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Exhibit 10.29
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STOCK PURCHASE AGREEMENT
BY AND AMONG
AMERIPATH, INC.,
XXXX XXXXXX, M.D., INC.
AND
XXXX XXXXXX, M.D.
EFFECTIVE AS OF OCTOBER 15, 1996
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TABLE OF CONTENTS
PAGE NO.
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ARTICLE I
PURCHASE OF CAPITAL STOCK
1.1 Purchase and Sale of Capital Stock....................................................................... 1
1.2 The Contingent Note...................................................................................... 4
1.3 Contingent Issuance of AmeriPath Stock................................................................... 9
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND CP&I
2.1 Corporate Organization, Qualification, etc............................................................... 15
2.2 Subsidiaries............................................................................................. 16
2.3 Capital Stock............................................................................................ 16
2.4 Corporate Record Books................................................................................... 16
2.5 Title to Stock........................................................................................... 16
2.6 Options and Rights....................................................................................... 16
2.7 Authorization, Etc....................................................................................... 16
2.8 No Violation............................................................................................. 17
2.9 Financial Statements..................................................................................... 17
2.10 Employees................................................................................................ 18
2.11 Absence of Certain Changes............................................................................... 18
2.12 Contracts................................................................................................ 19
2.13 True and Complete Copies................................................................................. 21
2.14 Title and Related Matters................................................................................ 21
2.15 Litigation............................................................................................... 22
2.16 Tax Matters.............................................................................................. 22
2.17 Compliance with Law and Applicable Government Regulations................................................ 23
2.18 ERISA and Related Matters................................................................................ 24
2.19 Intellectual Property.................................................................................... 25
2.20 Environmental Matters.................................................................................... 26
2.21 Dealings with Affiliates................................................................................. 27
2.22 Banking Arrangements..................................................................................... 27
2.23 Insurance................................................................................................ 27
2.24 Consents................................................................................................. 28
2.25 Investment Representations............................................................................... 28
2.26 Accounts Receivable; Inventories......................................................................... 29
2.27 Brokerage................................................................................................ 30
2.28 Improper and Other Payments.............................................................................. 30
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2.29 Participation in Audits.................................................................................. 30
2.30 Health Care Laws......................................................................................... 30
2.31 Financial Condition at Closing........................................................................... 32
2.32 Disclosure............................................................................................... 32
2.33 Limitation............................................................................................... 32
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
3.1 Corporate Organization, etc.............................................................................. 32
3.2 Subsidiaries............................................................................................. 33
3.3 Authorization, Etc....................................................................................... 33
3.4 No Violation............................................................................................. 33
3.5 Governmental Authorities................................................................................. 33
3.6 Issuance of AmeriPath Stock.............................................................................. 34
3.7 Financial Statements..................................................................................... 34
3.8 Capitalization; Options.................................................................................. 34
3.9 Compliance with Material Laws and Regulations............................................................ 35
3.10 Litigation............................................................................................... 35
3.11 Insurance................................................................................................ 35
3.12 Disclosure............................................................................................... 35
ARTICLE IV
COVENANTS OF THE SELLER
4.1 Regular Course of Business............................................................................... 35
4.2 Amendments............................................................................................... 36
4.3 Capital Changes; Pledges................................................................................. 36
4.4 Dividends................................................................................................ 36
4.5 Capital and Other Expenditures........................................................................... 36
4.6 Cash and Cash Equivalents................................................................................ 36
4.7 Borrowing................................................................................................ 36
4.8 Other Commitments........................................................................................ 36
4.9 Transfer of Business..................................................................................... 37
4.10 Interim Financial Information............................................................................ 37
4.11 Full Access and Disclosure............................................................................... 37
4.12 Confidentiality.......................................................................................... 37
4.13 Fulfillment of Conditions Precedent...................................................................... 37
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ARTICLE V
COVENANTS OF THE PURCHASER
5.1 Confidentiality.......................................................................................... 38
5.2 Full Access and Disclosure............................................................................... 38
5.3 Fulfillment of Conditions Precedent...................................................................... 38
ARTICLE VI
OTHER AGREEMENTS
6.1 Further Assurances....................................................................................... 39
6.2 Agreement to Defend...................................................................................... 39
6.3 Consents................................................................................................. 39
6.4 No Solicitation or Negotiation........................................................................... 39
6.5 Public Announcements..................................................................................... 39
6.6 Employment Agreements.................................................................................... 40
6.7 --DELETED--.............................................................................................. 40
6.8 Observer Rights.......................................................................................... 40
6.9 Certain Tax Matters...................................................................................... 40
6.10 Non-Competition Covenant................................................................................. 41
6.11 Non-disclosure; Confidentiality.......................................................................... 43
