Exhibit 2
ASSET PURCHASE AGREEMENT
AGREEMENT, dated July 28, 2005, among HEALTH PLUS MANAGEMENT SERVICES,
L.L.C, a New York limited liability company having its principal place of
business in Hempstead, New York (the "Buyer"), HEALTH MANAGEMENT CORPORATION
OF AMERICA, a Delaware corporation having its principal place of business in
Melville, New York ("HMCA"), DYNAMIC HEALTHCARE MANAGEMENT, INC., a New York
corporation having its principal place of business in Melville, New York
("Dynamic"), and FONAR CORPORATION, a Delaware corporation having its principal
place of business in Melville, New York ("Fonar") and the direct corporate
parent of HMCA (a wholly owned subsidiary of Fonar) and the indirect corporate
parent of Dynamic.
W I T N E S S E T H:
WHEREAS, HMCA owns all of the issued and outstanding shares of stock of
Dynamic (HMCA and Dynamic are hereinafter sometimes referred to as the
"Sellers" or individually as a "Seller");
WHEREAS, HMCA and Dynamic previously provided management services for
AlliancePhysical Medicine & Rehabilitation, P.C. ("Alliance"), Bellmore Medical
Practice, P.C. ("Bellmore") and Superior Medical Services, P.C. ("Superior");
WHEREAS, Alliance, Bellmore and Superior (the "Formerly Managed P.C.'s")
have ceased the practice of medicine and conduct of business and new
professional corporations, with different ownership, have commenced the
practice of medicine and conduct of business at sites previously utilized by
the Formerly Managed P.C.'s;
WHEREAS, HMCA has entered into management agreements (the "Management
Agreements") with each of said new P.C.'s which are Island South Physical
Medicine & Rehabilitation, P.C. ("Long Island Rehabilitation"), Physical
Medicine & Rehabilitation of New York, P.C. ("New York Rehabilitation"), Sports
Medicine & Spine Rehabilitation, P.C. (formerly known as Central Island
Physical Medicine & Rehabilitation, P.C.) ("Sports & Spine Rehabilitation"),
and Perry Physical Medicine and Rehabilitation, P.C. ("Perry Rehabilitation")
(together, Long Island Rehabilitation, New York Rehabilitation, Sports & Spine
Rehabilitation, and Perry Rehabilitation are hereinafter sometimes referred to
as the "New P.C.'s");
WHEREAS, pursuant to the Management Agreements, HMCA and Dynamic provide
physician practice management services to the New P.C.'s;
WHEREAS, the New P.C.'s are engaged in the practice of physical therapy
and rehabilitation;
WHEREAS, Sellers no longer wish to be in the business of managing physical
therapy and rehabilitation facilities;
WHEREAS, pursuant to the terms and conditions of this Agreement HMCA and
Dynamic wish to sell and the Buyer wishes to buy the business of the Sellers of
managing physical therapy and rehabilitation facilities (the "Physical Therapy
Management Business") and certain other assets of the Sellers used in
connection with the Physical Therapy Management Business, as specifically
identified herein; and
WHEREAS, in connection with this Agreement, HMCA and the members of the
Buyer, Xxxxxx Xxxxxxxx and Xxxxxx Xxxxx, wish to terminate the employment
agreements entered into between each of Xxxxxx Xxxxxxxx and Xxxxxx Xxxxx with
HMCA on August 20, 1998 ("Employment Agreements");
NOW THEREFORE, in consideration of the premises, representations and
covenants contained herein, the parties hereto agree as follows:
1. Sale and Purchase of Assets. The Sellers will sell, convey, transfer,
assign and deliver to the Buyer, free and clear of any lien, charge,
encumbrance, option, right of first refusal, security interest, easement,
obligation or claim or other third party right of any kind, as of the closing
date referred to in Section 3 below (the "Closing Date") and, subject to the
terms and conditions of this Agreement, the Buyer will purchase from the
Sellers as of the Closing Date, at the purchase price provided for in Section 2
below, the properties and assets of the Sellers, as existing on the Closing
Date, listed in Exhibit A hereto (the "Assets"). Only the Assets listed in
Exhibit A are included in the sale. All other assets and properties of HMCA
and Dynamic, including cash and the accounts receivable from the Formerly
Managed P.C.'s as existing on the Closing Date are excluded.
2. Purchase Price. The purchase price for the Assets to be conveyed
hereunder (the "Purchase Price") shall be Six Million Six Hundred Thousand
($6,600,000) Dollars, payable pursuant to a Promissory Note in the form of
Exhibit B hereto (the "Note") payable to HMCA as directed by the Sellers.
In the event that the Buyer shall sell all or part of the Assets other
than in the ordinary course of business or obtain debt financing secured by the
Assets, the net proceeds to the Buyer (after deduction of commissions, fees and
other expenses, including attorneys' and accountants' fees) no later than 60
days following the date the Buyer shall have received said net proceeds, shall
be paid by the Buyer to HMCA as a prepayment on the Note.
The Purchase Price for the Assets shall be allocated for federal, state,
local and foreign tax purposes by each party among the Sellers and the Assets
sold, transferred and assigned hereunder and the agreements contained herein
below as set forth on Schedule 2 attached hereto.
3. Closing. The closing ("Closing") of such sale and purchase shall take
place at the offices of Xxxxx Peabody LLP located at 000 Xxxxxxx Xxxxxx, Xxxxxx
Xxxx, Xxx Xxxx 00000, at 10:00 o'clock a.m., New York time, on the date hereof
or at such other time and place as the parties may agree upon in writing (such
time and date is herein called the "Closing Date").
At the Closing:
(a) Transfer of Assets by the Sellers. HMCA and Dynamic will deliver to
the Buyer bills of sale in the form of Exhibit C hereto, which shall vest in
the Buyer good and marketable title to the Assets, free and clear of any lien,
charge, encumbrance, option, right of first refusal, security interest,
easement, obligation or claim or other third party right of any kind.
(b) Payment of Consideration for the Assets. Buyer shall pay the Purchase
Price as provided in Paragraph 2.
(c) Security Agreement. The Buyer shall execute and deliver to HMCA a
security agreement in the form of Exhibit E securing the payment of the Note to
HMCA. Pursuant to the security agreement, the Buyer will grant to HMCA a
security interest in the Assets as existing at the time of the Closing and the
assets of the Buyer as existing from time to time to secure the payment of the
Note.
(d) Termination Agreements with Members of the Buyer. HMCA, Fonar and
each of Xxxxxx Xxxxxxxx and Xxxxxx Xxxxx will enter into Agreements in the form
of Exhibit F (Exhibit F-1 for Xxxxxx Xxxxxxxx and Exhibit F-2 for Xxxxxx Xxxxx)
hereto (the "Termination Agreements").
(e) [Intentionally Omitted]
(f) Assigned Agreements. At the Closing, Sellers shall assign the
Assigned Agreements to the Buyer pursuant to an Assignment and Assumption
Agreement in the form of Exhibit G hereto.
4. Assumption of Certain Liabilities and Obligations, Et Cetera. The
Buyer hereby agrees, effective upon the Closing, to assume and pay or
discharge, those liabilities and obligations of HMCA and Dynamic which are
specified as being assumed by the Buyer in the agreement and list of
liabilities attached hereto as Exhibit D hereto ("Assumed Liabilities").
5. No General Assumption; Excluded Liabilities. The Buyer will not
assume, be bound by or agree to pay, perform or discharge any liabilities or
obligations, fixed or contingent of HMCA, Dynamic or any of their respective
subsidiaries or affiliates of any kind or nature whatsoever, except for those
which are expressly assumed pursuant to the provisions of Section 4 above,
including without limitation, (i) legal, accounting, brokerage, finder's fees,
taxes or other expenses incurred by the Sellers in connection with this
Agreement or the consummation of the transactions contemplated hereby; (ii) any
intercompany debt or other liability or obligation of any nature between
Sellers and any past or present affiliate of any Seller; (iii) liabilities or
obligations incurred by any Seller after the Closing; (iv) any obligation or
liability relating to any litigation or any claim arising out of any dispute
against any Seller; (v) any liability for any federal, state, local, foreign or
other taxes, duties, or similar charges imposed by any taxing or governmental
authority on or payable by any Seller or relating to operations, products or
assets of any Seller, or as a consequence of the transactions contemplated
hereby; (vi) any liability or obligation to employees, government agencies or
other third parties in connection with any employee benefit plan of any Seller;
(vii) any liability or obligation of Seller that is not an Assumed Liability;
(viii) any liability or obligation to employees of any Seller, including any
liability or obligation with respect to wages or unused vacation time; (x) any
accounts payable, notes payable and bank debts of any Seller; and (xi) any
liability related to any business of Seller other than the Physical Therapy
Management Business.
6. Representations and Warranties by the Sellers. HMCA and Dynamic,
jointly and severally, represent and warrant to the Buyer as follows:
(a) Organization and Standing of the Sellers. HMCA and Dynamic are
corporations duly organized, validly existing and in good standing under the
law of the States of Delaware and New York, respectively, and have all
requisite power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby.
(b) Authorization, Et Cetera. The execution and delivery of this
Agreement and the sale and all other transactions contemplated hereby have been
duly authorized by all necessary action on the part of the HMCA and Dynamic. No
consents are necessary to authorize the transactions contemplated hereby under
any contract, indenture or other agreement to which HMCA or Dynamic is a party
or by which it is bound.
(c) Qualification. Neither HMCA nor Dynamic is required to qualify as a
foreign entity authorized to do business in any jurisdiction in which it is not
so qualified where such failure to qualify would have a material adverse effect
on the business and assets to be transferred to the Buyer under this Agreement.
(d) Subsidiaries. Dynamic does not own any stock or other equity interest
in any corporation, limited liability company, partnership or other entity.
(e) Financial Statements. The Sellers have or will deliver to the Buyer:
(i) representation letter to Xxxxxx & Kleigman, Sellers' accountants,
dated September 14, 2004, by HMCA on behalf of HMCA and its subsidiaries;
(ii) internal management report balance sheets for Dynamic's Physical
Therapy Management Business as at June 30, 2002, June 30, 2003 and June 30,
2004, and an interim internal management report balance sheet for Dynamic's
Physical Therapy Management Business as at April 30, 2005;
(iii) internal management report income statements for the Physical
Therapy Management Business for the one-year periods ending June 30, 2002, June
30, 2003 and June 30, 2004, and an interim internal management report income
statement for the Physical Therapy Management Business as at April 30, 2005;
(iv) Exhibit K regarding certain Sellers' accounts receivable that are
Assets;
(v) All financial statements, schedules, Exhibits and items referred to
above are, or will be when delivered, complete and correct in all material
respects, prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods indicated, fairly present or will
when delivered fairly present, the financial position of as at the respective
dates indicated and the results of its operations for the periods indicated,
and disclose all liabilities required to be disclosed, contingent or otherwise,
as at said dates. No such material liabilities are past due and no penalty or
interest is payable with respect to any such liabilities. Except as set forth
in such financial statements or this Agreement, there are no other liabilities
of HMCA and its subsidiaries.
