filed by the Companies on or before the Closing Date, or
program compliance matters, which would have a Material Adverse Effect
on the Companies, either individually or as a whole, or their assets,
operations or utility thereof, or the consummation of the transactions
contemplated hereby. The Companies have delivered to the Purchaser
accurate and complete copies of any Claims, actions or appeals listed
on SCHEDULE 2.30(C). Except for routinely scheduled reviews pursuant to
the Companies' Medicare and Medicaid Contracts, no valid review or
program integrity review related to the Companies has been conducted by
any Authority in connection with the Medicare or Medicaid programs and
no such review is scheduled, or to the Companies' knowledge, pending or
threatened against or affecting the Companies, their business, assets,
or the consummation of the transactions contemplated hereby.
(d) RATE LIMITATIONS AND RATES. Each facility currently
operated by the Companies charges rates and accordingly bills for
services which are legal and proper, and the Companies' standard and
Medicare rates are set forth on SCHEDULE 2.30(D). Certain reimbursement
rates established by third-party payors are subject to retrospective
adjustment, which adjustments are set forth on said SCHEDULE 2.30(D).
(e) REIMBURSEMENT DOCUMENTATION. Each of the Companies has
filed when due any and all cost reports and other documentation and
reports, if any, required to be filed by third-party payors and
governmental agencies in compliance with applicable contractual
provisions and/or laws, regulations and rules.
(f) PATIENT REFERRALS. No Person having a "financial
relationship" with the any of the Companies, as that term is defined in
42 U.S.C. Section 1395nn, is in a position, directly or indirectly, to
refer patients or services to the Companies, other than referrals which
comply with (or are exempt from) the requirements of 42 U.S.C. Section
1395nn and the regulations promulgated pursuant thereto.
2.31 FINANCIAL CONDITION. At and as of Closing, the Companies shall
have, in the aggregate, net working capital (consisting of cash, cash
equivalents and accounts receivable (net of contractual and bad debt
allowances), less current liabilities, all calculated on an accrual basis in
accordance with GAAP, "NET WORKING CAPITAL") of not less than $1,000,000. The
Purchaser will notify the Sellers of the actual collections made during the
three month period following the Closing Date with respect to the accounts
receivable of the Companies on the Closing Date. In
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the event that the Net Working Capital of the Companies, based on such actual
collections, is determined to be in excess of $1,000,000, such excess amount
will be paid to the Sellers in accordance with SECTION 1.1(C); in the event of a
deficiency in the Net Working Capital, calculated on the same basis, the Sellers
shall pay the amount of such deficiency to the Purchaser.
2.32 DISCLOSURE. Neither this Agreement nor any of the exhibits,
attachments, written statements, documents, certificates or other items prepared
for or supplied to the Purchaser by or on behalf of the Sellers or the Companies
with respect to the transactions contemplated hereby contains any untrue
statement of a material fact or omits a material fact necessary to make each
statement contained herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Sellers as follows:
3.1 CORPORATE ORGANIZATION, ETC. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and to own, operate and lease its
properties and assets. The Purchaser is duly qualified or licensed to do
business in good standing in every jurisdiction in which the conduct of its
business, the ownership or lease of its properties, or the transactions
contemplated by this Agreement, require it to be so qualified or licensed and
the failure to be so qualified or licensed would have a material adverse effect
on its business.
3.2 SUBSIDIARIES. Other than the wholly-owned subsidiaries of the
Purchaser listed in SCHEDULE 3.2 hereto, the Purchaser has no Subsidiaries.
3.3 AUTHORIZATION, ETC. The Purchaser has full corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The Board of Directors of the Purchaser has duly authorized
the execution, delivery and performance of this Agreement, the Contingent Notes
and the other agreements and transactions contemplated hereby, and no other
corporate proceedings on its part are necessary to authorize this Agreement and
the transactions contemplated hereby. Upon execution and delivery of this
Agreement by the parties hereto this Agreement shall, and upon issuance of the
Contingent Notes in accordance with the provisions hereof the Contingent Notes
shall, constitute legal, valid and binding obligations of the Purchaser,
enforceable against the Purchaser in accordance with their respective terms.
3.4 NO VIOLATION. The execution, delivery and performance by the
Purchaser of this Agreement, and all other agreements contemplated hereby, and
the fulfillment of and compliance with the respective terms hereof and thereof
by the Purchaser, do not and will not (a) conflict with or result in a breach of
the terms, conditions or provisions of, (b) result in a violation of,
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or (c) require any authorization, consent, approval, exemption or other action
by or notice to any Authority pursuant to, the certificate of incorporation or
by-laws of the Purchaser, or any Regulation to which the Purchaser is subject,
or any Contract or Order to which the Purchaser or its properties are subject.
The Purchaser will comply with all applicable Regulations and Orders in
connection with its execution, delivery and performance of this Agreement and
the transactions contemplated hereby.
3.5 GOVERNMENTAL AUTHORITIES. The Purchaser has complied in all
material respects with all applicable Regulations in connection with its
execution, delivery and performance of this Agreement and the agreements and
transactions contemplated hereby. The Purchaser is not required to submit any
notice, report, or other filing with any governmental authority in connection
with its execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby. No authorization, consent, approval, exemption
or notice is required to be obtained by the Purchaser in connection with the
execution, delivery, and performance of this Agreement and the agreements and
transactions contemplated hereby.
3.6 ISSUANCE OF AMERIPATH STOCK. The AmeriPath Stock issued to the
Sellers, in accordance with the terms and subject to the conditions set forth in
this Agreement, shall, upon issuance and delivery, be duly authorized, validly
issued, fully paid and non-assessable.
3.7 FINANCIAL STATEMENTS. To the best of Purchaser's knowledge, the
Purchaser Financial Statements (as defined below) fairly present its financial
position, business and operations, and are maintained in accordance with
reasonable business standards and do not fail to reflect any material activity,
charge, expense, income or other action or attribute of the Purchaser. True and
complete copies of the Purchaser's audited financial statements for the year
ended December 31, 1996, and unaudited financial statements for the six (6)
months ended June 30, 1997 (collectively, the "PURCHASER FINANCIAL STATEMENTS")
are attached hereto as EXHIBIT 3.7. Such financial statements have been prepared
in accordance with generally accepted accounting principles consistently applied
(except for purchase accounting adjustments that may be required by GAAP) and
accurately reflect the Purchaser's business, operations, financial results,
financial position, expenses, incomes, assets and liabilities and are complete
in all material respects as of their respective dates. There has been no
material adverse change to Purchaser's financial position since the financial
statements dated June 30, 1997.
3.8 LITIGATION. There is no Claim (as defined in SECTION 12.3) pending
or, to the best knowledge of the Purchaser, threatened against the Purchaser
which, if adversely determined, would have a material adverse effect on
Purchaser. Nor is there any Order outstanding against the Purchaser having, or
which, insofar as can reasonably be foreseen, in the future may have, a material
adverse effect on Purchaser.
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3.9 DISCLOSURE. Neither this Agreement nor any of the exhibits,
attachments, written statements, documents, certificates or other items prepared
for or supplied to the Sellers by or on behalf of the Purchaser with respect to
the transactions contemplated hereby contains any untrue statement of a material
fact or omits a material fact necessary to make each statement contained herein
or therein not misleading.
3.10 CONSENTS. There are no consents of governmental or other
regulatory agencies or authorities, foreign or domestic, required to be received
by or on the part of the Purchaser to enable the Purchaser to enter into and
carry out this Agreement in all material respects.
3.11 SENIOR CREDIT FACILITY. The Purchaser is not currently in default,
and will not be in default upon the consummation of this Agreement, under the
terms of the Amended and Restated Credit Agreement, originally dated May 29,
1996 and amended and restated June 27, 1997, among the Purchaser, its
subsidiaries, BankBoston, N.A., as agent, and the lenders named therein.