6.12 Rule 144 Best Efforts.................................................................................... 44
6.13 Exclusive Territory...................................................................................... 44
6.14 First Rights............................................................................................. 44
6.15 Unpaid Tax Liability..................................................................................... 44
6.16 Trade Names.............................................................................................. 45
6.17 Access to Books.......................................................................................... 45
6.18 Deliveries After Closing................................................................................. 45
6.19 Post Closing Operations.................................................................................. 45
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
7.1 Representations and Warranties; Covenants and Agreements................................................. 46
7.2 No Injunction............................................................................................ 46
7.3 --DELETED--.............................................................................................. 46
7.4 --DELETED--.............................................................................................. 46
7.5 No Material Adverse Change............................................................................... 46
7.6 Opinion of Seller's Counsel.............................................................................. 46
7.7 Employment Agreement..................................................................................... 46
7.8 Delivery of CP&I Share Certificates...................................................................... 47
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7.9 Shareholders' Agreement.................................................................................. 47
7.10 Subordination Agreement.................................................................................. 47
7.11 Other Agreements......................................................................................... 47
7.12 Transfer of Business..................................................................................... 47
7.13 Acquisition Agreement.................................................................................... 47
7.14 Escrow Agreement......................................................................................... 47
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLER
8.1 Representations and Warranties; Performance.............................................................. 48
8.2 No Injunction............................................................................................ 48
8.3 Purchase Consideration................................................................................... 48
8.4 Other Agreements......................................................................................... 48
8.5 Acquisition Agreement.................................................................................... 48
8.6 Opinion of Counsel....................................................................................... 48
8.7 Approval Certificate..................................................................................... 48
8.8 Escrow Agreement......................................................................................... 48
ARTICLE IX
CLOSING
9.1 Closing.................................................................................................. 48
9.2 Closing Deliveries....................................................................................... 49
ARTICLE X
TERMINATION AND ABANDONMENT
10.1 Methods of Termination................................................................................... 50
10.2 Procedure Upon Termination............................................................................... 51
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.1 Survival................................................................................................. 51
11.2 Indemnification by the Seller............................................................................ 52
11.3 Indemnification by the Purchaser......................................................................... 53
11.4 Third-Party Claims....................................................................................... 53
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11.5 Deductible............................................................................................... 54
11.6 Benefits................................................................................................. 55
11.7 Maximum Liability........................................................................................ 55
11.8 Insurance................................................................................................ 55
11.9 Notice of Claims......................................................................................... 55
11.10 Time Bar................................................................................................. 55
11.11 Exclusive Remedy......................................................................................... 55
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Amendment and Modification............................................................................... 56
12.2 Entire Agreement......................................................................................... 56
12.3 Certain Definitions...................................................................................... 56
12.4 Notices.................................................................................................. 59
12.5 Waiver of Compliance; Consents........................................................................... 60
12.6 Assignment............................................................................................... 60
12.7 Governing Law............................................................................................ 60
12.8 Consent to Jurisdiction; Service of Process.............................................................. 60
12.9 Injunctive Relief........................................................................................ 61
12.10 Counterparts............................................................................................. 61
12.11 Headings................................................................................................. 61
12.12 Binding Effect........................................................................................... 61
12.13 Severability............................................................................................. 61
12.14 Expenses................................................................................................. 61
12.15 Attorneys' Fees.......................................................................................... 61
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SCHEDULES
1.3 Contingent Stock
2.1 Jurisdictions of Qualification
2.2 Subsidiaries; Investments; Interests
2.8 Violations
2.9(a) Liabilities
2.9(b) Liabilities covered by Insurance
2.9(c) Accounts Payable
2.11 Certain Changes
2.12 Contracts
2.14 Real and Personal Property
2.15 Litigation
2.17(a) Permits and Licenses
2.17(b) Jurisdictions Licensed to Provide Health Care; Status
2.18 ERISA, Benefit Plans and Other Matters
2.19 Intellectual Property
2.19(d) Software
2.20 Environmental Matters
2.21 Affiliated Transactions
2.22 Banking Arrangements
2.23 Insurance
2.24 Consents
2.26 Accounts Receivable
2.28 Improper Payments
2.29 Participation in Audits
2.30(a) Fraud and Abuse
2.30(b) Third-Party Payors
2.30(c) Medicare and Medicaid Compliance
2.30(d) Rate Limitations and Rates
3.2 Subsidiaries of AmeriPath
3.8 Options, Rights
3.10 Litigation - AmeriPath
3.11 Insurance - AmeriPath
4.9 Assets and Liabilities of Medical Practices
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EXHIBITS
1.2 Form of 7% Non-Negotiable Subordinated Contingent Promissory Note
1.2(k) Escrow Agreement
1.3 Approval Certificate
2.1 CP&I's Articles of Incorporation, as amended, and By-laws
2.9 CP&I's Financial Statements
3.1 AmeriPath Certificate of Incorporation, as amended, and By-laws
3.7 AmeriPath Financial Statements
6.6 Form of Employment Agreement for the Seller
7.6 Opinion of Seller's Counsel
7.9 Signature Page to Shareholders' Agreement
7.10 Subordination Agreement
7.13 Acquisition Agreement
8.6 Opinion of Purchaser's Counsel
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") dated as of October 15,
1996, by and among AMERIPATH, INC., a Delaware corporation, or its permitted
assigns ("AmeriPath" or the "Purchaser"), XXXX XXXXXX, M.D., INC. (d/b/a
Cutaneous Pathology & Immunofluorescence Laboratory), an Ohio corporation
("CP&I"), and XXXX XXXXXX, M.D., who is the holder of One Hundred (100) common
shares, no par value per share, of CP&I (Xx. Xxxxxx shall be referred to herein
as the "Seller").