(f) Absence of Certain Changes. Since June 30, 2004, there has not been:
(i) any change in the business, condition (financial or otherwise), assets
or liabilities of HMCA and Dynamic, whether or not covered by insurance and
whether or not arising from transactions in the ordinary course of business,
which, individually or in the aggregate, has been materially adverse, except to
the extent set forth in subparagraph (f)(iv) below;
(ii) any damage, destruction or loss (whether or not covered by insurance)
materially and adversely affecting the business or prospects of HMCA or Dynamic
or any of the assets and properties of HMCA or Dynamic;
(iii) any increase in the compensation, pensions or other benefits payable
or to become payable by HMCA or Dynamic to any of its employees who are or will
be performing services at the facilities to be operated by the New P.C.'s or
any bonus payment or arrangement made to or with any thereof other than those
which are consistent with past practices and have been disclosed in writing to
the Buyer;
(iv) any event or condition of any character materially and adversely
affecting the businesses of HMCA or Dynamic, except (a) denials of claims for
reimbursement by professional corporations managed by HMCA for MRI scans
performed in certain cases where an improper financial relationship, in
particular where self-referral was alleged, based on (1) the common ownership
of the referring physical therapy facility and MRI facility, or (2) the
management of both facilities by HMCA (or Dynamic), (b) oral statements by
insurers that there may also be issues involving the corporate practice of
medicine based on the relationship of HMCA or Dynamic and the medical
facilities they manage, (c) a decision by the New York State Court of Appeals
that insurers may deny claims based on the corporate practice of medicine and
that in connection therewith, the insurer is entitled to make reasonable
inquiries and (d) the litigation listed on Exhibit R hereto. The operations
and business of each of HMCA and Dynamic has been conducted in all respects
only in the ordinary course and substantially in the manner in which they have
been conducted since the commencement of its most recently completed fiscal
year.
(g) Tax Returns and Payments. All tax returns and reports of each of
HMCA, Dynamic and the entities with which they are consolidated for tax
reporting purposes required by law to be filed have been duly filed, and all
taxes, assessments, fees and other governmental charges upon any properties,
assets, income or franchises of any such entity or for which any such entity is
otherwise liable, which are due and payable have been paid, other than those
presently payable without penalty or interest and which have been disclosed in
writing to the Buyer. The charges, accruals and reserves on the books of HMCA,
Dynamic and the entities with which they are consolidated for tax reporting
purposes with respect to taxes for all fiscal periods are adequate and said
corporations do not know of any actual or proposed tax assessment for any
fiscal period or of any basis therefor other than as so reflected on their
respective books and records. No extension of time for the assessment of
deficiencies in any federal or state tax has been requested of or granted by
any of said corporations. HMCA shall file or cause to be filed when due (or as
may be extended) the Federal, State and local income tax returns for said
corporations for all periods up to the Closing Date, shall pay all taxes,
interest and penalties as may be due for such periods and shall be entitled to
any refunds for any such periods up to the Closing Date.
(h) Real Property. Neither HMCA nor Dynamic owns any real property.
Exhibit H attached hereto contains a summary description of all leases of any
real property held by either HMCA or Dynamic and used by them in the conduct of
the Physical Therapy Management Business. HMCA has delivered to the Buyer
complete and correct copies of all such leases for real property. All of such
leases are valid and subsisting and none of them is in default. No toxic,
medically hazardous or radioactive materials are used in or produced by any
such operations and no such materials are disposed of or stored on any
properties leased or used in such operations other than medical waste and x-ray
materials which are produced or used in the ordinary conduct of the
professional corporations' medical practices and which are used, stored and
disposed of in accordance with applicable laws and regulations.
(i) Personal Property. All personal properties and assets used, or held
for use, in the Physical Therapy Management Business are included among the
Assets and are listed in Exhibit I hereto. HMCA or Dynamic has good and
marketable title to each of said items of personal property and assets, in each
case subject to no mortgage, pledge, lien, conditional sale agreement,
encumbrance or charge, except as set forth in Exhibit J. None of said personal
properties or assets is held by HMCA or Dynamic as lessee under or subject to
any lease or as conditional vendee under any conditional sale or other title
retention agreement, except as set forth in Exhibit J. All accounts and notes
receivable of HMCA and Dynamic on the schedule of accounts and notes receivable
attached hereto as Exhibit K represent valid and binding obligations and are
stated and reserved against in accordance with generally accepted accounting
principles and historical experience. All inventory and supplies are usable on
a normal basis in the existing Physical Therapy Management Business. There
have been no acquisitions or dispositions of any inventory or supplies since
June 30, 2004 except in the ordinary course of business. The Assets constitute
all of the properties and assets used by Sellers in connection with the
operation of the Physical Therapy Management Business and, include all of the
properties and assets necessary to operate the Physical Therapy Management
Business as it has been operated prior to the date hereof.
(j) Energy and Materials. Neither HMCA nor Dynamic has received any
notice or other communication, whether formal or informal, from any supplier of
gas, oil or electric power or of supplies or other materials used in its
business or operations to the effect that any such energy source, supplies or
material will become unavailable to an extent which might impair the continued
conduct of its business or operations at the greater of their current or
historic levels.
(k) Insurance. The insurance policies currently maintained by or for the
benefit of HMCA and Dynamic are listed on Exhibit L hereto and each is fully
paid for periods extending in all cases beyond the Closing Date.
(l) Disclosure. Neither this Agreement nor any certificate, list or other
instrument purporting to disclose facts germane to the Physical Therapy
Management Business or any Seller delivered or to be delivered to the Buyer by
or on behalf of the Sellers pursuant hereto or in connection with the
transactions contemplated hereby contains or will contain any untrue statement
of a material fact. To the best of HMCA's and Dynamic's knowledge, there is no
fact directly related to the Physical Therapy Management Business which
materially and adversely affects the business, properties, operations,
condition or prospects, financial or otherwise, of such business, which has not
been set forth in this Agreement or in the other documents, certificates and
statements already furnished to Buyer by or on behalf of the Sellers in
connection with the transactions contemplated hereby.
(m) Contracts. With the exception of those contracts and commitments
listed or referred to in Exhibit M, neither HMCA nor Dynamic is a party to or
bound by any contract or commitment, whether written or oral relating to the
Physical Therapy Management Business, other than orders and commitments for the
purchase or sale of supplies or services entered into in the ordinary course of
business not involving commitments singly or in the aggregate of more than Five
Thousand United States Dollars ($5,000).
HMCA and Dynamic have delivered to the Buyer complete and correct copies
of all Assigned Agreements. HMCA or Dynamic has complied with all the
provisions of such Agreements and is not in default under any of the terms
thereof. Noamounts owing by HMCA or Dynamic under any of such Agreements is
past due.
(n) Names, Copyrights, Patents, Trademarks, Et Cetera. The names or
designations, trademarks, trade names, copyrights, patents and other statutory
rights used by HMCA and Dynamic in the Physical Therapy Business are listed in
Exhibit N and are valid and in good standing and are owned or held by HMCA or
Dynamic without any known or suspected conflict with the rights of others.
HMCA and Dynamic have all franchises, permits, licenses and other authority as
is necessary to enable them to conduct their business as now being conducted,
and is not in default under any of such franchises, permits, licenses or other
authority. To the best of HMCA's and Dynamic's knowledge, they possess all
trademarks, trademark rights, trade names, trade name rights, copyrights,
patents, patent rights and other statutory rights necessary for them to conduct
their businesses as now being conducted, without conflict with any valid rights
of others. Neither HMCA nor Dynamic has licensed any other person to use, or
to have access to for any reason, any such rights owned or possessed by them
relating to the Physical Therapy Management Business.
(o) Compliance with Law and Government Regulations. To the best of
Sellers' knowledge, each Seller is in compliance with all applicable statutes,
regulations, decrees, orders, restrictions, guidelines and standards, imposed
by the United States of America, New York State and any other state, county,
municipality or agency of any thereof, and any foreign country or government to
which it or any of its operations may be subject, in respect of the conduct of
its business as currently and historically conducted and the ownership and
operation of its respective properties.
(p) Compensation. Attached hereto as Exhibit O is a true and complete
list of all persons employed by HMCA or Dynamic at the facilities to be operated
by the New P.C.'s, specifying the rate of compensation (including bonuses and
commissions, if any) and position held by each such person.
(q) Employee Stock Ownership Plan, Pension and Profit-Sharing Obligations.
HMCA and Dynamic have delivered to the Buyer complete and correct copies or
descriptions of, and any publications relating to, employee profit-sharing,
incentive, current or future pensions, retirement pay or other obligations for
deferred compensation applicable to persons employed by HMCA and Dynamic at the
facilities to be operated by the New P.C.'s, whether or not such obligations
are of a legally binding nature or in the nature of informal understandings,
including, without limitation, any Employee Stock Ownership Plan and Trust
("ESOP"). A list of all such plans is attached hereto as Exhibit P. None of
said plans has incurred any "accumulated funding deficiency" as such term is
defined in Section 302 of the Employee Retirement Income Security Act of 1974,
as amended (whether or not such deficiency is being waived).
(r) Employee Benefit Plans. HMCA and Dynamic have delivered to the Buyer
complete and correct descriptions of, and any publications of any employee
benefit plans, other than those referred to in Section 4 (q) above, applicable
to persons employed by HMCA or Dynamic at the facilities to be operated by the
New P.C.'s including but not limited to health insurance plans. A list of such
employee benefit plans is attached hereto as Exhibit Q.
(s) Labor Contracts, Et Cetera. Neither HMCA nor Dynamic is a party to
any collective bargaining or other labor union contract applicable to any
persons employed by HMCA or Dynamic. The Sellers do not know of any activities
or proceedings of any labor union (or representatives thereof) to organize any
employees of HMCA or Dynamic, or of any threats of strikes or work stoppages by
any employees of HMCA or Dynamic.