ARTICLE IV
COVENANTS OF THE SELLERS AND THE COMPANIES
From the date hereof until the Closing, except as otherwise consented
to or approved by the Purchaser in writing, the Sellers and the Companies
covenant and agree that they shall act, and the Sellers shall cause the
Companies so to act or refrain from acting where required hereinafter, to comply
with the following:
4.1 REGULAR COURSE OF BUSINESS. The Companies shall operate their
business diligently and in good faith and in the ordinary and usual course,
consistent with past management practices; shall maintain all of its respective
properties in good order and condition, shall maintain (except for expiration
due to lapse of time) all leases and Contracts in effect without change except
as expressly provided herein; shall comply with the provisions of all
Regulations and Orders applicable to the Companies and the conduct of their
respective business; shall not cancel, release, waive or compromise any debt,
Claim or right in its favor; shall not alter the rate or basis of compensation
of any of its officers, directors, employees or consultants; shall maintain
insurance and reinsurance coverage as in effect on the date hereof up to the
Closing Date; and shall preserve the business of the Companies intact, and use
its best efforts to keep available for the Companies and the Purchaser the
services of the officers and employees of the Companies, and to preserve the
good will of clients, patients, suppliers and others having business relations
with the Companies.
4.2 AMENDMENTS TO ORGANIZATIONAL DOCUMENTS. Except as set forth below
and as contemplated by this Agreement, no change or amendment shall be made in
the organizational documents of the Companies, nor shall the Companies merge
with or into or consolidate with any other corporation or Person, acquire
substantially all of the assets of any Person or change the character of its
business. Prior to the Closing, the Sellers shall cause the articles of
incorporation
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of each of the Companies to be amended to provide that the Companies shall be
business corporations, and not professional service corporations, to delete any
inconsistent references and to provide that the Companies may operate for any
lawful purpose which will allow Persons other than those licensed to practice
pathology in the State of Indiana to own shares of capital stock of such
companies. Immediately following the Closing, Purchaser may determine to merge
APS and Micro into Colab, each of the Companies being, at such time,
wholly-owned subsidiaries of AmeriPath, Inc., and to amend the articles of
incorporation of Colab to change the company's name to AmeriPath Indiana, Inc.
All of such amendments (together, the "COMPANY CHARTER AMENDMENTS") shall be in
form and substance satisfactory to AmeriPath.
4.3 CAPITAL CHANGES; PLEDGES. Except as contemplated under this
Agreement, the Companies shall not issue or sell any shares of its capital stock
of any class or issue or sell any securities convertible into, or options,
warrants to purchase or rights to subscribe to, any shares of its capital stock
and the Companies shall not pledge or otherwise encumber any shares of its
capital stock.
4.4 DIVIDENDS. The Companies shall not declare, pay or set aside for
payment any dividend or other distribution in respect of its capital stock, nor
shall the Companies, directly or indirectly, redeem, purchase or otherwise
acquire any shares of its capital stock.
4.5 CAPITAL AND OTHER EXPENDITURES. The Companies shall not make any
capital expenditures, or commitments with respect thereto.
4.6 CASH AND CASH EQUIVALENTS. Cash and cash equivalents shall be
preserved, and expended, solely in the ordinary and usual course of business. At
and as of the Closing, the Companies shall have, in the aggregate, cash, cash
equivalents and accounts receivable (net of contractual and bad debt allowances)
which satisfies the requirements of SECTION 2.31 hereof. No distributions of
cash or cash equivalents shall be made by the Companies to the Sellers
subsequent to the Closing.
4.7 BORROWING. The Companies shall not incur, assume or guarantee any
indebtedness, obligations or liabilities not reflected on the Financial
Statements (or the balance sheets included therein) except in the ordinary
course of business or for purposes of consummation of the transactions
contemplated by this Agreement and in any case only after consultation with the
Purchaser.
4.8 OTHER COMMITMENTS. Except as set forth in this Agreement, incurred
or transacted in the ordinary course of business, or permitted in writing by the
Purchaser, the Companies shall not enter into any transaction or make any
commitment or incur any obligation (including entering into any real property
leases).
4.9 INTERIM FINANCIAL INFORMATION. To the extent prepared in the
ordinary course of business, the Companies shall supply the Purchaser with
unaudited financial statements (including, without limitation, balance sheets
and statements of revenues and expenses) and information for
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each calendar month, promptly following the conclusion of such month, and as the
Companies may otherwise reasonably request.
4.10 FULL ACCESS AND DISCLOSURE.
(a) The Companies shall afford to the Purchaser and its
counsel, accountants and other authorized representatives reasonable
access during business hours to the Companies' facilities, properties,
books and records in order that the Purchaser may have full opportunity
to make such reasonable investigations as it shall desire to make of
the affairs of the Companies; and the Sellers shall cause the
Companies' officers, employees and auditors to furnish such additional
financial and operating data and other information as the Purchaser
shall from time to time reasonably request including, without
limitation, any internal control recommendations applicable to the
Companies made by the Companies' independent auditors in connection
with any examination of the Companies' Financial Statements and books
and records.
(b) From time to time prior to the Closing Date, the Companies
shall promptly supplement or amend information previously delivered to
the Purchaser with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have been
required to be set forth herein or disclosed.
(c) In connection with any "due diligence" examination
performed by the Purchaser with respect to the business of the
Companies, the Sellers shall fully cooperate and the results of such
"due diligence" examination shall be satisfactory to the Purchaser.
4.11 CONFIDENTIALITY. Each Seller and the Companies shall, and shall
cause its principals, officers and other personnel and authorized
representatives to, hold in confidence, and not disclose to any other party
without the Purchaser's prior consent, all written and oral information
furnished or disclosed by or received from the Purchaser or its officers,
directors, employees, agents, counsel and auditors in connection with the
transactions contemplated hereby except as may be required by applicable law or
as otherwise contemplated herein.
4.12 BREACH OF AGREEMENT. Neither any Seller nor the Companies shall
take any action which, if taken on or prior to the Closing Date, would
constitute a breach of this Agreement.
4.13 FULFILLMENT OF CONDITIONS PRECEDENT. The Companies and the Sellers
shall use their best efforts to obtain at their expense, on or prior to the
Closing Date, all such waivers, Permits, consents, approvals or other
authorizations from third parties and Authorities, and to do all things as may
be necessary or desirable in connection with the transactions contemplated by
this Agreement in order to fully and expeditiously consummate the transactions
contemplated by this Agreement.
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4.14 BANKING ARRANGEMENTS. The Companies shall open bank accounts at
such banks as directed by AmeriPath, and shall transfer all funds to such
accounts, all in accordance with the terms and conditions of AmeriPath's credit
facility.
4.15 TERMINATION OF ERISA PLANS. Prior to the Closing, the Companies
shall terminate the ERISA plans set forth on SCHEDULE 2.18 hereto. The Sellers
shall direct the termination of such plans, including any and all decisions with
respect to the transfer of the assets held in such plans and seeking any
necessary approvals from the Internal Revenue Service. AmeriPath shall have no
duties, responsibilities, rights or obligations with respect to such plans.
ARTICLE V
COVENANTS OF THE PURCHASER
The Purchaser hereby covenants and agrees with the Companies and the
Sellers that prior to the Closing or the termination of this Agreement:
5.1 CONFIDENTIALITY. The Purchaser shall, and shall cause its
principals, officers and other personnel and authorized representatives to, hold
in confidence, and not disclose to any other party without the Sellers's prior
consent, all information received by it from the Sellers or the Companies'
officers, directors, employees, agents, counsel and auditors in connection with
the transactions contemplated hereby except as may be required by applicable law
or as otherwise contemplated herein.
5.2 FULL ACCESS AND DISCLOSURE.
(a) The Purchaser shall afford to the Companies and each
Seller, and their counsel, accountants and other authorized
representatives reasonable access during business hours to the
Purchaser's facilities, properties, books and records in order that the
Sellers may have full opportunity to make such reasonable
investigations as they shall desire to make of the affairs of the
Purchaser; and the Purchaser shall cause its officers, employees and
auditors to furnish such additional financial and operating data and
other information as the Sellers shall from time to time reasonably
request including, without limitation, any internal control
recommendations applicable to the Purchaser made by the Purchaser's
independent auditors in connection with any examination of the
Purchaser's financial statements and books and records.
(b) From time to time prior to the Closing Date, the Purchaser
shall promptly supplement or amend information previously delivered to
the Companies and/or the Sellers with respect to any matter hereafter
arising which, if existing or occurring at the date of this Agreement,
would have been required to be set forth herein or disclosed.