WHEREAS, the Seller owns all of the issued and outstanding shares of
capital stock of CP&I, organized as a professional service corporation under
Section 1785.01 of the Revised Code of Ohio;
WHEREAS, AmeriPath desires to purchase and acquire from the Seller, and
the Seller desires to sell, transfer and deliver to AmeriPath, all of the issued
and outstanding shares of capital stock of CP&I, upon the terms and subject to
the conditions set forth herein;
WHEREAS, in order to comply with applicable federal and Ohio State
Health Care Laws, a grantor trust, a permitted assign hereunder (the "Trust"),
with AmeriPath as its sole beneficiary and with the Seller as the trustee, shall
acquire all of the issued and outstanding shares of stock of CP&I pursuant to
the terms and conditions set forth herein; and
WHEREAS, although the parties hereto have agreed as to the minimum
value of CP&I, they are not able to agree as to the total value of CP&I, and
thus the parties hereto have agreed to certain additional contingent purchase
price consideration based upon the results of operations of CP&I as more fully
set forth herein.
NOW, THEREFORE, for and in consideration of the mutual benefits to be
derived hereby and the premises, representations, warranties, covenants and
agreements herein contained, AmeriPath, the Seller and CP&I hereby agree,
intending to be legally bound, as follows:
ARTICLE I
PURCHASE OF CAPITAL STOCK
1.1 Purchase and Sale of Capital Stock.
(a) Subject to the terms and conditions of this Agreement, the
Seller agrees to sell, transfer and deliver to the Purchaser, and the
Purchaser agrees to purchase, acquire and accept delivery from the
Seller, all of the issued and outstanding capital stock of CP&I (the
"CP&I Shares").
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(b) Upon the sale, transfer and delivery to the Purchaser by
the Seller of the CP&I Shares at the Closing (as such term is defined
in Section 9.1 hereof), and in consideration therefor, AmeriPath shall
deliver to the Seller the following consideration in the aggregate (the
"Purchase Price"):
(i) SIX MILLION FIVE HUNDRED THOUSAND DOLLARS
($6,500,000.00), by wire transfer to such bank account as the
Seller may designate in a written notice delivered to the
Purchaser no later than five business days prior to the
Closing Date (as defined in Section 9.1);
(ii) Certificates evidencing 96,000 shares of Common
Stock, par value $.01 per share, of AmeriPath Inc., a Delaware
corporation (the "AmeriPath Stock");
(iii) 7% Non-Negotiable Subordinated Contingent
Promissory Note, in the form attached hereto as Exhibit 1.2
(the "Contingent Note"), in the aggregate maximum principal
amount of ONE MILLION FIVE HUNDRED THOUSAND DOLLARS
($1,500,000.00), the issuance and certain terms and conditions
of which Contingent Note are set forth in Section 1.2 below;
and
(iv) Up to 100,000 shares of AmeriPath Stock,
issuable over three years subject to the satisfaction of
certain contingencies, subject to and in accordance with
Section 1.3 hereof.
The consideration referred to in Sections 1.1(b) (i) through
(iii) shall be delivered to the Seller at the Closing, and the
consideration referred to in Section 1.1(b)(iv) shall be delivered to
the Seller as provided in Section 1.3(a).
(c) Purchase Price Adjustments.