(t) Litigation. Except as set forth on Exhibit R, there is no litigation,
arbitration, proceeding or investigation pending, or to HMCA's and Dynamic's
knowledge, threatened, which in their reasonable opinion might, either
individually or collectively, result in any material adverse change in the
business or condition (financial or otherwise) of the Physical Therapy
Management Business or in any of their properties or assets used therein, or in
any material liability on the part of HMCA or Dynamic in respect thereof, or in
any material change in the methods of doing business of HMCA or Dynamic, or
which questions the validity of this Agreement or of any action taken or to be
taken pursuant to or in connection with the provisions of this Agreement and,
to HMCA's and Dynamic's knowledge, there is no basis for any such litigation,
arbitration, condemnation, proceeding or investigation.
(u) Compliance with Other Instruments, Et Cetera. Neither the execution
and delivery of this Agreement nor the carrying out of the transactions
contemplated hereby will result in any violation, or be in conflict with any
term, of the certificate of incorporation or the by-laws of HMCA or Dynamic,
or any shareholder agreement or other governing agreement or document
applicable to HMCA or Dynamic. HMCA and Dynamic warrant that the consummation
of the transactions contemplated hereby will not result in any violation of or
be in conflict with any contract or other instrument to which HMCA or Dynamic
is a party, or by which it is otherwise bound.
(v) No Broker. Neither HMCA nor Dynamic has employed any finder, broker,
agent or other intermediary in connection with the negotiation or consummation
of this Agreement or any of the transactions contemplated hereby. HMCA and
Dynamic will indemnify the Buyer and hold it harmless against all liabilities,
expenses, costs, losses and claims, if any, arising from the employment by, or
services rendered to, HMCA or Dynamic (or any allegation of any such employment
by, or services rendered to, any of them) of any finder, broker, agent or other
intermediary in such connection.
(w) Financial Position of Certain New P.C.s. HMCA and Dynamic, jointly
and severally, represent, warrant and covenant to the Buyer that through the
payroll payment date of August 12, 2005, each of Perry Rehabilitation, Long
Island Rehabilitation and Sports & Spine Rehabilitation shall have sufficient
funds on hand to pay its payroll in a timely manner (including for the purpose
of such calculation, collections received through August 11, 2005 and excluding
other expenses outside of the ordinary course of business and the management
fees due under the Management Agreement), and that there shall be no need for
Buyer to advance any funds to any such New P.C. for such purpose. In the event
that the Buyer does have to advance such funds to any such New P.C. for such
purpose, the aggregate amount of any such advances may be deducted by Buyer
from any amounts remaining to be paid on account of the Note as permitted
pursuant to Section 17 hereof.
7. Representations and Warranties of the Buyer. The Buyer represents and
warrants to HMCA and Dynamic as follows:
(a) Organization and Standing. The Buyer is a limited liability company
duly organized, validly existing, and in good standing under the laws of the
State of New York and has all requisite corporate power and authority to enter
into this Agreement and to carry out the transactions contemplated under this
Agreement.
(b) Authorization, Et Cetera. The execution and delivery of this
Agreement and the purchase and all other transactions contemplated hereby have
been duly authorized by the necessary parties on behalf of the Buyer. No
consent,approval, authorization or order of, or registration, qualification,
designation, declaration or filing with, any governmental authority on the part
of the Buyer is required in connection with the execution and delivery of this
Agreement or the carrying out of the transaction contemplated hereby. The
Buyer has obtained or will obtain prior to the Closing all consents necessary
to authorize the transactions contemplated hereby under any contract, lease,
indenture or other agreement to which it is a party or by which it is bound.
The Buyer shall also make all necessary governmental and non-governmental
registrations, filings and notifications required to be made by them in
connection therewith.
(c) Litigation, Et Cetera. There is no litigation, arbitration, proceeding
or investigation pending or, to Buyer's knowledge, threatened against the Buyer
which questions the validity of this Agreement or of any action taken or to
betaken pursuant to or in connection with the provisions of this Agreement, or
which, in the Buyer's reasonable opinion might, either individually or
collectively, result in any material adverse change in its business or condition
(financial or otherwise) or in any of its properties or assets, or in any
material liability on its part, or in any material change in its business,
and to its knowledge, there is no basis for any such litigation, arbitration,
condemnation, proceeding or investigation.
(d) Compliance with Law and Government Regulations. To the best of the
Buyer's knowledge, the Buyer is in compliance in all material respects with all
applicable statutes, regulations, decrees, orders, restrictions, guidelines and
standards, imposed by the United States of America, any state, county,
municipality or agency of any thereof, and any foreign country or government to
which it or any of its respective operations may be subject, in respect of the
conduct by such corporation of its business as currently conducted and the
ownership and operation of its respective properties, where the consequences of
noncompliance would have a material adverse effect on such corporation or its
business.
(e) Insurance. The Buyer maintains such insurance policies or is self
insured with respect to its assets, business and operations as it reasonably
deems necessary, prudent and cost-effective.
(f) Compliance with Other Instruments. Neither the execution and delivery
of this Agreement nor the carrying out of the transactions contemplated hereby
will result in any violation of or be in conflict with any term of either the
Buyer's formation or organizational documents or of any contract or other
instrument to which it is a party, or of any judgment, decree, order, statute,
rule or regulation by which it is bound.
(g) Disclosure. Neither this Agreement nor any certificate, list or other
instrument purporting to disclose facts germane to the Buyer delivered or to be
delivered to the Seller by or on behalf of the Buyer pursuant hereto or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact. To the best of the Buyer's knowledge,
there is no fact directly related to the Buyer's business known to the Buyer
which materially and adversely affects the business, properties, operations,
condition or prospects, financial or otherwise, of the Buyer which has not been
set forth in this Agreement or in the other documents, certificates and
statements already furnished to the Seller by or on behalf of the Buyer in
connection with the transactions contemplated hereby.
(h) Broker. The Buyer has not employed any finder, broker, agent or other
intermediary in connection with the negotiation or consummation of this
Agreement or any of the transactions contemplated hereby, and it will indemnify
the Sellers and hold them harmless against all liabilities, expenses, costs,
losses and claims, if any, arising from the employment by, or services rendered
to it (or any allegation of any such employment by, or services rendered to it)
of any finder, broker, agent or other intermediary in such connection.
8. Covenants of HMCA and Dynamic. HMCA and Dynamic covenant and agree
with the Buyer as follows:
(a) Books and Records. At the Closing, HMCA and Dynamic will turn over to
the Buyer as part of its delivery of the Assets, all records and files,
physician lists, lists of insurance companies, lists of health maintenance
organizations and preferred provider organizations, books of account, inventory
records, personnel records, financial books and records and other books and
records, including without limitation tax records and returns which relate to
the Assets and the Physical Therapy Management Business. HMCA's and Dynamic's
personnel will cooperate in the Buyer's obtaining necessary data in any manner
which Buyer may reasonably request.
(b) Non-Competition. For a period of five (5) years after the Closing, so
long as there is no material default on the part of the Buyer in respect of the
payment of any part of the Purchase Price hereunder which is not waived or not
cured within any applicable grace or cure period, HMCA, Dynamic, Fonar, and
every direct and indirect subsidiary of Fonar, will, not directly or
indirectly: (i) form, own, manage, operate, join, control or participate in
the formation, ownership, management, operation or control of, or be connected
in any manner with, any business (whether as an officer, director, stockholder,
employee or otherwise) (x) involving the management of, or the provision of
management services to, any physical therapy and rehabilitation practice,
within a radius of ten (10) miles of any physical therapy and rehabilitation
practice now managed by HMCA, Dynamic or Fonar or any direct or indirect
subsidiary of Fonar which will be managed by the Buyer upon the consumption of
this transaction; (ii) solicit, divert, take away or attempt to take away any
of Buyer's clients, customers or suppliers or the business or patronage of any
such clients, customers or suppliers or in any way interfere with, disrupt or
attempt to disrupt any then existing relationships between Buyer and any of its
clients, customers or suppliers or other persons with whom it deals or contact
or enter into any business transaction with any such clients, customers or
suppliers or other persons for any purpose detrimental to the interests of the
Buyer; or (iii) solicit or hire, or directly or indirectly assist any person to
solicit or hire, any person who is employed by the Buyer, or induce such a
person to leave his or her employment with the Buyer.
Nothing contained herein shall prohibit the HMCA or Dynamic from managing
or otherwise providing services to or having business dealings with any
diagnostic imaging facility or purchasing and holding shares of stock of a
competitor of the Buyer which are traded on any national or regional stock
exchange or on the NASDAQ System as long as the shares owned by HMCA and
Dynamic at any one time do not exceed three percent (3%) of the total shares of
such class outstanding and provided further neither HMCA nor Dynamic exercises
any control over or performs any executive, management or other services for
such competitor. HMCA and Dynamic agree that the remedy at law for any breach
of the covenants in this Section would be inadequate and that the Buyer would
be entitled to injunctive relief in the case of any such breach. Should it be
held at any time that the restriction placed upon HMCA and Dynamic by this
Section is too onerous and is not necessary for the protection of the Buyer,
HMCA and Dynamic agree that any court of competent jurisdiction may impose any
lesser restriction which such court may consider to be necessary or appropriate
properly to protect the Buyer, but any such determination as to the invalidity
or unenforceability of this covenant shall not affect the validity or
enforceability hereof in any State or other jurisdiction over which such court
does not have jurisdiction.
In consideration of the performance of Buyer's obligations hereunder,
HMCA, Dynamic, Fonar, and each and every direct and indirect subsidiary of Fonar
agree that such entity shall retain any information contained in Business
Material in confidence and shall not, directly or indirectly, use, copy or
publish any of that information or reveal, report, disclose or divulge any of
that information to any third party without the prior written consent of Buyer,
nor assist any person to do so. For purposes of this Agreement, "Business
Material" shall mean all information, written and oral, concerning Buyer, the
Physical Therapy Management Business, or the Assets that is either non-public,
confidential, proprietary or competitively sensitive in nature, including,
without limitation, customer and client lists, names and other information
relating to customer and client contracts, customer and client files, and
methods and strategies relating to negotiating contracts with customers,
clients and persons referring customers and clients. Upon Buyer's request,
each such entity shall promptly deliver to Buyer all written material
containing or reflecting any information containing Business Material and will
not retain any copies, extracts or other reproductions in whole or in part of
such written material, except as needed by Sellers to comply with applicable
laws or any court order as determined by Sellers' counsel in good faith, to
prepare tax returns, for purposes of financial audits, and to respond to any
audit by any governmental agency.