(c) The Purchaser shall fully cooperate in connection with any
"due diligence" examination performed by the Companies or the Sellers
with respect to the business of
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the Purchaser. For purposes of this SECTION 5.2, "Purchaser" shall mean
and include AmeriPath and its Subsidiaries.
ARTICLE VI
OTHER AGREEMENTS
The parties hereto further agree, on or before the Closing Date, as
follows:
6.1 FURTHER ASSURANCES. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Regulations to consummate and
make effective the transactions contemplated by this Agreement. In furtherance
and not in limitation of the preceding sentence, the parties hereto shall use
their best efforts to cause the Closing to take place on or before September 1,
1997. If at any time after the Closing Date the Purchaser shall consider or be
advised that any further deeds, assignments or assurances in law or in any other
things are necessary, desirable or proper to vest, perfect or confirm, of record
or otherwise, in the Purchaser (or the Companies, as appropriate), the title to
any property or rights of Sellers acquired or to be acquired by reason of, or as
a result of, the acquisition, the Sellers agree that the Sellers shall execute
and deliver all such proper deeds, assignments and assurances in law and do all
things necessary, desirable or proper to vest, perfect or confirm title to such
property or rights in the Companies and otherwise to carry out the purpose of
this Agreement.
6.2 AGREEMENT TO DEFEND. In the event any action, suit, proceeding or
investigation of the nature specified in SECTIONS 7.2 or 8.2 is commenced,
whether before or after the Closing Date, all the parties hereto agree to
cooperate and use their best efforts to defend against and respond thereto.
6.3 CONSENTS. Without limiting the generality of SECTION 6.1, each of
the parties hereto shall use their best efforts to obtain all permits,
authorizations, consents and approvals of all Persons and governmental
authorities necessary, proper or advisable in connection with the consummation
of the transactions contemplated by this Agreement prior to the Closing Date.
6.4 NO SOLICITATION OR NEGOTIATION. Unless and until this Agreement is
terminated, neither the Sellers nor the Companies through its directors,
officers, employees, representatives, agents, advisors, accountants and
attorneys shall initiate, solicit or encourage, directly or indirectly, any
inquiries or the making of any proposal with respect to, or engage in
negotiations concerning, or provide any confidential information or data to any
Person with respect to, or have any discussions with any Persons relating to,
any acquisition, business combination or purchase of all or any significant
asset of, or any equity interest in, the Companies, or otherwise facilitate any
effort or attempt to do or seek any of the foregoing, and shall immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted
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heretofore with respect to any of the foregoing. Should the Companies or any
Seller be contacted with respect to any offer, inquiry or proposal, the
Companies and the Sellers shall immediately advise the Purchaser in writing of
the name, address and phone number of the contact and the nature of the inquiry.
6.5 NO TERMINATION OF SELLERS' OBLIGATIONS BY SUBSEQUENT INCAPACITY,
ETC. Each Seller specifically agrees that the obligations of such Seller
hereunder, including, without limitation, obligations pursuant to ARTICLE XI and
SECTION 6.4 shall not be terminated by the death or incapacity of any Seller.
6.6 EMPLOYMENT AGREEMENTS. The Companies and the Sellers shall,
immediately prior to the Closing, terminate any existing employment agreements
between the Companies and each Seller and the Sellers set forth on SCHEDULE 6.6
hereto shall each enter into an Employment Agreement with AmeriPath Indianapolis
in the form of EXHIBIT 6.6 attached hereto (the "EMPLOYMENT AGREEMENT").
6.7 PUBLIC ANNOUNCEMENTS. Neither any Seller nor the Companies nor any
Affiliate, representative or shareholder of either of such Persons, shall
disclose any of the terms of this Agreement to any third party (other than the
Purchaser's advisors and senior lending group and the Sellers' advisors) without
the other party's prior written consent unless required by any applicable law.
The form, content and timing of any and all press releases, public announcements
or publicity statements (except for any disclosures under or pursuant to Federal
or State securities laws in connection with the registration of AmeriPath's
securities or otherwise) with respect to this Agreement or the transactions
contemplated hereby shall be subject to the prior approval of the Purchaser. No
press releases, public announcements or publicity statements shall be released
by either party without such prior mutual agreement.
The parties hereto further agree, from and after the Closing Date, as
follows:
6.8 DELIVERIES AFTER CLOSING. From time to time after the Closing, at
the Purchaser's request and without expense to the Companies and without further
consideration from the Purchaser or the Companies, the Sellers shall execute and
deliver such other instruments of conveyance and transfer and take such other
action as the Purchaser reasonably may require to convey, transfer to and vest
in the Purchaser, and to put the Purchaser in possession of, any rights or
property to be sold, conveyed, transferred or delivered hereunder.
6.9 NON-COMPETITION COVENANT.
(a) As a material and valuable inducement for the Purchaser to
enter into this Agreement, pay and deliver the Purchase Price
consideration and consummate the transactions provided for herein,
during the "RESTRICTED PERIOD" (as hereinafter defined), each Seller
agrees, unless otherwise permitted by AmeriPath in writing, that he or
she shall not, as a shareholder, principal, agent, consultant, manager,
advisor, director, officer, control person, operator, or in any other
capacity or manner whatsoever:
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(i) directly or indirectly engage in the practice of
pathology, or engage in any business or perform any service,
directly or indirectly, in competition with the business of
the Companies, the Companies' successors and assigns, or have
any interest whatsoever in any enterprise that shall so engage
in such activities, which is located in, provides services in
or does any business whatsoever in, the area which is within
twenty-five (25) miles of any County in the State of Indiana
in which the Companies, or any Affiliate of the Companies, is
then doing business or providing services or has done business
or provided service within the preceding twelve (12) month
period (the "Restricted Territory"), or
(ii) from any facility or location, whether within or
without the Restricted Territory, knowingly (x) perform
pathology services for any patient, medical facility,
hospital, laboratory or health care provider located in the
Restricted Territory or (y) perform pathology services for any
patient, medical facility, hospital, laboratory or health care
provider who was or is a customer, client or patient of the
Companies, or any Affiliate of the Companies; except that it
shall not be a violation of this SECTION 6.9 for a Seller to
perform pathology services in the Restricted Territory during
the Restricted Period (i) as an employee of a local, federal
or state government or agency; (ii) in performing the
Employee's duties as a member of the United States military
services or the National Guard; or (iii) on a locum tenens
basis.
(b) As used in this Agreement, the term "RESTRICTED PERIOD"
shall mean and include the longer of (x) a period of seven (7) years,
from the Closing to the seventh (7th) anniversary of the Closing, and
(y) during such time as the Seller is employed by an AmeriPath Entity
and for a period of two (2) years following the effective date of any
termination of such Seller's employment with any such AmeriPath Entity
(regardless of the cause, reason or justification of any such
termination.
(c) Each Seller further agrees that during the Restricted
Period which follows any termination of the Restricted Party's
employment with any AmeriPath Entity, the Seller will not knowingly,
directly or indirectly, (a) solicit the employment of any employee,
agent or consultant of any AmeriPath Entity who was such at any time
during the twelve (12) months preceding the Seller's termination of
employment with the AmeriPath Entity, or (b) induce any employee of an
AmeriPath Entity to leave the employ of any such AmeriPath Entity,
unless in each case the Seller obtains the prior written consent of
AmeriPath.
(d) Each Seller covenants and agrees that the restrictions set
forth in this SECTION 6.9 are fair, reasonable and necessary to protect
the interests of AmeriPath and its Affiliates, such restrictions were
negotiated and bargained for and the consideration delivered in
connection with this Agreement reflects and assumes the each Seller's
strict compliance with, and the enforceability by the Purchaser of,
these restrictions.
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(e) Each Seller acknowledges and agrees that the provisions of
SECTION 6.9 and SECTION 6.10 are material and of the essence to this
Agreement. In addition, if the scope of any restriction or covenant
contained in either such Section should be or become too broad or
extensive to permit enforcement thereof to its fullest extent, then
such restriction or covenant shall be enforced to the maximum extent
permitted by law, and the Seller hereby consents and agrees that (a) it
is the parties intention and agreement that the covenants and
restrictions contained herein be enforced as written, and (b) in the
event a court of competent jurisdiction should determine that any
restriction or covenant contained herein is too broad or extensive to
permit enforcement thereof to its fullest extent, the scope of any such
restriction or covenant may be modified accordingly in any judicial
proceeding brought to enforce such restriction or covenant, but should
be modified to permit enforcement of the restrictions and covenants
contained herein to the maximum extent the court, in its judgment, will
permit.