(i) Within sixty (60) days of the Closing Date, the
Purchaser shall determine (in accordance with Section 1.2(b)
hereof) and advise the Seller by written notice (the
"Adjustment Notice") of the Operating Earnings (as defined
below) of CP&I for the twelve month period ended September 30,
1996 (the "Adjustment Earnings"); provided, however, the
Adjustment Earnings shall include pro forma adjustments
including setting the Seller's salary at the annual rate set
forth in his Employment Agreement, excluding non-recurring
charges and expenses and proportional charges with respect to
entertainment and continuing education expenses attributable
to the Seller's medical practice. In the event either party
believes there is a basis for a purchase price adjustment as
described herein (an "Adjustment"), such party shall notify
the other of such Adjustment within ten (10) days of receipt
by the Seller of the Adjustment Notice, and the other party
shall have the right to dispute such Adjustment. AmeriPath and
the Seller shall negotiate in good faith to resolve any such
dispute. In the event AmeriPath and the Seller cannot resolve
such dispute within thirty (30) days, the independent
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certified public accounting firm which then audits
AmeriPath's financial statements shall resolve the dispute,
with such firm's opinion being final and binding on all
parties; provided, however, the Seller, at his own expense,
may refer the matter to another independent public accounting
firm, and the average of the decisions of the two firms shall
be the final and binding resolution of the matter. If neither
party has requested an Adjustment pursuant this Section
1.1(c)(i) within ten (10) days of the receipt by the Seller of
the Adjustment Notice (the Adjustment Notice will be deemed to
have been received by the Seller two business days after it
was sent by the Purchaser if it was delivered by overnight
delivery with a reputable national courier), then AmeriPath
shall issue and deliver to the Seller certificates
representing 50,667 shares of AmeriPath Stock and no further
Adjustment shall be made hereunder. If the parties agree that
an Adjustment is necessary and they have agreed on the
Adjustment Earnings, then the Adjustment shall be determined
as follows:
a. In the event that the Adjustment Earnings
are greater than $1,500,000.00, the Purchaser shall
issue and deliver additional shares of AmeriPath
Stock to the Seller. The number of additional shares
shall be equal to 50,667 plus a fraction (x) the
numerator of which is the product of (a) 3.8 and (b)
the amount by which the Adjustment Earnings exceed
$1,500,000.00 and (y) the denominator of which is
$15.00.
b. In the event that the Adjustment Earnings
are greater than or equal to $1,300,000.00, but less
than $1,500,000.00, the Purchaser shall issue and
deliver certificates to the Seller representing the
number of shares of AmeriPath Stock as determined in
the following sentence. The number of shares to be
issued and delivered by AmeriPath to the Seller shall
be equal to a fraction (x) the numerator of which is
the amount by which the product of the Adjustment
Earnings and 3.8 exceeds $5,000,000.00 and (y) the
denominator of which is $15.00.
c. In the event that the Adjustment Earnings
are less than $1,300,000.00, the Seller shall refund
to AmeriPath $3.80 for every $1.00 for which the
Adjustment Earnings are below $1,300,000.
(ii) Upon the consummation of the first to occur of
(a) an underwritten offering of AmeriPath Stock pursuant to a
registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), as declared effective by the
Securities and Exchange Commission (the "SEC") resulting in
gross proceeds to AmeriPath of at least $20,000,000.00 (a
"Qualified IPO") or (b) a Sale of Control (as defined in
Section 12.3 hereof), and the value of the AmeriPath Stock
(the price at which the AmeriPath Stock is sold to the public
in connection with the Qualified IPO or, with respect to a
Sale of Control, the purchase price paid, consideration
exchanged or value received for the shares, in either case,
the "Per
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Share Value") is determined to be less than $15.00
per share, then AmeriPath shall issue additional shares of
AmeriPath Stock to the Seller. The number of shares to be
issued and delivered to the Seller shall equal the amount by
which (x) $2,200,000.00 divided by the Per Share Value
(provided, however, if the Per Share Value is less than $10.00
per share, the denominator shall be $10.00) exceeds (y)
146,667. Such number of shares shall be issued and delivered
to the Seller within sixty (60) days of the consummation of
such determination transaction.
(iii) The parties hereto agree to adjust the Purchase
Price (the "Working Capital Adjustment"), within one hundred
fifty (150) days from the Closing Date such that (x) the
amount by which CP&I's Positive Working Capital (as defined in
Section 2.31 hereof) exceeds $141,000 shall be additional
Purchase Price and the amount of the Working Capital
Adjustment shall be paid to the Seller and (y) the amount by
which CP&I's Positive Working Capital is below $141,000 shall
be a reduction to the Purchase Price and the Seller shall, and
hereby agrees to, remit or pay to the Purchaser the amount of
the Working Capital Adjustment.
1.2 The Contingent Note.
(a) Principal Amounts; Issuance. The Contingent Note shall be
due and payable in the applicable principal amount specified in or
calculated pursuant to the Contingent Note and the Annexes to such
Contingent Note (the "Appropriate Principal Amount") corresponding to a
target range of Operating Earnings (as defined below) or Cumulative
Operating Earnings (as defined below), as the case may be, specified in
the Contingent Note and the Annexes thereto, with respect to each of
the three (3) twelve month periods ending September 30, 1997 through
September 30, 1999, if, and only if, (i) with respect to the twelve
month period ending September 30, 1997, Operating Earnings for such
year equal or exceed the specified minimum target amount of $750,000.00
(the "Year-1 Minimum Target") or, (ii) with respect to the 24 month
period ending September 30, 1998 and the 36 month period ending
September 30, 1999, Cumulative Operating Earnings for such periods
equal or exceed $1,500,000.00 and $2,250,000.00, respectively (together
with the Year-1 Minimum Target, as relevant to the applicable year, the
"Minimum Targets"). For each of the periods for which Operating
Earnings or Cumulative Operating Earnings, as the case may be, are less
than the applicable Minimum Target, no principal payment(s) shall be
required, due or made under the Contingent Note, with respect to that
period, and any and all interest with respect thereto or accrued
thereon, which otherwise would have become due or payable had the
applicable Minimum Target been achieved for such period, shall be
canceled and voided.