(c) Consents. HMCA and Dynamic shall obtain all consents required to be
obtained by them to consummate the transactions contemplated by this Agreement,
including all third party consents required to assign the Assigned Agreements
to the Buyer. The parties acknowledge and agree that neither Xxxxxx Xxxxxxxx
nor Xxxxxx Xxxxx shall be required to provide any personal guarantees or
similar security to any third party for purposes of Sellers obtaining the
consent of a third party to assign the Assigned Agreements to the Buyer, and
that if required by such third party, each Seller agrees to provide any
required guarantee or security or to remain secondarily liable on any Assigned
Agreement.
(d) Further Assurances. From time to time, at the Buyer's request
(whether at or after the Closing) and without further consideration, HMCA and
Dynamic will execute and transfer and will take such other action as the Buyer
may reasonably request in order to more effectively give effect to the
transactions contemplated hereby.
(e) Assigned Agreements. At the Closing, Sellers shall assign the
Assigned Agreements to the Buyer and the Buyer shall assume the post-Closing
obligations of Sellers thereunder, pursuant to the terms and conditions set
forth herein and in the Assignment and Assumption Agreement.
(f) Nonassignable Agreements. The parties acknowledge that it is
impractical for Sellers to obtain the consent of the relevant third parties
with respect to the agreements listed on Exhibit D-2. Therefore, Sellers shall
cooperate with the Buyer in any reasonable arrangement designed to provide for
the Buyer the benefits of such agreements, including enforcement of any and all
rights of Sellers against the other party thereto arising out of a breach or
cancellation thereof by such other party or otherwise and the right to purchase
any of the relevant equipment at the end of the lease term or otherwise. The
Buyer shall perform all such obligations on each agreement on the Sellers'
behalf or in the Buyer's discretion otherwise reimburse the Sellers for
payments made for the benefit of the Buyer (provided, however, that the Sellers
shall first have provided the Buyer with written evidence to the Buyer's
reasonable satisfaction that the Sellers actually have made such payments for
which they are being reimbursed), in either case as provided in the Assignment
and Assumption Agreement attached hereto as Exhibit G.
(g) Vendor Relationships; Missing Agreements. The parties acknowledge
that the Sellers have certain vendor relationships that may be relevant to the
Physical Therapy Management Business, as listed on Exhibit D-3, that derive
from agreements or relationships in which a Seller is not a party, derive from
relationships in which there is no agreement, or derive from agreements that
Sellers cannot locate. Sellers shall cooperate with the Buyer in any
reasonable arrangement designed to provide for the Buyer the benefits of such
agreements or relationships, including enforcement of any and all rights of
Sellers against the other party thereto arising out of a breach or cancellation
thereof by such other party or otherwise. The Buyer shall perform all such
obligations on each agreement or relationship on the Sellers' behalf or in the
Buyer's discretion otherwise reimburse the Sellers for payments made for the
benefit of the Buyer (provided, however, that the Sellers shall first have
provided the Buyer with written evidence to the Buyer's reasonable satisfaction
that the Sellers actually have made such payments for which they are being
reimbursed), in either case as provided in the Assignment and Assumption
Agreement attached hereto as Exhibit G.
9. Covenants of the Buyer. The Buyer covenants and agrees with the
Sellers that:
(a) Books and Records. After the Closing, the Buyer will permit HMCA,
Dynamic and their representatives, at such reasonable times as they may
request, to inspect and make extracts from any books and records turned over by
HMCA and Dynamic to the Buyer at the Closing for the purpose of preparing any
tax returns, liquidating or complying with other governmental requirements.
(b) Further Assurances. From time to time at HMCA's or Dynamic's request
(whether at or after the Closing) and without further consideration, the Buyer
will execute such instruments and documents and take such other action as HMCA
and Dynamic may reasonably request in order to more effectively give effect to
the transactions contemplated hereby.
10. Conditions of the Buyer's Obligations. The obligations of the Buyer
under this Agreement are subject to the fulfillment to its reasonable
satisfaction, prior to or at the Closing, of each of the following conditions,
any of which can and, if unmet, shall be deemed waived at Closing, unless
otherwise agreed in writing:
(a) No Government Opposition. No governmental entity shall have made
known any opposition to, or questioning of, the consummation of the
transactions contemplated hereby.
(b) No Private Opposition. No private party shall have commenced an
action or filed suit against any of the parties or their respective shareholders
questioning in any way the validity of this Agreement or the transactions
contemplated hereby.
(c) Consents. HMCA and Dynamic shall have obtained all consents and
approvals required to be obtained by them hereunder to the transactions
contemplated by this Agreement.
(d) Condition of Assets. The tangible Assets being sold hereunder shall
be in operating condition and shall have suffered no loss or damage, normal wear
and tear excepted, whether by reason of causes within or without the control of
the parties and whether covered by insurance or not.
(e) Proceedings and Documents. All proceedings in connection with the
transactions contemplated hereby and all documents and instruments incident to
such transactions shall be reasonably satisfactory in legal substance and form
to counsel for the Buyer, and the Buyer and its counsel shall have received all
such counterpart originals or certified or other copies of such documents as
they or their counsel may reasonably request.
(f) Assigned Agreements. Sellers shall have assigned the Assigned
Agreements to the Buyer.
11. Conditions of HMCA's and Dynamic's Obligations. The obligations of
HMCA and Dynamic under this Agreement are subject to the fulfillment to their
reasonable satisfaction, prior to or at the Closing, of each of the following
conditions, any of which can and, if unmet, shall be deemed waived at Closing,
unless otherwise agreed in writing.
(a) No Government Opposition. No governmental entity shall have made
known any opposition to, or questioning of, the consummation of the transactions
contemplated hereby.
(b) No Private Opposition. No private party shall have commenced an
action or filed suit against any of the parties or their respective
shareholders questioning in any way the validity of this Agreement or the
transactions contemplated hereby.
(c) Security Agreement. The Buyer shall execute and deliver to HMCA the
Security Agreement in the form of Exhibit E.
12. Expenses. Except as otherwise provided herein, HMCA, Dynamic and
Fonar will pay all costs and expenses attributable to the performance of and
compliance with all agreements and conditions contained in this Agreement to be
performed or complied with them (including, without limitation, all fees and
expenses of their counsel), and the Buyer will pay all costs and expenses
attributable to the performance of and compliance with all agreements and
conditions contained in this Agreement to be performed or complied with by it
(including, without limitation, all fees and expenses of their counsel).
13. Survival of Representations and Warranties. All statements,
representations and agreements contained in any certificate or other instrument
delivered by HMCA and Dynamic pursuant to this Agreement, or otherwise made by
them in writing as a condition of, or otherwise in connection with, the
transactions contemplated hereby, shall be deemed also to be representations
and warranties by HMCA and Dynamic hereunder. The representations and
warranties of the parties under this Agreement shall survive the Closing.
14. Indemnification by HMCA and Dynamic. HMCA and Dynamic, jointly and
severally, shall indemnify and hold harmless the Buyer, Xxxxxx Xxxxxxxx and
Xxxxxx Xxxxx from all losses, liabilities, obligations, claims, lawsuits,
judgments, costs and expenses (including reasonable attorneys' fees) arising
from: (a) any material misrepresentation, breach of warranty or breach of
covenant by HMCA, Dynamic or Fonar under this Agreement or the failure of HMCA,
Dynamic or Fonar to perform any obligation required to be performed by it
hereunder; (b) events occurring, conditions existing, or activities of any
Seller following the Closing, related to any Seller's business prior to
Closing, or the assertion against Buyer, Xxxxxx Xxxxxxxx or Xxxxxx Xxxxx of a
claim which, if valid, would constitute a liability arising out of or related
to any Seller's business prior to Closing; (c) any Excluded Liability; (d) any
of the matters referenced in Sections 6(f) and/or 6(t) hereunder or in any
Exhibit related thereto; and (e) any arrangement between a Seller and a
Formerly Managed P.C. or a New P.C., and any investigation or other inquiry by
a federal or state agency or any insurance carrier of the Buyer, Xxxxxx
Xxxxxxxx and/or Xxxxxx Xxxxx related in any way thereto either directly or
indirectly. There shall be no limit on the aggregate liability of the Sellers
under this Section 14. Any such amount may be satisfied by offsetting any said
liability against any remaining obligations due under the Note.
15. Indemnification by the Buyer. The Buyer shall indemnify and hold
harmless HMCA and Dynamic from all losses, liabilities, obligations, claims,
lawsuits, judgments, costs and expenses (including reasonable attorneys' fees):
(a) arising after the Closing from the Assumed Liabilities; and (b) arising
from any material misrepresentations, breach of warranty or breach of covenant
by it under this Agreement or its failure to perform any obligation required to
be performed by it hereunder; provided, however, that the aggregate liability
of the Buyer under this Section and on account of the Purchase Price shall not
exceed the Purchase Price.
16. Indemnification Procedure. In the event that any claim is made with
respect to which a party hereto (an "Indemnified Party") intends to seek
indemnification hereunder, the Indemnified Party shall give the party from
which it intends to seek indemnification hereunder ("Indemnifying Party")
prompt written notice of such claim and the Indemnifying Party shall have the
right to assume the defense of the claim with counsel of its own choosing
reasonably acceptable to the Indemnified Party, provided that such defense is
conducted with diligence and continuity and provided further that the
Indemnified Party shall have the right to participate in the defense of such
claim with counsel of its choosing at its expense. The parties shall cooperate
in the defense of any such claim and neither the Indemnifying Party nor the
Indemnified Party shall have the right to settle or pay any such claim without
the consent of the other, which consent shall not be unreasonably withheld.
17. Offsets. In the event that HMCA or Dynamic shall be required to
indemnify the Buyer, Xxxxxx Xxxxxxxx and/or Xxxxxx Xxxxx pursuant to Paragraph
14 hereof, the amount of any such liability, obligation, loss, claim, judgment,
cost or expense may be deducted from any amounts remaining to be paid on
account of the Note. It shall not be a default if payment of the Note is not
made because of the proper exercise by the Buyer of its rights of offset as
provided herein. Notwithstanding the foregoing, the aggregate amount which may
be deducted hereunder with respect to claims as to which a final determination
of the amounts due the Buyer from HMCA and Dynamic has not yet been made, will
be $1,000,000. (For the purposes hereof, "final determination" shall mean the
agreement of the parties or the decision of a court of competent jurisdiction
which has become final and nonappealable.) The remedy provided herein shall
not be exclusive, and the Indemnified Party may elect to pursue other remedies
available at law, in equity or as provided by this Agreement in lieu of such
remedy or concurrently with such remedy.