6.10 NON-DISCLOSURE; CONFIDENTIALITY.
(a) CONFIDENTIAL INFORMATION. By virtue of each Seller's
employment, association or involvement with an AmeriPath Entity, each
Seller may obtain confidential or proprietary information developed, or
to be developed, by an AmeriPath Entity. "Confidential Information"
means all proprietary or business sensitive information, whether in
oral, written, graphic, machine-readable or tangible form, and whether
or not registered, and including all notes, plans, records, documents
and other evidence thereof, including but not limited to all: patents,
patent applications, copyrights, trademarks, trade names, service
marks, service names, "know-how," patient lists, details of client or
consulting contracts, pricing policies, operational methods, marketing
plans or strategies, product development techniques or plans,
procurement and sales activities, promotion and pricing techniques,
credit and financial data concerning customers, business acquisition
plans or any portion or phase of any scientific or technical
information, discoveries, computer software or programs used or
developed in whole or in part by any AmeriPath Entity (including source
or object codes), processes, procedures, formulas or improvements of
any AmeriPath Entity; algorithms; computer processing systems and
techniques; price lists; customer lists; procedures; improvements,
concepts and ideas; business plans and proposals; technical plans and
proposals; research and development; budgets and projections; technical
memoranda, research reports, designs and specifications; new product
and service developments; comparative analyses of competitive products,
services and operating procedures; and other information, data and
documents now existing or later acquired by an AmeriPath Entity,
regardless of whether any of such information, data or documents
qualify as a "trade secret" under applicable Federal or State law.
"Confidential Information" shall not include (a) any information which
is in the public domain during the period of service by the Seller or
becomes public thereafter, provided such information is not in the
public domain as a consequence of disclosure by the Seller in violation
of this Agreement, and (b) any information not considered confidential
information by similar enterprises operating in the clinical or
anatomical laboratory industry or otherwise in the ordinary course.
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(b) NON-DISCLOSURE. Each Seller agrees that, except as
directed by such Seller's AmeriPath Entity employer, as required or
otherwise contemplated under this Agreement or such Seller's Employment
Agreement or as otherwise required by law, he will not at any time
(during the term of such Seller's employment by an AmeriPath Entity or
at any time thereafter), except as may be expressly authorized by the
AmeriPath Entity in writing or, if necessary, to such Seller's
attorney, disclose to any Person or use any Confidential Information
whatsoever for any purpose whatsoever, or permit any Person whatsoever
to examine and/or make copies of any reports or any documents or
software (whether in written form or stored on magnetic, optical or
other mass storage media) prepared by him or that come into his
possession or under his control by reason of his employment by an
AmeriPath Entity or by reason of any consulting or software development
services he has performed or may in the future perform for an AmeriPath
Entity which contain or are derived from Confidential Information. Each
Seller further agrees that while employed at an AmeriPath Entity, no
Confidential Information shall be removed from the AmeriPath Entity's
business premises, without the prior written consent of such AmeriPath
Entity.
(c) AMERIPATH GROUP PROPERTY. As used in this Agreement, the
term "AMERIPATH GROUP PROPERTY" means all documents, papers, computer
printouts and disks, records, customer or patient lists, files,
manuals, supplies, computer hardware and software, equipment, inventory
and other materials that have been created, used or obtained by any
AmeriPath Entity, or otherwise belonging to any AmeriPath Entity, as
well as any other materials containing Confidential Information as
defined above. Each Seller recognizes and agrees that:
(i) All the AmeriPath Group Property shall be and
remain the property of the AmeriPath Entity to which such
belongs;
(ii) Each Seller will preserve, use and hold the
AmeriPath Group Property only for the benefit of AmeriPath and
its Affiliates and to carry out the business of the AmeriPath
Entity, AmeriPath and its Affiliates; and
(iii) When any Seller's employment is terminated,
such Seller will immediately deliver and surrender to the
AmeriPath Entity all the AmeriPath Group Property, including
all copies, extracts or any other types of reproductions,
which such Seller has in his possession or control.
6.11 RULE 144 BEST EFFORTS. Following such time, if any, that AmeriPath
is or may become, and solely while AmeriPath is, a public company with its
securities registered under the Securities Act, and listed or quoted for trading
by a national securities exchange or inter-dealer quotation system, AmeriPath
will use its best efforts to see that AmeriPath is in compliance with the
requirements of Rule 144 under the Securities Act applicable to the issuer of
securities, so as to facilitate non-registered sales of AmeriPath Stock by the
Sellers who then own AmeriPath Stock consistent with the requirements and
limitations of Rule 144. Nothing in this SECTION 6.11
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shall be deemed as either (i) any representation or warranty that Ameripath will
become or remain a public company with securities registered under the
Securities Act, or (ii) any covenant or agreement by AmeriPath to register,
under federal or state securities laws or otherwise, any AmeriPath securities
issued to, or held by, the Sellers.
6.12 338(H)(10) ELECTION. The parties hereto agree that (i) the
acquisition of the Company Shares that constitute shares of capital stock of APS
and Micro will be in accordance with Section 338 of the Code, (ii) a Statement
of Election (the "ELECTION") on Form 8023-A under Section 338(h)(10) of the Code
shall be made and filed with the appropriate authority and (iii) the Sellers
shall be solely responsible for paying any taxes which may result from the
Election and out of or as a consequence of the transactions contemplated hereby.
For purposes of allocation under Section 1060 of the Code for purposes of the
Election, valuations will be made in accordance with the applicable provisions
of the Code and Federal income tax regulations as determined by AmeriPath and
its independent appraisers, whose determinations shall be binding on all
parties; PROVIDED, HOWEVER, that the valuations will not be materially different
than the value of such Companies on an accrual basis. The Sellers shall
indemnify AmeriPath (and its Affiliates) and hold AmeriPath (and its Affiliates)
harmless from any loss, charge or expense resulting from the Election and the
payment of the taxes due in connection therewith and herewith.
6.13 ASSIGNMENT OF CONTRACTS. The parties hereto agree to use their
best efforts to obtain the necessary or desirable consents in order to assign
each of the contracts listed on SCHEDULE 6.13 hereto to AmeriPath Indianapolis
prior to October 31, 1997.
6.14 ACQUISITIONS. The parties acknowledge and agree that it is in
their mutual interest to expand AmeriPath's business in Indiana and surrounding
areas and, accordingly, the parties covenant and agree to cooperate in
connection with such expansion and, if appropriate, the review and consider
operational changes that may be necessary or desirable.
6.15 PRESERVATION OF EXISTENCE. The Purchaser covenants and agrees that
it will, for so long as at least a majority of the Employment Agreements are in
effect, it will cause AmeriPath Indianapolis to remain in existence; PROVIDED,
HOWEVER, that Purchaser may cause a change in the ownership structure of the
Business or the existence of AmeriPath Indianapolis so long as (i) such change
is not inconsistent with Applicable Laws and (ii) the Employment Agreements then
in effect are assumed or guaranteed by an AmeriPath Affiliate in a manner not
inconsistent with Applicable Laws.
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ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
Each and every obligation of the Purchaser under this Agreement shall
be subject to the satisfaction, on or before the Closing Date, of each of the
following conditions, unless waived in writing by the Purchaser:
7.1 REPRESENTATIONS AND WARRANTIES; COVENANTS AND AGREEMENTS. The
representations and warranties of the Sellers contained in ARTICLE II and
elsewhere in this Agreement and all information contained in any exhibit,
certificate, schedule or attachment hereto or in any writing delivered by, or on
behalf of, the Sellers or the Companies to the Purchaser, shall be true and
correct when made and shall be true and correct in all material respects on the
Closing Date as though then made, except as expressly provided herein. The
Sellers and the Companies shall have performed and complied with all agreements,
covenants and conditions and shall have made all deliveries required by this
Agreement to be performed, delivered and complied with by them prior to the
Closing Date. Each of the Sellers and the president of the Companies shall have
executed and delivered to the Purchaser a certificate, dated the Closing Date,
certifying to the foregoing.