(b) "Operating Earnings"; "Cumulative Operating
Earnings".
(i) Definition of "Operating Earnings". For purposes
hereof (and Section 1.3 and the Contingent Note), the term
"Operating Earnings", with respect
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to any twelve-month period, shall mean the income of
or attributable to CP&I, which following the Closing shall be
a wholly-owned subsidiary of AmeriPath, for such twelve-month
period (i.e., October 1 through September 30), before
deduction for (in each case, with respect to CP&I) (i)
interest paid in such year, (ii) income tax payable for such
year, (iii) charges for amortization of goodwill, including
without limitation any amortization of goodwill recorded in
connection with this transaction or amortization of any
payments made under the Contingent Notes, (iv) any fees or
expenses incurred by CP&I in connection with the transactions
contemplated by this Agreement, (v) the effect of any change
after the Closing Date in the accounting principles or
policies of CP&I (including reserves, expenses or accounting
charges), and (vii) costs, expenses and charges relating to
management, billing or other services provided by AmeriPath or
its Affiliates (as defined in Section 12.3) not requested or
approved by the Seller; provided, however that any invoice for
charges, costs or expenses for less than $5,000 may only be
renegotiated (and shall not otherwise be deemed approved by
the Seller) if the Seller objects to the charge by sending a
notification to the Company within sixty (60) days of
receiving the invoice. All such calculations shall be
determined in accordance with GAAP (as defined in Section 12.3
hereof) requested or approved by the Seller (or for which the
Seller failed to timely object) and any such changes in GAAP
adopted by the Financial Accounting Standards Board; provided
that (A) revenues shall be calculated on a cash basis and
expenses shall be calculated on an accrual basis and (B)
revenues and expenses attributable to the practice of
dermatology shall be excluded from CP&I revenues and expenses
for purposes of determining Operating Earnings hereunder.
(ii) Calculation of Operating Earnings. A statement
of the Operating Earnings, prepared by AmeriPath senior
management, will be delivered to the Seller as soon as
practicable following the end of each year, but in all events
within 80 days after the end of each such period. If the
Seller wishes to challenge the calculation of Operating
Earnings, he may do so by giving written notice of such
objection (the "Objection Notice") to AmeriPath, signed by the
Seller, within 30 days after receipt of such statement of
Operating Earnings. The Objection Notice shall set forth in
reasonable detail the Seller's calculation of Operating
Earnings (or Cumulative Operating Earnings, as the case may
be). If an Objection Notice is so timely delivered to
AmeriPath, AmeriPath and the Seller shall use their best
efforts to resolve as soon as practicable any difference of
opinion. If they are unable to resolve such difference within
20 days after receipt by AmeriPath of the Objection Notice
from the Seller, the matter shall be referred to the
independent public accounting firm who then audits the annual
financial statements of AmeriPath, whose decision shall be
final and binding on all parties; provided, however, the
Seller, at his own expense, may refer the matter to another
independent public accounting firm, and the average of the
decisions of the two firms shall be the final and binding
resolution of the matter. If an Objection Notice is not timely
delivered to AmeriPath, and if the statement of Operating
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Earnings prepared by AmeriPath senior management indicates
that the Minimum Target has been met for a given period, then
the Appropriate Principal Amount (together with accrued and
unpaid interest thereon) of the Contingent Note with respect
to such period shall be paid within five (5) days after the
earlier of the end of the 30-day period within which the
Seller is entitled to deliver an Objection Notice, or receipt
by AmeriPath of notice from the Seller that he accepts the
calculation of Operating Earnings. If the Seller objects to
the calculation of Operating Earnings for the purpose of
determining compliance with this Section, the Appropriate
Principal Amount of the Contingent Note for such period shall
be paid within five (5) days after resolution of the dispute
with respect to such calculation to the extent, and solely to
the extent, that such resolution indicates that the Minimum
Target has been exceeded for such period.
(iii) Cumulative Operating Earnings. For purposes
hereof, the term "Cumulative Operating Earnings" shall mean
and include, with respect to the 24 month period ending
September 30, 1998 and the 36 month period ending September
30, 1999, the Operating Earnings of CP&I, on a cumulative
basis, from October 1, 1996 through the end of such period
(e.g., the Cumulative Operating Earnings for the period ending
September 30, 1998 shall equal the Operating Earnings, on a
cumulative basis, from October 1, 1996 through September 30,
1998 (i.e., twenty four full months of Operating Earnings
would be included)).