18. Notices, Et Cetera. All notices, consents and other communications
hereunder shall be in writing (except for those relating to day-to-day
transactions in the ordinary course of business where representatives of the
parties may reach a decision, subsequently to be confirmed in writing) and
shall be deemed to have been given when delivered personally, sent by Federal
Express or other overnight courier service, or mailed by first-class,
registered or certified mail, postage prepaid, addressed (a) if to HMCA,
Dynamic or Fonar, at 0 Xxxxxxxxx Xxxxxx Xxxxx, Xxxxxxxx, Xxx Xxxx 00000; or at
such other address or addresses as HMCA and Dynamic shall have furnished to the
Buyer in writing, or (b) if to the Buyer, at 000 Xx. Xxxxxxxx Xxxxxx,
Xxxxxxxxx, Xxx Xxxx 00000, Attention: Xxxxxx Xxxxxxxx, President, or at such
other address as the Buyer shall have furnished to HMCA and Dynamic in writing.
19. Publicity; Confidentiality. No party to this Agreement shall directly
or indirectly make or cause to be made any public announcements or issue any
notices in any form with respect to the terms and conditions of this Agreement
without the consent in writing of the other parties not to be unreasonably
withheld; provided, however, that: (a) the Buyer shall be permitted to make or
cause to be made any announcement or issue any notice necessary, in the Buyer's
reasonable judgment, to operate the Physical Therapy Management Business; and
(b) Fonar and the Sellers shall be permitted to make or cause to be made any
announcement or issue any notice necessary, in Fonar's counsel's reasonable
judgment, to comply with applicable laws, including applicable securities laws.
20. Assignment. This Agreement may not be assigned by any of the parties
without the express written consent of the other parties hereto.
Notwithstanding the foregoing, any agreement or instrument delivered pursuant
to this Agreement may be assignable to the extent expressly provided therein.
21. Employee Matters. The Buyer may, but shall not be required to, offer
employment to employees employed by the Sellers for the Physical Therapy
Management Business on such terms as the Buyer in its sole discretion deems
appropriate. Sellers shall release any such employees from any and all
obligations of such employees to Sellers pursuant to any confidentiality
agreement (other than with respect to confidential information not related to
the Physical Therapy Management Business), non-competition agreement or similar
agreement that would prohibit or restrict such employees from being employed by
or otherwise providing services to the Buyer. The Buyer shall not assume or be
responsible in any way for the obligations, liabilities or responsibilities (i)
of any employee benefit plan or similar plan of any Seller, (ii) of any Seller,
any affiliate of any Seller or any fiduciary under, arising from, or with
respect to any employee benefit plan or similar plan of any Seller, or (iii) to
any of any Seller's officers, directors, employees and agents, arising from or
related to the transactions contemplated by this Agreement, including, without
limitation, obligations, liabilities or responsibilities under the WARN Act or
for accrued vacation time, severance or other benefits. The Buyer shall not be
deemed to be a successor employer with respect to the employment of any
employee of any Seller or with respect to any of any Seller's employee benefit
plans or similar plans.
22. Miscellaneous. This Agreement, together with the Exhibits hereto,
embodies the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof, and shall be binding upon and inure to
the benefit of and be enforceable by the successors and permitted assigns of
such parties. This Agreement may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against whom enforcement
of such change, waiver, discharge or termination is sought. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law. The headings of this Agreement are for reference only, and shall not
limit or otherwise affect any of the terms or provisions hereof. This
Agreement may be executed in several counterparts and may be executed by the
respective parties hereto on separate counterparts, each of which shall be an
original but all of which together shall constitute one and the same
instrument. This Agreement shall be construed in accordance with and governed
by the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in the manner legally binding upon them as of the
date first above written.
HEALTH MANAGEMENT CORPORATION OF AMERICA
By: /s/Xxxx Xxxxxxx, Managing Director
DYNAMIC HEALTHCARE MANAGEMENT, INC.
By: /s/Xxxx Xxxxxxx, Managing Director
FONAR CORPORATION
By: /s/Xxxx Xxxxxxx, Vice President of Marketing
HEALTH PLUS MANAGEMENT SERVICES, L.L.C.
By: /s/Xxxxxx Xxxxxxxx
Xxxxxx Xxxxxxxx, President
EXHIBIT A
Schedule of Assets to Be Sold
Omitted
EXHIBIT B
Form of Promissory Note
$6,600,000 July 28, 2005
Health Plus Management Services, L.L.C. (the "Maker"), for value received,
hereby promises to pay to the order of Health Management Corporation of America
(the "Payee"), at its office located at 0 Xxxxxxxxx Xxxxxx Xxxxx, Xxxxxxxx, Xxx
Xxxx 00000, the principal sum of Six Million Six Hundred Thousand ($6,600,000)
Dollars, with interest on the outstanding principal balance, in 120 consecutive
monthly installments. The first 12 installments shall consist only of interest
on unpaid principal, and the remaining installments shall consist of 108 equal
installments of principal and interest in the amount of $76,014 each. The
first installment hereunder shall be due on August 28, 2005 and installments
thereafter shall be payable on the 28th day of each month, up to and including
July 28, 2015. This Note shall bear interest from the date hereof, at a rate
equal to five percent (5%) per annum.
All payments shall be made in lawful money of the United States of
America. This Note may be prepaid in full at any time, or in part from time to
time, without penalty or premium, but with interest accrued on all outstanding
principal to the date of such payment. All payments on this Note shall be
applied first to accrued but unpaid interest and then to the outstanding
principal balance hereof.
If any installment of this Note becomes due and payable on a Saturday,
Sunday, or public or other banking holiday under the laws of the State of New
York, the maturity thereof shall be extended to the next succeeding business
day, and interest shall be payable thereon at the rate herein specified during
such extension.
Except as otherwise provided herein, the Maker waives presentment, demand,
demand for payment, protest, notice of dishonor or notice of any kind in
connection with this Note.
This Note has been issued pursuant to an Asset Purchase Agreement dated
the date hereof (the "Agreement") and is subject to the right of the Maker to
offset and deduct certain claims as provided therein. The payment of this Note
is secured by a Security Agreement of even date herewith between the Maker and
the Payee (the "Security Agreement"). In addition, under certain circumstances
as provided in the Agreement, the Maker is entitled to a prepayment of all or
part of this Note. This Note is non-negotiable and may not be assigned without
the prior written consent of the Maker.
The occurrence of any one or more of the following shall constitute an
Event of Default under this Note.
(1) The Maker shall fail to make any payment hereunder or under any other
Note payable by the Maker under the Agreement when due and such failure shall
continue for a period of ten (10) days following written notice of default;
(2) A default or event of default shall occur under the Security
Agreement, which is not cured within any applicable grace or cure period
provided therein.
(3) The Maker shall cease doing business as a going concern, make an
assignment for the benefit of creditors, admit in writing its inability to pay
its debts as they become due, file a petition commencing a voluntary case under
any chapter of Title 11 of the United States Code (the "Bankruptcy Code"), be
adjudicated an insolvent, file a petition seeking for itself any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
arrangement under any present or future statute, law, rule or regulation or file
an answer admitting the material allegations of a petition filed against it in
any such proceeding, consent to the filing of such a petition or acquiesce in
the appointment of a trustee, receiver or liquidator of it or of all or any part
of its assets or properties, or take any action looking to its dissolution or
liquidation; or
(4) An order for relief against the Maker shall have been entered under
any chapter of the Bankruptcy Code or a decree or order by a court having
jurisdiction in the premises shall have been entered approving as properly
filed a petition seeking reorganization, arrangement, readjustment,
liquidation, dissolution or similar relief against the Maker under any present
or future statute, law, rule or regulation, or any trustee, receiver or
liquidator of the Maker or of all or any part of its assets and properties
shall be appointed; or if there is commenced against the Maker any proceeding
seeking any such relief or the appointment of any such trustee, receiver or
liquidator which remains undismissed for a period of sixty (60) days.
Upon the occurrence of an Event of Default, at the option of the Payee,
this Note shall become immediately due and payable together with all accrued
and unpaid interest hereunder up through the date of payment, upon the giving
of notice by the Payee.
In the case of the occurrence of an Event of Default, the Maker shall pay
to the Payee all reasonable costs and expenses (including reasonable attorneys
fees) incurred in connection with the enforcement and collection of this Note,
provided, however, that if the Event of Default shall arise from any improper
offset or deduction made by the Maker from any amounts due hereunder in good
faith pursuant to the Agreement, no such expenses or attorneys fees shall be
payable by Maker.
No delay on the part of the Payee in exercising any of its options, powers
or rights, or partial or single exercise thereof, shall constitute a waiver
thereof. No waiver of any of its rights hereunder shall be deemed to be made
by the Payee unless the same shall be in writing, duly signed on behalf of the
Payee, and each such waiver, if any, shall apply only with respect to the
specific instance involved, and shall in no way impair the rights of the Payee
or the obligations of the Maker to the Payee in any other respect at any other
time. This Note may be modified or amended only in a writing duly executed by
Payee and Maker.
This Note shall be binding upon the Maker and the Payee and their
respective successors and permitted assigns.
This Note shall be governed and construed in accordance with the laws of
the State of New York without reference to the conflict of laws provisions
thereof.
The courts of record of New York State or of the United States District
Courts for the Southern and Eastern Districts of New York shall have exclusive
jurisdiction with respect to any legal action or proceeding relating to or
arising under this Note.
HEALTH PLUS MANAGEMENT SERVICES, L.L.C.
By: ___________________________________
Xxxxxx Xxxxxxxx, President
EXHIBIT C
Xxxx of Sale
Xxxx of Sale, dated July 28, 2005, by Health Management Corporation of
America, a Delaware corporation and Dynamic Healthcare Management, Inc., a New
York corporation (the "Sellers"), each having an office address at 0 Xxxxxxxxx
Xxxxxx Xxxxx, Xxxxxxxx, Xxx Xxxx 00000 and Health Plus Management Services,
L.L.C., a New York limited liability company (the "Buyer") having its principal
place of business in Hempstead, New York, relating to the Assets being sold,
assigned, conveyed and transferred pursuant to the Asset Purchase Agreement
among the Sellers, the Buyer and Fonar Corporation of even date herewith (the
"Asset Purchase Agreement").
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, and pursuant to the Asset Purchase Agreement, the
Sellers do hereby sell, grant, transfer, assign, convey and deliver to Buyer,
its successors and assigns all of Seller's right, title and interest and in and
to all of the Assets. Sellers, jointly and severally, hereby covenant with
Buyer, its successors and assigns, that Sellers are the lawful owner of the
Assets free and clear of all liens, mortgages, security interests, leases,
contracts and other claims or encumbrances other than those disclosed in the
Asset Purchase Agreement and the Exhibits thereto, and warrant that Sellers
will defend the same against the lawful claims and demands of all persons
whomsoever, other than those so disclosed or claiming through or under Buyer.