7.2 NO INJUNCTION. No preliminary or permanent injunction or other
Order, decree or ruling issued by any Authority, or any Regulation promulgated
or enacted by any Authority shall be in effect, which would prevent the
consummation of the transactions contemplated hereby.
7.3 THIRD PARTY CONSENTS. Except as set forth on SCHEDULE 7.3 hereto,
the Purchaser, the Sellers and the Companies shall have obtained all consents,
approvals, waivers or other authorizations with respect to the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, such that the contracts and leases listed in
SCHEDULE 7.3 hereto shall remain in effect (without default, acceleration,
termination, assignment, right of termination or assignment, payment, increase
in rates or compensation payable, penalty, interest or other adverse effect)
from and after the Closing Date as such contracts and leases operated and were
in effect before the Closing Date.
7.4 REGULATORY APPROVALS. The Federal and State regulatory agencies or
authorities listed in SCHEDULE 7.4 hereto shall have approved the applications
listed in such Schedule with respect to the change of control represented by the
transactions contemplated by this Agreement, and such approval shall not impose
financial obligations on the Purchaser that are objectionable to it.
7.5 NO MATERIAL ADVERSE CHANGE. There shall have been no Material
Adverse Change since the date of this Agreement. The Purchaser shall have
received a certificate (which shall be addressed to the Purchaser), dated the
Closing Date, of the president and chief financial officer of the Companies,
certifying to the foregoing.
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7.6 OPINION OF SELLER'S COUNSEL. The Purchaser shall have received an
opinion of counsel to the Sellers and the Companies (which will be addressed to
the Purchaser), dated the Closing Date, in the form of EXHIBIT 7.6 hereto.
7.7 EMPLOYMENT AGREEMENTS. The Sellers shall have terminated their
existing employment agreements with the Companies and shall have executed and
delivered to the Purchaser Employment Agreements in the form of EXHIBIT 6.6
attached hereto.
7.8 DELIVERY OF COMPANY SHARE CERTIFICATES. All of the Sellers shall
have executed and delivered this Agreement, or a counterpart hereof, and
together shall have delivered at the Closing stock certificates representing all
of the Company Shares, duly endorsed for transfer to the Purchaser, together
with stock powers duly executed in blank.
7.9 SUBORDINATION AGREEMENT. At the Closing, each of the Sellers shall
have executed and delivered the Subordination Agreement, in the form attached
hereto as EXHIBIT 7.9.
7.10 SHAREHOLDERS' AGREEMENT. At the Closing, each Seller shall have
executed and delivered a counterpart signature page to that certain
Shareholders' Agreement, dated as of February 29, 1996, by and among AmeriPath
and each of the stockholders of AmeriPath (the "SHAREHOLDERS' AGREEMENT"),
pursuant to which each Seller agrees to be bound by all of the provisions of the
Shareholders' Agreement, in accordance with their terms, to the same extent as
if he had been an original signatory thereto.
7.11 CREDITOR CONSENTS. The creditors set forth on SCHEDULE 7.11 hereto
shall have agreed in writing with the Companies as to the amounts owed in order
for such creditors to have been paid in full and to release all Liens in favor
of such creditors. The Companies shall have obtained from the creditors set
forth on SCHEDULE 7.11 and shall provide to the Purchaser at Closing, such UCC
termination statements, releases of mortgages and other releases of Liens as
shall be required by the Purchaser and its lenders.
7.12 COMPANY CHARTER AMENDMENTS. The Companies shall have taken all
appropriate and required board of director and shareholder action to approve,
and shall have filed with the Secretary of State of the State of Indiana in form
acceptable for filing, the Company Charter Amendments.
7.13 TRUST AGREEMENT; MANAGEMENT AGREEMENT. Xxxxxxx X. Xxxxxxx, M.D.
(the "TRUSTEE") shall have executed and delivered a Trust Agreement,
substantially in the form attached hereto as EXHIBIT 7.13(A), pursuant to which
AmeriPath shall be the beneficiary of the Trust and Trustee shall be the trustee
(the "TRUST AGREEMENT"). AmeriPath Indianapolis and AmeriPath Indiana shall have
executed and delivered a Management Agreement, substantially in the form
attached hereto as EXHIBIT 7.13(B), pursuant to which AmeriPath Indiana shall
provide certain management services to AmeriPath Indianapolis and AmeriPath
Indianapolis shall provide certain physician services to AmeriPath Indiana (the
"MANAGEMENT AGREEMENT").
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ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
Each and every obligation of the Sellers under this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by the Sellers:
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. The representations
and warranties of the Purchaser contained in ARTICLE III and elsewhere in this
Agreement and all information contained in any exhibit, schedule or attachment
hereto, the Purchaser, to the Sellers, shall be true and correct in all material
respects when made and shall be true and correct in all material respects on the
Closing Date as though then made, except as expressly provided herein. The
Purchaser shall have performed and complied in all material respects with all
agreements, covenants and conditions required by this Agreement to be performed
and complied with by them prior to the Closing Date. The Chief Financial Officer
of the Purchaser shall have delivered to the Sellers a certificate, dated the
Closing Date, certifying to the foregoing.
8.2 NO INJUNCTION. No preliminary or permanent injunction or other
Order, decree or ruling issued by any Authority, or any Regulation promulgated
or enacted by any Authority shall be in effect, which would prevent the
consummation of the transactions contemplated hereby.
8.3 PURCHASE CONSIDERATION. Each Seller shall have received the
consideration (in the form of cash, AmeriPath Stock and Contingent Notes)
required to be delivered at Closing and to which such Seller is entitled
pursuant to SECTION 1.1 hereof.
8.4 EMPLOYMENT AGREEMENTS. AmeriPath Indianapolis shall have executed
and delivered to each of the Sellers an Employment Agreement between AmeriPath
Indianapolis and such Seller in the form of EXHIBIT 6.6 attached hereto.
8.5 TRUST AGREEMENT; MANAGEMENT AGREEMENT. AmeriPath shall have
executed and delivered the Trust Agreement. AmeriPath Indianapolis and AmeriPath
Indiana shall have executed and delivered the Management Agreement.
8.6 OPINION OF PURCHASER'S COUNSEL. The Sellers shall have received an
opinion of counsel to the Purchaser (which will be addressed to the Sellers),
dated the Closing Date, in the form of EXHIBIT 8.6 hereto.
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ARTICLE IX
CLOSING
9.1 CLOSING. Unless this Agreement shall have been terminated or
abandoned pursuant to the provisions of ARTICLE X hereof, a closing of the
transactions contemplated by this Agreement (the "CLOSING") shall be held on
August 29, 1997, or on such other date which is mutually agreed upon in writing
following the satisfaction or waiver of the conditions to closing set forth in
ARTICLE VII and ARTICLE VIII hereof (the "CLOSING DATE"). The Effective Date of
the Closing shall be deemed to be September 1, 1997 (the "EFFECTIVE DATE").
9.2 CLOSING DELIVERIES. At the Closing,
(a) the Sellers and the Companies shall deliver or cause to be
delivered to the Purchaser:
(i) a certificate or certificates or assignment
evidencing all of the Company Shares, duly endorsed for
transfer with all necessary transfer stamps affixed;
(ii) copies of all consents and approvals required by
SECTIONS 7.3, 7.4 and 7.12 (including UCC termination
statements, releases of mortgages or other releases of Liens);
(iii) the Opinion of Counsel required by SECTION 7.6;
(iv) the Officers' Certificates required by SECTIONS
7.1 and 7.5;
(v) the Employment Agreements required by SECTION
7.7;
(vi) the Subordination Agreement required by SECTION
7.9;
(vii) the counterpart signature pages to the
Shareholders' Agreement required by SECTION 7.10;
(viii) the Trust Agreement and Management Agreement
required by SECTION 7.13;
(ix) a certificate, signed by the secretaries of the
Companies, as to the organizational documents of the
Companies, the resolutions adopted by the board of directors
and shareholders of the Companies in connection with this
Agreement, the incumbency of certain officers of the Companies
and the jurisdictions in which the Companies are qualified to
conduct business, in form acceptable to the Purchaser;
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(x) certificates issued by the appropriate
governmental authorities evidencing the good standing, with
respect to both the conduct of business and the payment of all
franchise taxes, of the Companies as of a date not more than
10 days prior to the Closing Date, as a corporation organized
under the laws of the State of Indiana and as a foreign
corporation authorized to do business under the laws of the
various jurisdictions where it is so qualified.