(iv) Limitations--Termination. If the Seller's
employment is terminated by CP&I for any reason prior to the
fourth anniversary of the Closing Date, or if CP&I is sold,
liquidated or closed or its operations suspended or terminated
(in whole or in part) without the Seller's consent (in each
case, a "CP&I Termination"), then Operating Earnings with
respect to the twelve month period in which such CP&I
Termination occurred, and Operating Earnings for each
subsequent period, shall in no event be less than the
Operating Earnings for the four fiscal quarters prior to such
CP&I Termination; provided, however, if the CP&I Termination
occurs after (A) the end of the first fiscal quarter in any
fiscal year, the annualized Operating Earnings for the twelve
month period in which the CP&I Termination occurs shall be
twice the Operating Earnings for the last fiscal quarter of
the prior year and the first fiscal quarter of the year in
question; and (B) the end of the second fiscal quarter in any
fiscal year, the annualized Operating Earnings for the period
in which the CP&I Termination occurs shall be 4/3 times the
Operating Earnings for the last fiscal quarter of the prior
year and the first two fiscal quarters of the year in
question.
(v) Limitations--Services. For purposes of
calculating Operating Earnings (and, as relevant, Cumulative
Operating Earnings) hereunder, the expenses associated with
CP&I may include costs, expenses and charges relating to
management, billing or other services provided by AmeriPath or
its Affiliates requested or approved by the Seller (or for
which the Seller failed to timely
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object) to the extent the price or amount charged or
allocated with respect to such services is based upon the fair
market value thereof and is competitive with the price or
amount that would be charged by a Person (as such term is
defined in Section 12.3 hereof) not affiliated with AmeriPath
on an arms'-length, negotiated basis.
(c) Effect of Sale on Contingent Note. Should any Person
acquire AmeriPath, whether by means of a merger with or into AmeriPath
in which AmeriPath does not survive or the acquisition of all or
substantially all of the stock or assets of AmeriPath (an "AmeriPath
Acquisition"), then, with respect to the Contingent Note, as a
condition to consummation of the AmeriPath Acquisition, the acquiring
Person shall be required either to acknowledge and guarantee
AmeriPath's on-going obligations under the Contingent Note or to assume
the obligations under the Contingent Note.
(d) Effect of Acquisitions on Contingent Note. In the event
that AmeriPath acquires one or more Persons or businesses after the
Closing Date, Operating Earnings will be calculated without including
(i) the income generated by, or expenses incurred in connection with,
the acquisition or the acquired Person or business, and (ii) any
selling, general or administrative expenses which do not relate to CP&I
or its business.
(e) Maturity and Redemption. For each year for which Operating
Earnings or Cumulative Operating Earnings equal or exceed the
applicable Minimum Target, the Appropriate Principal Amount of the
Contingent Note, together with interest accrued on such Appropriate
Principal Amount, shall become due and payable and shall be paid as
provided in subparagraph (a) above and (g) below. If, in the judgment
of a majority of the full Board of Directors of AmeriPath (which
judgment is made based upon the written advice of independent counsel),
it is determined that the Contingent Note, or the holding of the
Contingent Note by the Seller, may violate any Regulation or Order of
any Authority (as such terms are defined in Section 12.3), then, at
AmeriPath's sole discretion (as recommended by such counsel), the
Contingent Note may be canceled and voided and the Board of Directors
of AmeriPath, acting in good faith, shall provide the Seller a
reasonably equivalent economic and financial substitute consideration
therefor.
(f) Payments. Except as set forth in Section 1.2(l) below, all
payments of principal (including any prepayments or redemptions), and
interest under the Contingent Note shall be made by AmeriPath in lawful
money of the United States of America in immediately available funds
(or at the written request of the holders thereof, by cashier's or bank
check) not later than twelve o'clock noon, Miami, Florida time, on the
date each such payment is due. To the extent calculation of any payment
amounts (whether principal, interest or otherwise) results in fractions
of a cent, the amount shall be rounded down to the nearest whole cent.
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16
(g) Option to take Principal Payments in AmeriPath Stock. The
Seller, at his sole option and election, exercisable by delivering a
signed notice to AmeriPath at least five (5) days prior to any payment
date with respect to the Contingent Note, and subject to Section 1.2(l)
below, may elect to receive AmeriPath Stock instead of the Appropriate
Principal Amount to which he is entitled, if, and only if, Operating
Earnings with respect to the year for which the Seller has delivered
notice to AmeriPath exceed $1,500,000.00, and so long as AmeriPath
Stock, if publicly traded, has not had a closing price during the five
trading day period prior to the election of less than $10.00 per share.
The number of shares of AmeriPath Stock which the Seller is entitled to
receive pursuant hereto is equal to a fraction, (x) the numerator of
which is the Appropriate Principal Amount for such twelve month period,
less $600,000.00, and (y) the denominator of which is $15.00, or if
AmeriPath Stock is publicly traded, the lower of $15.00 or the current
market price of the AmeriPath Stock (not to be less than $10.00).