This Xxxx of Sale shall be subject to, governed by, and construed in
accordance with the laws of the State of New York. Capitalized terms set forth
herein and not defined herein shall have the meanings set forth for such terms
in the Asset Purchase Agreement. If any conflict exists between the terms of
this Xxxx of Sale and the terms of the Asset Purchase Agreement, the terms of
the Asset Purchase Agreement shall govern and control.
HEALTH MANAGEMENT CORPORATION OF AMERICA
By:______________________________
DYNAMIC HEALTHCARE MANAGEMENT, INC.
By: _______________________________
EXHIBIT D
Assumed Liabilities
On the Closing Date, the Buyer shall assume and agree to undertake to pay,
perform and discharge as and when due all obligations, responsibilities and
liabilities incurred on and after the Closing Date in connection with the
performance by the Buyer of the Assigned Agreements that, by the terms of each
such Assigned Agreement, arise after Closing, relate to periods following the
Closing and are to be observed, paid, discharged, or performed, as the case may
be, in each case at any time after the Closing Date.
The term Assumed Liabilities shall include any and all obligations of
Buyer with respect to the items listed on Exhibits D-2 and D-3 as provided in
the Assignment and Assumption Agreement attached as Exhibit G.
EXHIBIT D-2
NONASSIGNABLE AGREEMENTS
OMITTED
EXHIBIT D-3
VENDOR RELATIONSHIPS; MISSING AGREEMENTS
OMITTED
EXHIBIT E
Security Agreement
SECURITY AGREEMENT dated as of July 28, 2005 between Health Plus
Management Services, L.L.C. (hereinafter sometimes referred to as the "Buyer")
and Health Management Corporation of America (the "Secured Party"), having its
principal office at 0 Xxxxxxxxx Xxxxxx Xxxxx, Xxxxxxxx, Xxx Xxxx 00000.
WITNESSETH:
WHEREAS, the Secured Party has sold certain assets to the Buyer (the
"Assets") pursuant to an Asset Purchase Agreement (the "Agreement") dated the
date hereof;
WHEREAS, in order to induce the Secured Party to enter into the Agreement
and to accept the consideration provided therein, the Buyer has agreed to grant
the Secured Party a security interest in substantially all of the assets of the
Buyer to secure the payment of the Note issued by the Buyer to the Secured
Party in consideration for the Assets (the obligations of the Buyer under the
Note are hereinafter referred to as the "Obligations");
NOW THEREFORE, in consideration of the premises, representations,
covenants and agreements contained herein, the parties hereto agree as follows:
1. Security Interest. To secure the payment and performance of the
Obligations, the Buyer hereby grants and assigns to the Secured Party a
continuing security interest in the Collateral. As used herein the term
"Collateral" shall mean all personal property assets of the Buyer acquired or
arising before, at or after the Closing, whether tangible or intangible,
including, without limitation, all cash, accounts receivable, claims, contract
rights, corporate names, intellectual property, furniture, fixtures, office
equipment, office supplies, medical equipment, medical instruments and medical
supplies, all substitutes and accessories thereto, and the proceeds thereof.
2. Representations, Warranties and Covenants. The Buyer represents,
warrants and covenants as follows:
a. The Buyer is the owner of each item of the Collateral, free and clear
of any liens, security interests, mortgages, pledges or other encumbrances
except for "Permitted Encumbrances" (as hereinafter defined), and the Buyer
shall keep the Collateral free and clear of any liens, security interests,
mortgages, pledges or other encumbrances other than Permitted Encumbrances or
those in favor of the Secured Party. For the purposes hereof, the term
Permitted Encumbrances shall mean (i) any lien, security interest, mortgage,
pledge or other encumbrance existing at the time of the Closing or in favor of
an affiliate of the Secured Party. (Nothing contained herein shall limit any
remedy or recourse any party may have against the Secured Party with respect to
the existence of any such lien, security interest, mortgage, pledge or other
encumbrance), (ii) liens for taxes or other governmental assessments which are
not yet due or which are being contested in good faith by appropriate
proceedings, (iii) workmen's liens, materialmen's liens and the like which may
arise by statute or operation of law, provided that the Buyer shall pay any
obligations secured thereby when due, or contest the same by appropriate
proceedings and (iv) liens, security interests, conditional sales or title
retention agreements securing the purchase price of any items of Collateral.
b. The principal executive office and place of business of the Buyer is
located in Nassau County, New York.
c. The Buyer will not move any tangible assets included as part of the
Collateral without giving ten days prior written notice thereof to the Secured
Party and will not move any Collateral outside of the State of New York or the
County in which it is located without first executing and delivering to the
Secured Party such financing statements as are necessary in order to enable to
Secured Party to perfect its security interest hereunder in the locality where
such Collateral is to be moved, which financing statements must be delivered
at least ten (10) days prior to moving the Collateral.
d. The Buyer will not use the Collateral in violation of any applicable
law, ordinance or regulation and will use its best efforts not to impair the
value of any Collateral.
e. The Buyer will promptly pay any taxes and assessments levied against
the Collateral, unless contested in good faith by appropriate proceedings.
f. The Buyer will execute and deliver to the Secured Party such financing
statements and other instruments and documents as the Secured Party may from
time to time request which may be necessary or reasonably appropriate to
perfect the security interest of the Secured Party granted hereby.
g. Nothing contained herein shall prevent the Buyer from liquidating any
accounts receivable included in the Collateral and using the proceeds thereof
or any cash on hand in any manner it may deem necessary or appropriate in the
conduct of its business and affairs, in the ordinary course of Buyer's business
(which shall include capital expenditures to upgrade and/or expand Buyer's
business and compensation to Buyer's personnel including Xxxxxx Xxxxxxxx and
Xxxxxx Xxxxx), as long as no Event of Default as hereinafter described, has
occurred and remains uncured.
h. The Buyer shall not sell, assign, transfer or otherwise dispose of any
of the Collateral other than in the ordinary course of its business; in this
regard the Buyer may not assign accounts receivable to a factor or for the
purpose of collection to another third party without the prior written consent
of the Secured Party and provided that in any such case the right to receive
any payments from such factor or other third party and the proceeds thereof
shall be subject to the security interest of the Secured Party hereunder.
i. The Buyer shall insure the tangible assets included in the Collateral
against fire, theft and other casualty in such amounts and to such extent as
The Buyer shall from time to time deem reasonable and appropriate. Such
policy(ies) shall name the Secured Party as additional insured, as its
interests may appear, and shall provide for thirty (30) days prior written
notice to the Secured Party of any cancellation. The Buyer shall provide the
Secured Party with certificates evidencing such insurance or copies of such
policies upon request.
4. Default Under Security Agreement. The Buyer shall be in default under
this Security Agreement if it shall default in the performance of any of its
obligations hereunder and such default is not cured within thirty (30) days of
the giving of written notice thereof by the Secured Party to the Buyer.
5. Rights and Remedies. In the event any event of default shall occur
under the Obligations, or the Buyer shall be in default under this Security
Agreement then, unless any such default is cured within any applicable grace or
cure period, an Event of Default hereunder shall have occurred and the Secured
Party shall have and may exercise the rights and remedies of Secured Party
provided under the Uniform Commercial Code.
6. Governing Law. The Agreement shall be construed and enforced in
accordance with the laws of the State of New York.
7. Miscellaneous. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. This Agreement shall not be assignable by any party without the prior
written consent of the other parties hereto. The Secured Party may assign
their rights and benefits under this Agreement to any assignee or holder of the
indebtedness or obligations secured hereby. Any termination, waiver or
modification of the terms and provisions hereof shall be in writing and be
approved by the Buyer and the Secured Party. Any notice required or permitted
hereunder shall be deemed given if in writing and delivered personally or sent
by certified or registered mail, postage prepaid, addressed to the party to
which it is given at the address for such party specified at the outset hereof.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement in the manner legally binding upon them as of the date first above
written.
HEALTH PLUS MANAGEMENT SERVICES, L.L.C.
By: _______________________________
Xxxxxx Xxxxxxxx, President
HEALTH MANAGEMENT CORPORATION OF AMERICA
By: _______________________________
EXHIBIT F-1
TERMINATION OF EMPLOYMENT AGREEMENT
Agreement made this 28th day of July, 2005 by and between Xxxxxx Xxxxxxxx
(the "Employee"), Health Management Corporation of America (the "Employer") and
Fonar Corporation (the "Guarantor").
W I T N E S S E T H
WHEREAS, the Employer and the Employee entered into an employment
agreement dated August 20, 1998 (the "Employment Agreement"), and pursuant to
paragraph 18 of the Employment Agreement, the Guarantor guaranteed the
obligations of the Employer under the Employment Agreement;
WHEREAS, the term of the Employment Agreement is ten years;
WHEREAS, HMCA (along with its affiliate Dynamic Healthcare Management,
Inc.) is selling to Health Plus Management Services, LLC, a New York limited
liability company of which the Employee is a member, the portion of its
business relating to the management of physical therapy and rehabilitation
facilities in accordance with and subject to the terms and conditions of an
Asset Purchase Agreement being executed and delivered concurrently herewith
(the "Asset Purchase Agreement"); and
WHEREAS, in connection with and pursuant to the terms of the Asset
Purchase Agreement, the parties hereto desire to terminate the Employment
Agreement for the consideration and on the terms and conditions provided
herein;
NOW THEREFORE, in consideration of the premises, covenants, terms and
conditions set forth herein, the parties hereto agree as follows:
1. Termination of Employment Agreement. The Employment Agreement is
terminated effective as of the date hereof and neither the Employer, Employee
nor Guarantor shall have any further rights or obligations thereunder
(including but not limited to any and all Employer and/or Guarantor rights with
respect to non-competition and confidentiality (other than rights with respect
to confidential information not related to the Physical Therapy Management
Business as such term is defined in the Asset Purchase Agreement)), except for
any compensation, benefits or expense reimbursement to the Employee (including
any bonuses) thereunder accrued but unpaid for periods prior to the effective
date.
2. Bonus. In consideration for the termination of the Employment
Agreement the Guarantor shall issue to the Employee and deliver to the Employee
on the date hereof shares of its common stock having a value at the time of
delivery, determined in accordance with Section 8 of this Agreement, of
$800,000 as a termination bonus (the "Bonus Shares").
3. Collection of Accounts Receivable. For a period of up to three (3)
years following the date hereof, the Employee will use commercially reasonable
efforts to assist the Employer in the collection of the presently outstanding
accounts receivable of Alliance Physical Medicine & Rehabilitation, P.C.