(xi) such other certified resolutions, documents and
certificates as are required to be delivered by any Seller or
the Companies pursuant to the provisions of this Agreement.
(b) The Purchaser shall deliver to the Sellers:
(i) the consideration (in the form of cash, AmeriPath
Stock and Contingent Notes) required to be paid or delivered
to each such Seller at Closing in accordance with SECTION 1.1;
(ii) the Officers' Certificate required by SECTION
8.1;
(iii) the Employment Agreements required by SECTION
8.4;
(iv) the Opinion of Counsel required by SECTION 8.6;
and
(v) such other certified resolutions, documents and
certificates as are required to be delivered by the Purchaser
pursuant to the provisions of this Agreement.
ARTICLE X
TERMINATION AND ABANDONMENT
10.1 METHODS OF TERMINATION. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time:
(a) by mutual consent of the Purchaser, the Sellers and the
Companies;
(b) by the Purchaser or both of the Sellers and the Companies
if this Agreement is not consummated on or before September 1, 1997;
PROVIDED, HOWEVER, that if any party has breached or defaulted with
respect to its respective obligations under this Agreement on or before
such date, such party may not terminate this Agreement pursuant to this
SECTION 10.1(B), and each other party to this Agreement shall at its
option enforce its rights against such breaching or defaulting party
and seek any remedies against such party, in either case as provided
hereunder and by applicable law; or
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53
(c) by the Purchaser if as of the Closing Date (including any
extensions) any of the conditions specified in ARTICLE VI hereof shall
not have been satisfied or if the Companies or any of the Sellers is
otherwise in default under this Agreement.
10.2 PROCEDURE UPON TERMINATION. In the event of termination and
abandonment pursuant to SECTION 10.1 hereof, and subject to the proviso
contained in SECTION 10.1(B), this Agreement shall terminate and shall be
abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:
(a) each party shall redeliver all documents and other
material of any other party relating to the transactions contemplated
hereby, whether obtained before or after the execution hereof, to the
party furnishing the same;
(b) all information received by any party hereto with respect
to the business of any other party or the Companies (other than
information which is a matter of public knowledge or which has
heretofore been or is hereafter published in any publication for public
distribution or filed as public information with any governmental
authority) shall not at any time be used for the advantage of, or
disclosed to third parties by, such party to the detriment of the party
furnishing such information; and
(c) no party hereto shall have any further liability or
obligation to any other party under or in connection with this
Agreement; PROVIDED, HOWEVER, the non-breaching or non-defaulting party
shall not be foreclosed from bringing a Claim or cause of action or
otherwise recovering from the breaching or defaulting party.
ARTICLE XI
SURVIVAL OF TERMS; INDEMNIFICATION
11.1 SURVIVAL. All of the terms and conditions of this Agreement,
together with the representations, warranties and covenants contained herein or
in any instrument or document delivered or to be delivered pursuant to this
Agreement, shall survive the execution of this Agreement and the Closing
notwithstanding any investigation heretofore or hereafter made by or on behalf
of any party hereto; provided, however, that (a) the agreements and covenants
set forth in this Agreement shall survive and continue until all obligations set
forth therein shall have been performed and satisfied; and (b) all
representations and warranties shall survive and continue until:
(1) with respect to the representations and
warranties in SECTIONS 2.16 (tax matters), 2.18 (ERISA
matters), 2.20 (environmental matters) and 2.30 (health care
regulatory matters), until sixty (60) days following the
expiration of the applicable statute of limitations;
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(2) with respect to the representations and
warranties in SECTIONS 2.3 (capitalization), 2.4 (title to the
Company Shares) and 2.6 (options and rights on capital stock),
these representations shall survive and continue forever and
without limitation; and
(3) with respect to all other representations and
warranties, the date upon which AmeriPath receives from its
outside auditors the audited financial statements for
AmeriPath's fiscal year ending December 31, 2000 (the "2000
AUDIT DATE"), except for representations, warranties and
indemnities for which an indemnification Claim shall be
pending as of the 2000 Audit Date, in which event such
indemnities shall survive with respect to such Claim until the
final disposition thereof.
11.2 INDEMNIFICATION BY THE SELLERS. Subject to this ARTICLE XI, the
Purchaser and its officers, directors, employees, shareholders, representatives
and agents shall be indemnified and held harmless by the Sellers, jointly and
severally, at all times after the date of this Agreement, against and in respect
of any and all damage, loss, deficiency, liability, obligation, commitment, cost
or expense (including the fees and expenses of counsel) resulting from, or in
respect of, any of the following:
(a) Any misrepresentation, breach of warranty, or
non-fulfillment of any obligation on the part of any Seller or the
Companies under this Agreement, any document relating thereto or
contained in any schedule or exhibit to this Agreement or from any
misrepresentation in or omission from any certificate, schedule, other
agreement or instrument by any Seller or the Companies hereunder;
(b) Any and all liabilities of the Companies of any nature
whether accrued, absolute, contingent or otherwise, and whether known
or unknown, existing at the Closing Date to the extent not reflected
and reserved against in the balance sheet for the six months ended June
30, 1997 included in the Financial Statements or not otherwise
adequately disclosed in this Agreement or the schedules or exhibits
thereto, including, without limitation:
(i) All Tax liabilities of the Companies, together
with any interest or penalties thereon or related thereto,
through the Closing Date and any Tax liability of the
Companies arising in connection with the transactions
contemplated hereby. Any Taxes, penalties or interest
attributable to the operations of the Companies payable as a
result of an audit of any tax return shall be deemed to have
accrued in the period to which such Taxes, penalties or
interest are attributable;
(ii) All environmental liabilities relating to any of
the Companies' properties, including federal, state and local
environmental liability, together with any interest or
penalties thereon or related thereto, through the Closing
Date, but excluding any amount for which there is an adequate
accrual and reserve on the
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55
balance sheet for the six months ended June 30, 1997 included
in the Financial Statements;
(iii) All claims by Medicare, Medicaid, or any other
third party payor relating to reimbursement for services
provided by the Companies prior to the Closing Date
("REIMBURSEMENT CLAIMS"). Indemnification by Seller for
Reimbursement Claims shall include all costs incurred by
Purchaser for such claims, including, but not limited to,
applicable investigative and audit expenses, attorneys fees,
reimbursement costs, and any fines and penalties levied
against the Companies; and
(c) All demands, assessments, judgments, costs and reasonable
legal and other expenses arising from, or in connection with any Claim
incident to any of the foregoing.
(d) All other Claims of the Purchaser shall be resolved in
accordance with SECTION 11.4.
11.3 INDEMNIFICATION BY THE PURCHASER. Subject to this ARTICLE XI, the
Sellers and their heirs, assigns, representatives and agents shall be
indemnified and held harmless by the Purchaser, at all times after the date of
this Agreement, against and in respect of any and all damage, loss, deficiency,
liability, obligation, commitment, cost or expense (including the fees and
expenses of counsel) resulting from, or in respect of, any misrepresentation,
breach of warranty, or non-fulfillment of any obligation on the part of the
Purchaser under this Agreement, any document relating thereto or contained in
any schedule or exhibit to this Agreement or from any misrepresentation in or
omission from any certificate, schedule, other agreement or instrument by the
Purchaser hereunder.