(h) Subordination; Subordination Agreement. The Contingent
Note shall be subordinate and junior in right of payment to certain
senior indebtedness pursuant to the attached subordination agreement
attached hereto as Exhibit 7.10 (the "Subordination Agreement"), by and
among AmeriPath's senior lenders and each of the holders of promissory
notes of AmeriPath. As a condition to AmeriPath's obligations under the
Contingent Note, the Seller agrees to execute and deliver appropriate
documents and agreements evidencing the subordination of the Contingent
Note to such senior indebtedness of AmeriPath.
(i) Notes Non-negotiable. The Contingent Note shall be
non-transferable and non-negotiable other than in connection with
estate planning, by will or pursuant to the laws of descent and
distribution.
(j) Right of Set-Off on Seller's Contingent Note. With respect
to the Contingent Note, AmeriPath shall have the right, following prior
written notice to the Seller, to set-off against principal or interest
payable under the Contingent Note the amount of any indemnification
payment owed under Article XI hereof. Such notice shall state with
reasonable specificity the good faith basis for AmeriPath's right to
such indemnification payment, and a copy of such notice shall also be
sent to each director of AmeriPath. The Seller shall have the right to
respond to such notice, and if the Seller requests that the exercise of
such right of set-off be considered and approved by the Board of
Directors, then such right shall not be exercised unless considered and
approved by a majority of the full Board of Directors. If within 10
days after receipt of such notice of set-off, the Seller contests in
writing (sent to AmeriPath) AmeriPath's claim that of indemnification
under Article XI hereof, then the amount which AmeriPath would
otherwise have paid to the Seller but for the exercise of such right of
set-off shall be paid into an interest bearing escrow account
maintained by a bank selected by AmeriPath, to be held in such account
until AmeriPath and the Seller have reached agreement as to the amount,
if any, of such indemnification payment and set-off, or until there has
been a judicial resolution of such matter, at which time the amount
held in such segregated
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17
account, together with any interest accrued thereon, shall be
released to the prevailing party, as appropriate and/or instructed.
AmeriPath and the Seller agree that they will use their best efforts to
resolve any such dispute within 30 days of receipt of notice by
AmeriPath of the Seller's objection to the set-off.
(k) Escrow. Notwithstanding anything contained herein or in
the Contingent Note to the contrary, to the extent that principal
and/or interest is due and payable under the Contingent Note, the first
$100,000 for each of the three payment periods (on an aggregate basis
such that after 36 months, the escrow account shall have $300,000
unless less than $300,000 had been earned in the aggregate under the
Contingent Note in which case the total amount earned under the
Contingent Note shall be held in escrow) shall be held, subject to the
Escrow Agreement attached hereto as Exhibit 1.2(k) (the "Escrow
Agreement").
(l) Defaults. The Seller shall be entitled to the benefit of
the Events of Default set forth in the applicable form of Contingent
Note.
(m) Conflict. To the extent there is any conflict or
inconsistency between the terms of this Agreement and the terms
specified in the Contingent Note, the terms specified in the Contingent
Note shall govern and prevail.
1.3 Contingent Issuance of AmeriPath Stock. As additional purchase
price consideration, the Purchaser shall issue to the Seller, subject to the
conditions and restrictions set forth in this Section 1.3 (the "Stock Rights"),
up to an aggregate maximum of 100,000 shares of AmeriPath Stock. Upon achieving
the range (the "Applicable Range") of Operating Earnings or Cumulative Operating
Earnings, as the case may be, set forth on Schedule 1.3 hereto, with respect to
each period commencing the twelve month period ending September 30, 1997 through
the 36 month period ending September 30, 1999, AmeriPath shall deliver, in the
aggregate, certificates evidencing the corresponding number of shares of
AmeriPath Stock indicated on Schedule 1.3 hereto (the "Applicable Stock Amount")
to the Seller as so indicated, which shares shall be subject to the terms,
conditions and restrictions set forth in this Section 1.3.
(a) Delivery; Right to Contingent Issuance Subject to
Cancellation. Certificates for shares representing the Applicable Stock
Amount shall be delivered on or before each December 31 following each
period that the Applicable Range of Operating Earnings or Cumulative
Operating Earnings, as the case may be, has been achieved, if, and only
if, (i) with respect to the twelve months ending September 30, 1997,
Operating Earnings equal or exceed a minimum target amount of
$750,000.00 (the "First Year Minimum Stock Target") or, (ii) with
respect to the 24 month period ending September 30, 1998 and the 36
month period ending September 30, 1999, Cumulative Operating Earnings
for such periods equal or exceed $1,500,000.00 and $2,250,000.00,
respectively (together with the First Year Minimum Stock Target, as
relevant to the applicable period, the "Minimum Stock Targets").