("Alliance"), which formerly conducted a physical therapy and rehabilitation
practice in Hempstead, New York and Bellmore Medical Practice, P.C.
("Bellmore"), which formerly conducted physical therapy and rehabilitation
practices in Xxxxxxxx, Xxx Xxxx xxx Xxxx Xxxx, Xxx Xxxx. Both Alliance and
Bellmore are New York professional corporations managed by HMCA. Such
collection efforts shall be consistent with the past practice of such
professional corporations except to the extent, if any, curtailed by the
Employer and provided that no litigation shall be commenced in the collection
of such accounts receivable without the consent of the Employer. The Employee
shall not be required to incur any legal expenses hereunder but will cooperate
with counsel selected by the Employer in the event of any litigation in
connection with the collection of such accounts receivable. In no event shall
the aggregate liability of the Employee under this Section 3 exceed $200,000,
which shall represent an absolute cap on any such liability. The Employer and
the Guarantor, jointly and severally, shall indemnify and hold harmless the
Employee from and against any losses, claims, damages or liabilities to which
he may become subject as a result of the performance of his obligations under
this Section 3, insofar as such losses, claims, damages or liabilities do not
arise out of the gross negligence or willful misconduct of the Employee.
4. Compensation for Services. For undertaking the collection
responsibilities referred to in Section 3 of this Agreement, the Employee will
receive on the date hereof shares of Guarantor's common stock having a value at
the time of delivery, determined in accordance with Section 8 of this
Agreement, of $200,000 (the "Services Shares").
5. Validity, Due Authorization and Registration of Bonus Shares and
Services Shares. All of the Bonus Shares and Services Shares to be issued
hereunder have been duly authorized and, when issued in accordance with this
Agreement, will be validly issued, fully-paid and nonassessable shares of the
Guarantor's common stock. The Bonus Shares and Service Shares will, when
issued in accordance with this Agreement, be duly registered on an effective
registration statement on an appropriate Form under the Securities Act of 1933,
as amended, listed for trading on the NASDAQ SmallCap Market, and may be sold
by the Employee to the public at any time without limitation or restriction
(except to the extent the Employee agrees to limit the volume of his selling as
provided in Section 6 of this Agreement) and without any further registration
or filing with, or notice to, the Securities and Exchange Commission or any
state securities administrator and without any obligation on the part of the
Employee or any broker to deliver a prospectus. The certificates representing
the Bonus Shares and Service Shares will contain no restrictive legends. The
Employer and the Guarantor, jointly and severally, shall indemnify and hold
harmless the Employee from and against any losses, claims, damages or
liabilities to which he may become subject under the Securities Act of 1933 or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any registration
statement covering the Bonus Shares and Service Shares or an omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, not misleading, or arise out of or
are based upon an allegation or determination that the Employee was not
entitled to rely upon such registration statement in making resales of the
Bonus Shares or Service Shares or that, in making such resales, the Employee
was an underwriter; and the Company the Guarantor hereby agree to reimburse the
Employee for all reasonable legal and other expenses incurred by him in
connection with investigating or defending any such action or claim as and when
such expenses are incurred.
6. Contractual Limitations on Resale. The Employee shall limit the number
of Bonus Shares and Service Shares he publicly sells in a single trading day to
the greater of (i) 10,000 shares, (ii) 10% of the average daily number of
shares of the Guarantor's common stock traded on the NASDAQ System over the
immediately preceding 5 trading days, or (iii) 10% of the number of shares of
the Guarantor's common stock traded on the NASDAQ System on the day he sells.
In the event that the Employee privately sells, assigns, or gifts Bonus Shares
or Service Shares, he shall require the recipients to agree to be bound by the
volume limitations of this Section such that the number of Bonus Shares and
Service Shares sold by the Employee and his transferees in the aggregate do not
exceed the volume limitations of this Section 6.
7. Price Protection. It is intended by the parties that the net proceeds
to be received by the Employee from the sale of the Bonus Shares and Service
Shares, after the deduction of commissions and selling fees, shall be
$1,000,000 in the aggregate (the "Guaranteed Amount"). If the net proceeds
shall be less than $1,000,000, then the Guarantor shall have the option to
continue to issue additional shares having a value equal to the initial and any
subsequent shortfall or paying the shortfall in cash. Any shortfall shall be
paid by Guarantor to the Employee within 30 days following a written demand by
the Employee. Shares which are sold privately or otherwise privately assigned,
transferred or gifted by the Employee are not entitled to the price protection
benefit of this Section, and the value of such shares, calculated as of the
date of their issuance by the Guarantor, shall be deducted from the Guaranteed
Amount. So long as the Employee has not been prohibited from reselling Bonus
Shares and Service Shares as a result of the volume limitations set forth in
Section 6 of this Agreement and so long as the registration statement covering
the Bonus Shares and Service Shares has remained effective and available for
the resale of the Bonus Shares and Service Shares, the value of any shares held
by the Employee for over one year, also valued as of the date of their
issuances, shall also be deducted from the Guaranteed Amount, as being assumed
that after that time, the Employee has decided to hold the shares for
investment and assume the risk inherent therein.
8. Valuation of Shares for Purposes of Issuance. Solely for the purpose
of determining the number of shares to be issued initially hereunder or to
cover any deficiency where the aggregate net proceeds of the shares sold is
less the Guaranteed Amount, the number of shares to be issued shall be
calculated based on the average of the closing prices of Fonar Corporation's
common stock on the NASDAQ SmallCap Market (or any subsequent relevant exchange
or trading platform) for the five trading days preceding the third day prior
to the day of the anticipated delivery of the stock to the Employee.
Alternatively, the Guarantor and the Employee may jointly elect to use the
value of the shares on the day they are ordered if there appears to be an
upward or downward trend in the price of the Guarantor's common stock.
9. Miscellaneous. This Agreement shall inure to the benefit of the
parties hereto and their respective successors, heirs and permitted assigns,
but may not be assigned by any party hereto without the prior written consent
of the others. This Agreement shall be governed by the laws of the State of
New York without regard to the conflict of laws provisions thereof. This
Agreement contains the entire understanding and agreement of the parties hereto
with respect to the subject matter hereof and may not be waived, amended or
terminated unless in writing executed by the parties hereto. The Courts of the
State of New York and Federal Courts sitting in the State of New York shall
have exclusive jurisdiction over any litigation arising from or relating to the
subject matter of this Agreement. The headings herein are for convenience of
reference only and shall not affect the interpretation of any provision hereof.
HEALTH MANAGEMENT
CORPORATION OF AMERICA
By: _________________________________
Name:
Title:
FONAR CORPORATION
By: _________________________________
Name:
Title:
_________________________________
XXXXXX XXXXXXXX
EXHIBIT F-2
TERMINATION OF EMPLOYMENT AGREEMENT
Agreement made this 28th day of July, 2005 by and between Xxxxxx Xxxxx
(the "Employee"), Health Management Corporation of America (the "Employer") and
Fonar Corporation (the "Guarantor").
W I T N E S S E T H
WHEREAS, the Employer and the Employee entered into an employment
agreement dated August 20, 1998 (the "Employment Agreement"), and pursuant to
paragraph 18 of the Employment Agreement, the Guarantor guaranteed the
obligations of the Employer under the Employment Agreement;
WHEREAS, the term of the Employment Agreement is ten years;
WHEREAS, HMCA (along with its affiliate Dynamic Healthcare Management,
Inc.) is selling to Health Plus Management Services, LLC, a New York limited
liability company of which the Employee is a member, the portion of its
business relating to the management of physical therapy and rehabilitation
facilities in accordance with and subject to the terms and conditions of an
Asset Purchase Agreement being executed and delivered concurrently herewith
(the "Asset Purchase Agreement"); and
WHEREAS, in connection with and pursuant to the terms of the Asset
Purchase Agreement, the parties hereto desire to terminate the Employment
Agreement for the consideration and on the terms and conditions provided
herein;
NOW THEREFORE, in consideration of the premises, covenants, terms and
conditions set forth herein, the parties hereto agree as follows:
1. Termination of Employment Agreement. The Employment Agreement is
terminated effective as of the date hereof and neither the Employer, Employee
nor Guarantor shall have any further rights or obligations thereunder
(including but not limited to any and all Employer and/or Guarantor rights with
respect to non-competition and confidentiality (other than rights with respect
to confidential information not related to the Physical Therapy Management
Business as such term is defined in the Asset Purchase Agreement)), except for
any compensation, benefits or expense reimbursement to the Employee (including
any bonuses) thereunder accrued but unpaid for periods prior to the effective
date.
2. Bonus. In consideration for the termination of the Employment
Agreement the Guarantor shall issue to the Employee and deliver to the Employee
on the date hereof shares of its common stock having a value at the time of
delivery, determined in accordance with Section 8 of this Agreement, of
$800,000 as a termination bonus (the "Bonus Shares").
3. Collection of Accounts Receivable. For a period of up to three (3)
years following the date hereof, the Employee will use commercially reasonable
efforts to assist the Employer in the collection of the presently outstanding
accounts receivable of Alliance Physical Medicine & Rehabilitation, P.C.
("Alliance"), which formerly conducted a physical therapy and rehabilitation
practice in Hempstead, New York and Bellmore Medical Practice, P.C.
("Bellmore"), which formerly conducted physical therapy and rehabilitation
practices in Xxxxxxxx, Xxx Xxxx xxx Xxxx Xxxx, Xxx Xxxx. Both Alliance and
Bellmore are New York professional corporations managed by HMCA. Such
collection efforts shall be consistent with the past practice of such
professional corporations except to the extent, if any, curtailed by the
Employer and provided that no litigation shall be commenced in the collection
of such accounts receivable without the consent of the Employer. The Employee
shall not be required to incur any legal expenses hereunder but will cooperate
with counsel selected by the Employer in the event of any litigation in
connection with the collection of such accounts receivable. In no event shall
the aggregate liability of the Employee under this Section 3 exceed $200,000,
which shall represent an absolute cap on any such liability. The Employer and
the Guarantor, jointly and severally, shall indemnify and hold harmless the
Employee from and against any losses, claims, damages or liabilities to which
he may become subject as a result of the performance of his obligations under
this Section 3, insofar as such losses, claims, damages or liabilities do not
arise out of the gross negligence or willful misconduct of the Employee.
4. Compensation for Services. For undertaking the collection
responsibilities referred to in Section 3 of this Agreement, the Employee will
receive on the date hereof shares of Guarantor's common stock having a value at
the time of delivery, determined in accordance with Section 8 of this
Agreement, of $200,000 (the "Services Shares").