11.4 THIRD-PARTY CLAIMS. Except as otherwise provided in this
Agreement, the following procedures shall be applicable with respect to
indemnification for third-party Claims. Promptly after receipt by the party
seeking indemnification hereunder (hereinafter referred to as the "INDEMNITEE")
of notice of the commencement of any (a) Tax audit or proceeding for the
assessment of Tax by any taxing authority or any other proceeding likely to
result in the imposition of a Tax liability or obligation or (b) any action or
the assertion of any Claim, liability or obligation by a third party (whether by
legal process or otherwise), against which Claim, liability or obligation the
other party to this Agreement (hereinafter the "INDEMNITOR") is, or may be,
required under this Agreement to indemnify such indemnitee, the indemnitee will,
if a Claim thereon is to be, or may be, made against the indemnitor, notify the
indemnitor in writing of the commencement or assertion thereof and give the
indemnitor a copy of such Claim, process and all legal pleadings. The indemnitor
shall have the right to participate in the defense of such action with counsel
of reputable standing. The indemnitor shall have the right to assume the defense
of such action unless such action (i) may result in injunctions or other
equitable remedies in respect of the indemnitee or its business; (ii) may result
in liabilities which, taken with other then existing Claims under this ARTICLE
XI, would not be fully indemnified hereunder; or (iii) may have an adverse
impact on the business or financial condition of the indemnitee after the
Closing
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56
Date (including an effect on the Tax liabilities, earnings or ongoing business
relationships of the indemnitee). The indemnitor and the indemnitee shall
cooperate in the defense of such Claims. In the case that the indemnitor shall
assume or participate in the defense of such audit, assessment or other
proceeding as provided herein, the indemnitee shall make available to the
indemnitor all relevant records and take such other action and sign such
documents as are necessary to defend such audit, assessment or other proceeding
in a timely manner. If the indemnitee shall be required by judgment or a
settlement agreement to pay any amount in respect of any obligation or liability
against which the indemnitor has agreed to indemnify the indemnitee under this
Agreement, the indemnitor shall promptly reimburse the indemnitee in an amount
equal to the amount of such payment plus all reasonable expenses (including
legal fees and expenses) incurred by such indemnitee in connection with such
obligation or liability subject to this ARTICLE XI.
Prior to paying or settling any Claim against which an indemnitor is,
or may be, obligated under this Agreement to indemnify an indemnitee, the
indemnitee must first supply the indemnitor with a copy of a final court
judgment or decree holding the indemnitee liable on such claim or failing such
judgment or decree, and must first receive the written approval of the terms and
conditions of such settlement from the indemnitor. An indemnitor shall have the
right to settle any Claim against it, subject to the prior written approval of
the indemnitee, which approval shall not be unreasonably withheld.
An indemnitee shall have the right to employ its own counsel in any
case, but the fees and expenses of such counsel shall be at the expense of the
indemnitee unless (a) the employment of such counsel shall have been authorized
in writing by the indemnitor in connection with the defense of such action or
Claim, (b) the indemnitor shall not have employed, or is prohibited under this
SECTION 11.4 from employing, counsel in the defense of such action or Claim, or
(c) such indemnitee shall have reasonably concluded that there may be defenses
available to it which are contrary to, or inconsistent with, those available to
the indemnitor, in any of which events such fees and expenses of not more than
one additional counsel for the indemnified parties shall be borne by the
indemnitor.
11.5 DEDUCTIBLE; MAXIMUM LIABILITY. Notwithstanding the foregoing
provisions of this ARTICLE XI, except as set forth in this SECTION 11.5, no
indemnification pursuant to this ARTICLE XI shall be required of an indemnifying
party hereunder unless and until the aggregate amount due the indemnified party
for all Claims under this ARTICLE XI shall exceed $100,000 (the "DEDUCTIBLE").
In the event that such threshold amount is exceeded with respect to a claim by
Purchaser against the Companies, then the threshold shall be deemed to also be
met with respect to each Seller. The maximum liability under this Agreement for
each Seller with respect to such Seller's personal obligations shall be equal to
the cash portion of the Purchase Price received by such Seller pursuant to
SECTION 1.1(B)(I). Notwithstanding the foregoing, no Claim (regardless of
amount) that arises out of a breach of any of the representations or warranties
contained in SECTIONS 2.3 (capitalization), 2.5 (title to the Shares), 2.6
(options and rights on capital stock), 2.16 (tax matters), 2.30 (healthcare laws
and regulations) or 2.31 (selected financial amounts as of Closing) shall be
subject to the Deductible or any limitation with respect to the maximum
indemnification provided hereunder.
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ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by a written agreement
signed by the Companies, the Purchaser and the Sellers.
12.2 ENTIRE AGREEMENT. This Agreement, including the schedules and
exhibits hereto and the documents, annexes, attachments, certificates and
instruments referred to herein and therein, embodies the entire agreement and
understanding of the parties hereto in respect of the agreements and
transactions contemplated by this Agreement and supersedes all prior agreements,
representations, warranties, promises, covenants, arrangements, communications
and understandings, oral or written, express or implied, between the parties
with respect to such transactions. There are no agreements, representations,
warranties, promises, covenants, arrangements or understandings between the
parties with respect to such transactions, other than those expressly set forth
or referred to herein.
12.3 CERTAIN DEFINITIONS.
"AFFILIATE" means, with regard to any Person, (a) any Person,
directly or indirectly, controlled by, under common control of, or
controlling such Person, (b) any Person, directly or indirectly, in
which such Person holds, of record or beneficially, five percent or
more of the equity or voting securities, (c) any Person that holds, of
record or beneficially, five percent or more of the equity or voting
securities of such Person, (d) any Person that, through Contract,
relationship or otherwise, exerts a substantial influence on the
management of such Person's affairs, (e) any Person that, through
Contract, relationship or otherwise, is influenced substantially in the
management of their affairs by such Person, or (f) any director,
officer, partner or individual holding a similar position in respect of
such Person.
"AUTHORITY" means any governmental, regulatory or
administrative body, agency, arbitrator or authority, any court or
judicial authority, any public, private or industry regulatory agency,
arbitrator authority, whether international, national, federal, state
or local.
"CLAIM" means any action, claim, obligation, liability,
expense, lawsuit, demand, suit, inquiry, hearing, investigation, notice
of a violation, litigation, proceeding, arbitration, or other dispute,
whether civil, criminal, administrative or otherwise, whether pursuant
to contractual obligations or otherwise.
"CONTRACT" means any agreement, contract, commitment,
instrument or other binding arrangement or understanding, whether
written or oral.
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58
"ENVIRONMENTAL LAW" means any Regulation, Order, settlement
agreement or governmental requirement, which relates to or otherwise
imposes liability or standards of conduct concerning mining or
reclamation of mined land, discharges, emissions, releases or
threatened releases of noises, odors or any pollutants, contaminants or
hazardous or toxic wastes, substances or materials, whether as matter
or energy, into ambient air, water, or land, or otherwise relating to
the manufacture, processing, generation, distribution, use, treatment,
storage, disposal, cleanup, transport or handling of pollutants,
contaminants, or hazardous wastes, substances or materials, including
(but not limited to) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Resource Conservation and
Recovery Act of 1976, as amended, the Toxic Substances Control Act of
1976, as amended, the Federal Water Pollution Control Act Amendments of
1972, the Clean Water Act of 1977, as amended, any so-called
"Superlien" law, and any other similar Federal, state or local
statutes.
"ENVIRONMENTAL PERMIT" shall mean Permits, certificates,
approvals, licenses and other authorizations relating to or required by
Environmental Law and necessary or desirable for the Corporation's
business.
"GAAP" means generally accepted accounting principles, applied
on a consistent basis.
"HEALTH CARE LAWS" means any Federal, state, or local
Regulation or Order, of any Authority, which relates to or otherwise
imposes liability or standards of conduct concerning the licensure,
certification, qualification, or operation of a health maintenance
organization, pharmacy, home health agency or other aspect of a
Corporation's business subject to such Health Care Laws, including but
not limited to laws governing home health agencies; The Health
Maintenance Organization Act; [the Indiana Pharmacy Act; the Indiana
Drug and Cosmetic Act; the Indiana Comprehensive Drug Abuse Prevention
and Control Act]; the Patient Self-Referral Act; the Employee Health
Care Access Act; 21 U.S.C. ss.301-392, the Federal Food Drug and
Cosmetic Act; 21 U.S.C. ss.821 et seq., the Federal Drug Abuse Act;
Section 1128B of the Social Security Act; The Clinical Laboratory
Improvement Amendments of 1988; 42 U.S.C. ss.1320a-7b, 42 C.F.R. Part
1001, 42 CFR Chapter IV, Subchapter C; Sections 1876 or 1903 of the
Social Security Act; 45 CFR, Part 74; 45 CFR, Part 92; 42 CFR 455.109
Section 306 of the Clean Air Act; 42 U.S.C. ss.1857(h) et seq., Section
508 of the Clean Water Act; 33 U.S.C. ss.1368 et seq., Executive Order
11738 and Environmental Protection Agency regulations; 40 CFR Part 15,
Title VI of the Civil Rights Act of 1964; 42 U.S.C. ss.2000 d et seq.,
Section 504 of the Rehabilitation Act of 1933; 29 U.S.C. ss.7940; Title
IX of the Education Amendments of 1972, 20 U.S.C. ss.1681 et seq., the
Age Discrimination Act of 1975; 42 U.S.C. ss.6101 et seq., Section 654
of OBRA '81; 42 U.S.C. ss.9849 and the Americans with Disabilities Act
of 1990; P.L. 101-336, OBRAs 1986 through 1993, as amended, and any
other similar Federal, state or local Regulations.