5. Validity, Due Authorization and Registration of Bonus Shares and
Services Shares. All of the Bonus Shares and Services Shares to be issued
hereunder have been duly authorized and, when issued in accordance with this
Agreement, will be validly issued, fully-paid and nonassessable shares of the
Guarantor's common stock. The Bonus Shares and Service Shares will, when
issued in accordance with this Agreement, be duly registered on an effective
registration statement on an appropriate Form under the Securities Act of 1933,
as amended, listed for trading on the NASDAQ SmallCap Market, and may be sold
by the Employee to the public at any time without limitation or restriction
(except to the extent the Employee agrees to limit the volume of his selling as
provided in Section 6 of this Agreement) and without any further registration
or filing with, or notice to, the Securities and Exchange Commission or any
state securities administrator and without any obligation on the part of the
Employee or any broker to deliver a prospectus. The certificates representing
the Bonus Shares and Service Shares will contain no restrictive legends. The
Employer and the Guarantor, jointly and severally, shall indemnify and hold
harmless the Employee from and against any losses, claims, damages or
liabilities to which he may become subject under the Securities Act of 1933 or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any registration
statement covering the Bonus Shares and Service Shares or an omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, not misleading, or arise out of or
are based upon an allegation or determination that the Employee was not
entitled to rely upon such registration statement in making resales of the
Bonus Shares or Service Shares or that, in making such resales, the Employee
was an underwriter; and the Company the Guarantor hereby agree to reimburse the
Employee for all reasonable legal and other expenses incurred by him in
connection with investigating or defending any such action or claim as and when
such expenses are incurred.
6. Contractual Limitations on Resale. The Employee shall limit the number
of Bonus Shares and Service Shares he publicly sells in a single trading day to
the greater of (i) 10,000 shares, (ii) 10% of the average daily number of
shares of the Guarantor's common stock traded on the NASDAQ System over the
immediately preceding 5 trading days, or (iii) 10% of the number of shares of
the Guarantor's common stock traded on the NASDAQ System on the day he sells.
In the event that the Employee privately sells, assigns, or gifts Bonus Shares
or Service Shares, he shall require the recipients to agree to be bound by the
volume limitations of this Section such that the number of Bonus Shares and
Service Shares sold by the Employee and his transferees in the aggregate do not
exceed the volume limitations of this Section 6.
7. Price Protection. It is intended by the parties that the net proceeds
to be received by the Employee from the sale of the Bonus Shares and Service
Shares, after the deduction of commissions and selling fees, shall be
$1,000,000 in the aggregate (the "Guaranteed Amount"). If the net proceeds
shall be less than $1,000,000, then the Guarantor shall have the option to
continue to issue additional shares having a value equal to the initial and any
subsequent shortfall or paying the shortfall in cash. Any shortfall shall be
paid by Guarantor to the Employee within 30 days following a written demand by
the Employee. Shares which are sold privately or otherwise privately assigned,
transferred or gifted by the Employee are not entitled to the price protection
benefit of this Section, and the value of such shares, calculated as of the
date of their issuance by the Guarantor, shall be deducted from the Guaranteed
Amount. So long as the Employee has not been prohibited from reselling Bonus
Shares and Service Shares as a result of the volume limitations set forth in
Section 6 of this Agreement and so long as the registration statement covering
the Bonus Shares and Service Shares has remained effective and available for
the resale of the Bonus Shares and Service Shares, the value of any shares held
by the Employee for over one year, also valued as of the date of their
issuances, shall also be deducted from the Guaranteed Amount, as being assumed
that after that time, the Employee has decided to hold the shares for
investment and assume the risk inherent therein.
8. Valuation of Shares for Purposes of Issuance. Solely for the purpose
of determining the number of shares to be issued initially hereunder or to
cover any deficiency where the aggregate net proceeds of the shares sold is
less the Guaranteed Amount, the number of shares to be issued shall be
calculated based on the average of the closing prices of Fonar Corporation's
common stock on the NASDAQ SmallCap Market (or any subsequent relevant exchange
or trading platform) for the five trading days preceding the third day prior
to the day of the anticipated delivery of the stock to the Employee.
Alternatively, the Guarantor and the Employee may jointly elect to use the
value of the shares on the day they are ordered if there appears to be an
upward or downward trend in the price of the Guarantor's common stock.
9. Miscellaneous. This Agreement shall inure to the benefit of the
parties hereto and their respective successors, heirs and permitted assigns,
but may not be assigned by any party hereto without the prior written consent
of the others. This Agreement shall be governed by the laws of the State of
New York without regard to the conflict of laws provisions thereof. This
Agreement contains the entire understanding and agreement of the parties hereto
with respect to the subject matter hereof and may not be waived, amended or
terminated unless in writing executed by the parties hereto. The Courts of the
State of New York and Federal Courts sitting in the State of New York shall
have exclusive jurisdiction over any litigation arising from or relating to the
subject matter of this Agreement. The headings herein are for convenience of
reference only and shall not affect the interpretation of any provision hereof.
HEALTH MANAGEMENT
CORPORATION OF AMERICA
By: _________________________________
Name:
Title:
FONAR CORPORATION
By: _________________________________
Name:
Title:
_____________________________________
XXXXXX XXXXX
EXHIBIT G
Assignment and Assumption Agreemenc
ASSIGNMENT and ASSUMPTION AGREEMENT dated this 28th day of July, 2005 by
and among Health Management Corporation of America and Dynamic Healthcare
Management, Inc., as assignors ("the Assignors"), and Health Plus Management
Services, L.L.C. ("Assignee").
WITNESSETH:
WHEREAS, the Assignors, the Assignee and Fonar Corporation are parties to
an Asset Purchase Agreement of even date herewith (the "Asset Purchase
Agreement") pursuant to which the Assignors sold the Assets, as defined
therein, to the Assignee; and
WHEREAS, pursuant to the terms of the Asset Purchase Agreement, the
Assignors have agreed to assign certain agreements, contracts, commitments and
other rights included among the Assets, as of the date hereof, to the Assignee,
and the Assignee has agreed to assume certain liabilities and obligations
thereunder, for periods following the Closing, as provided in the Asset
Purchase Agreement.
NOW, THEREFORE, in consideration of the premises, covenants and agreements
contained herein, the parties hereto agree as follows:
1. Assigned Agreements. The Assignors hereby assign, transfer and convey
to the Assignee all of their rights, title and interest in and to the Assigned
Agreements, as defined in Exhibit A to the Asset Purchase Agreement, and the
Buyer hereby assumes and agrees to pay, perform and discharge all of the
obligations and liabilities under the Assigned Agreements after the Closing.
Nothing in this Agreement shall be deemed to cause any obligations or
liabilities of Assignors to be assumed by the Assignee if they are not Assumed
Liabilities.
2. Non-Assignable Agreements. With respect to the Non-Assignable
Agreements listed on Exhibit D-2, the Assignors will permit the Assignee to
enjoy all of the rights and benefits under those agreements that the Assignors
would otherwise be entitled to for the term thereof, in accordance with the
terms thereof, including any right to purchase any equipment covered by said
agreements at the Assignee's expense, and the Assignee, as long as such rights
and benefits are provided or made available to Assignee shall comply with the
terms of such agreements and shall pay, perform and discharge all of the
post-Closing obligations and liabilities under such agreements, or reimburse
the Assignors for doing so (upon receipt of evidence by the Assignors
supporting such reimbursement reasonably acceptable to Assignee). Any such
agreement and the agreement of the Assignors and Assignee hereunder with
respect thereto may be terminated only in accordance with the terms of said
Non-Assignable Agreement, except that the Assignee also shall have the right to
terminate its agreement under this paragraph with respect to a Non-Assignable
Agreement if the rights and benefits thereunder are no longer made available to
the Assignee for any reason other than the failure of the Assignee to comply
with its obligations under this paragraph.
3. Vendor Relationships; Missing Agreements. With respect to the items
listed in Exhibit D-3, the provisions of Paragraph 2 of this Assignment and
Assumption Agreement shall apply to any agreement referred to in Exhibit D-3
where a copy thereof has been provided to the Assignee or the terms thereof
have been disclosed, as long as the Assignors shall permit or arrange to permit
the Assignee to enjoy all of the rights and benefits under those agreements.
Where there is no agreement or the terms thereof have not been disclosed then
the Assignee shall be responsible for paying for the charges for benefits it
receives, or reimbursing the Assignors for doing so (upon receipt of evidence
by the Assignors supporting such reimbursement reasonably acceptable to
Assignee), but the Assignee may terminate such relationships by giving
reasonable notice to either the Assignors or the provider of benefits.
4. All notices required or permitted under this Agreement shall be in
writing and shall be deemed given as provided in Section 18 of the Asset
Purchase Agreement.
5. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. This
Agreement and the Asset Purchase Agreement constitute the entire agreement
between the parties hereto with respect to the subject matter hereof and may
not be amended, waived or terminated except in a writing signed by all parties
hereto. The headings herein are for convenience of reference only and shall
not affect the interpretation of this Agreement. This Agreement shall be
subject to, governed by, and construed in accordance with, the laws of the
State of New York. Capitalized terms set forth herein and not defined herein
shall have the meanings set forth for such terms in the Asset Purchase
Agreement. If any conflict exists between the terms of this Agreement and the
terms of the Asset Purchase Agreement, the terms of the Asset Purchase
Agreement shall govern and control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in the manner legally binding upon them as of the date
and year first set forth above.
HEALTH PLUS MANAGEMENT
SERVICES, L.L.C.
By: ________________________________
HEALTH MANAGEMENT
CORPORATION OF AMERICA
By: ________________________________
DYNAMIC HEALTHCARE MANAGEMENT, INC.
By: ________________________________
EXHIBIT H
REAL ESTATE LEASES
OMITlTED
EXHIBIT I
PERSONAL PROPERTY
OMITTED
EXHIBIT J
LIENS, ENCUMBRANCES, ETC.
OMITTED
EXHIBIT K
SCHEDULE OF ACCOUNTS AND NOTES RECEIVABLE
OMITTED
EXHIBIT L
INSURANCE POLICIES
OMITTED
EXHIBIT M
CONTRACTS
OMITTED
EXHIBIT N
NAMES, COPYRIGHT, TRADEMARKS, ETC.
NONE
EXHIBIT O
COMPENSATION TO PERSONNEL
OMITTED
EXHIBIT P
RETIREMENT PLANS, ETC.
OMITTED
EXHIBIT Q
EMPLOYEE BENEFIT PLANS
OMITTED
EXHIBIT R
LITIGATION
OMITTED
SCHEDULE 2
OMITTED