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"LIEN" means any security interest, lien, mortgage, pledge,
hypothecation, encumbrance, Claim, easement, restriction or interest of
another Person of any kind or nature.
"MATERIAL ADVERSE CHANGE" means any development or change
which has, had or would have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means any circumstances, state of
facts or matters which has, or might reasonably be expected to have, a
material adverse effect in respect of the Companies' business,
operations, properties, assets, condition (financial or otherwise),
results, plans, strategies or prospects.
"ORDER" means any decree, judgment, award, order, injunction,
rule, consent of or by an Authority.
"PERSON" means any corporation, partnership, joint venture,
company, syndicate, organization, association, trust, entity, Authority
or natural person.
"PROPRIETARY RIGHTS" means any patent, patent application,
copyright, trademark, trade name, service xxxx, service name, trade
secret, know-how, confidential information or other intellectual
property or proprietary rights.
"REGULATION" means any law, statute, rule, regulation,
ordinance, requirement, announcement or other binding action of or by
an Authority.
"SUBSIDIARY" means any Person which the Purchaser or the
Companies, as the case may be, owns, directly or indirectly, 50% or
more of the outstanding stock or other equity interests.
12.4 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand or mailed, first class certified mail
with postage paid or by overnight receipted courier service:
(a) If to the Sellers or the Companies, to:
Community Hospital
0000 Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, M.D.
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60
with a copy to:
Xxxx X. Xxxxxxx, Esq.
Bingham, Summers, Welsh & Xxxxxxxx
2700 Market Tower
00 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
or to such other person or address as the Sellers or
the Companies shall furnish by notice to the Purchaser in writing.
(b) If to the Purchaser to:
AmeriPath, Inc.
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxx 00000
Attn: Xxxxx X. New, President
with a copy to:
Xxxxxxxxx Xxxxxxx Xxxxxxx
Xxxxxx Xxxxx & Xxxxxxx, P.A.
000 X. Xxx Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
or to such other person or address as the Purchaser
shall furnish by notice to Seller in writing.
12.5 WAIVER OF COMPLIANCE; CONSENTS. Any failure of any party hereto to
comply with any obligation, covenant, agreement or condition herein may be
waived in writing by the other parties hereto, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing.
12.6 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties,
except that the Purchaser may assign its rights, interests and obligations
hereunder to any wholly-owned Subsidiary, and may grant Liens or security
interests in respect of its rights and interests hereunder, without the prior
approval of the Sellers.
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12.7 GOVERNING LAW. The Agreement shall be governed by the internal
laws of the State of Florida as to all matters, including but not limited to
matters of validity, construction, effect and performance.
12.8 CONSENT TO JURISDICTION; SERVICE OF PROCESS. The Companies and
each of the Sellers hereby irrevocably submit to the jurisdiction of the state
or federal courts located in Broward County, Florida in connection with any
suit, action or other proceeding arising out of or relating to this Agreement
and the transactions contemplated hereby, and hereby agree not to assert, by way
of motion, as a defense, or otherwise in any such suit, action or proceeding
that the suit, action or proceeding is brought in an inconvenient forum, that
the venue of the suit, action or proceeding is improper or that this Agreement
or the subject matter hereof may not be enforced by such courts.
12.9 INJUNCTIVE RELIEF. The parties hereto agree that in the event of a
breach of any provision of this Agreement, the aggrieved party or parties may be
without an adequate remedy at law. The parties therefore agree that in the event
of a breach of any provision of this Agreement, the aggrieved party or parties
may elect to institute and prosecute proceedings in any court of competent
jurisdiction to enforce specific performance or to enjoin the continuing breach
of such provision, as well as to obtain damages for breach of this Agreement. By
seeking or obtaining any such relief, the aggrieved party shall not be precluded
from seeking or obtaining any other relief to which it may be entitled.
12.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.11 HEADINGS. The article, section and subsection headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement (or any provision hereof).
12.12 BINDING EFFECT. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the signatories to this
Agreement and each of their respective successors and permitted assigns.
12.13 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party hereto, upon any breach or default of any
other party under this Agreement, shall impair any such right, power or remedy
of such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party hereto of any breach or default under this Agreement, or
any waiver on the part of any party of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any party, shall be cumulative and
not alternative.
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12.14 SEVERABILITY. Unless otherwise provided herein, if any provision
of this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
12.15 EXPENSES. All fees, costs and expenses (including, without
limitation, legal, auditing and accounting fees, costs and expenses) incurred in
connection with considering, pursuing, negotiating, documenting or consummating
this Agreement and the transactions contemplated hereby shall be borne and paid
solely by the party incurring such fees, costs and expenses. Without limiting
the generality of the foregoing, the Sellers will bear the costs of audits of
the financial statements of the Companies; PROVIDED, HOWEVER, that the Sellers
shall not be responsible for any costs in excess of $3,000, which excess shall
be borne by the Purchaser.
12.16 ATTORNEYS' FEES. If any party to this Agreement seeks to enforce
the terms and provisions of this Agreement, then the prevailing party in such
action shall be entitled to recover from the losing party all costs in
connection with such action, including without limitation reasonable attorneys'
fees, expenses and costs incurred with respect to trials, appeals and
collection.
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IN WITNESS WHEREOF, the parties hereto have made and entered into this
Agreement the date first hereinabove set forth.
PURCHASER:
AMERIPATH, INC.
By: /s/ Xxxxx X. New
--------------------------------------
Name: Xxxxx X. New
Title: President and Chief Executive Officer
SELLERS:
/s/ XXXXXX X. XXXXXXX
---------------------------------
XXXXXX X. XXXXXXX, M.D.
/s/ XXXXXXX X. XXXXXX
---------------------------------
XXXXXXX X. XXXXXX, M.D.
/s/ XXXXXX X. XXXXXX
---------------------------------
XXXXXX X. XXXXXX, M.D.
/s/ J. XXXXXXX XXXXX
---------------------------------
J. XXXXXXX XXXXX, M.D.
/s/ MARTIAL X. XXXXXXX
---------------------------------
MARTIAL X. XXXXXXX, M.D.
/s/ XXXXXX X. XXXXXX
---------------------------------
XXXXXX X. XXXXXX, M.D.
/s/ XXXXXXX X. XXXXXXX
---------------------------------
XXXXXXX X. XXXXXXX, M.D.
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/s/ XXXXX X. XXXXXX
---------------------------------
XXXXX X. XXXXXX, M.D.
/s/ XXXXXX X. XXXXX
---------------------------------
XXXXXX X. XXXXX, M.D., PH.D.
/s/ XXXXX X. XXXXXX
---------------------------------
XXXXX X. XXXXXX, M.D.
/s/ XXXXX X. XXXXXXXX
---------------------------------
XXXXX X. XXXXXXXX, M.D.
/s/ XXXX X. XXXXXXXX
---------------------------------
XXXX X. XXXXXXXX, M.D.
/s/ XXXXXXX X. XXXXXX
---------------------------------
XXXXXXX X. XXXXXX, M.D.
/s/ XXXX X. XXXXXXXX
---------------------------------
XXXX X. XXXXXXXX, M.D.
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65
COMPANIES:
COLAB INCORPORATED PROFESSIONAL
CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxx, M.D.
--------------------------------------
Name: Xxxxxxx X. Xxxxxxx, M.D.
Title: President
ANATOMICAL PATHOLOGY SERVICES, P.C.
By: /s/ Xxxxxxx X. Xxxxxxx, M.D.
--------------------------------------
Name: Xxxxxxx X. Xxxxxxx, M.D.
Title: President
MICRODIAGNOSTICS, P.C.
By: /s/ Xxxxxxx X. Xxxxxxx, M.D.
--------------------------------------
Name: Xxxxxxx X. Xxxxxxx, M.D.
Title: President
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