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18
(b) Effect of Sale on Stock Rights. In the event of an
AmeriPath Acquisition (as such term is defined in Section 1.2(c)),
then, with respect to such Stock Rights that have not theretofore been
canceled or voided because the Minimum Stock Target was not or has not
been met for the period in question, as a condition to consummation of
the AmeriPath Acquisition, the acquiring Person shall be required
either to (i) acknowledge and guarantee AmeriPath's on-going
obligations under the Stock Rights, (ii) assume the obligations under
the Stock Rights or (iii) convert the rights to receive AmeriPath Stock
into rights to receive stock in the acquiring Person (of substantially
equivalent value, based upon the acquisition value, as reasonably
determined in good faith by the Board of Directors of AmeriPath,
provided, however, the Seller, at his own expense, may refer the matter
to an independent public accounting or investment banking firm which
firm's decision shall be final and binding unless the Purchaser refers
the matter to its independent public accounting firm, in which case,
the average of the decisions of the two firms shall be the final and
binding resolution of the matter).
(c) Effect of Acquisitions on Stock Rights. In the event that
AmeriPath acquires one or more Persons or businesses after the Closing
Date, Operating Earnings will be calculated without including (i) the
income generated by, or expenses incurred in connection with, the
acquisition or the acquired Person or business, and (ii) any selling,
general or administrative expenses which do not relate to CP&I or its
business.
(d) Termination of Stock Rights; Call on AmeriPath Stock. If,
in the judgment of a majority of the full Board of Directors of
AmeriPath (based upon the written legal opinion of independent counsel,
a copy of which shall be delivered to the Seller), it is determined
that the Stock Rights, or the holding of the AmeriPath Stock by the
Seller, violates any Regulation or Order of any Authority and
divestiture of such Stock Rights and AmeriPath Stock is required by
such Regulation or Order, then, at AmeriPath's sole discretion and
option, (i) the Stock Rights may be canceled and voided (and the
parties shall endeavor in good faith to arrive at a reasonably
equivalent substitute consideration therefor, including, if
permissible, contingent cash payments) and (ii) all outstanding shares
of AmeriPath Stock issued to or held by the Seller may be redeemed or
purchased by AmeriPath (the "Call"), and the Seller hereby irrevocably
and unconditionally agrees to sell such stock to AmeriPath upon any
such Call, at its then fair market value (as determined in good faith
by AmeriPath's Board of Directors, provided, however, the Seller, at
his own expense, may refer the matter to an independent public
accounting or investment banking firm which firm's decision shall be
final and binding unless the Purchaser refers the matter to its
independent public accounting firm, in which case, the average of the
decisions of the two firms shall be the final and binding resolution of
the matter). AmeriPath shall give the Seller irrevocable written notice
of any cancellation of the Stock Rights and any Call of the AmeriPath
Stock permitted hereunder not less than five (5) business days prior to
the date of such event, specifying such termination and/or Call and the
amount to be paid for the AmeriPath Stock on the closing date specified
therein, whereupon such amount specified in such notice, upon receipt
by AmeriPath of the certificates therefor at the closing thereof, shall
be paid to the Seller.
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(e) Payments; Certificates. All payments for AmeriPath Stock
which is "called" by AmeriPath pursuant to Section 1.3(d) shall be made
by AmeriPath in lawful money of the United States of America in
immediately available funds (or at the written request of the Seller,
by bank check) after proper tender by the Seller of certificates
representing all of the AmeriPath Stock owned by the Seller, duly
endorsed for transfer to the Purchaser, together with stock powers duly
executed in blank. Any and all Liens, Claims, encumbrances or other
restrictions with respect to the AmeriPath Stock so called (other than
Permitted Liens and transfer restrictions under the Shareholders'
Agreement (as defined in Section 7.9) or under any applicable federal
or state securities laws) shall be satisfied and released, to the
satisfaction of AmeriPath, prior to closing on the purchase thereof. To
the extent calculation of any payment amounts results in fractions of a
cent, the amount shall be rounded down to the nearest whole cent.
(f) Transferability; Shareholders' Agreement. The Stock Right
is not transferable by the Seller other than in connection with estate
planning, by will or pursuant to the laws of descent and distribution.
Any shares of AmeriPath Stock issued pursuant to this Agreement or
pursuant to the Stock Right shall be subject to the Purchaser's
Shareholders' Agreement (as defined in Section 7.9) relating to the
AmeriPath Stock other than Sections 9 and 10 thereof. As a condition to
the issuance of shares of AmeriPath Stock in connection with any Stock
Right (and at AmeriPath's option, at each issuance), the Seller shall
execute and deliver to the Purchaser a counterpart to the Shareholders'
Agreement, in the form of Exhibit 7.9 hereto, and the Seller shall make
such representations and execute such certificates as AmeriPath may
reasonably require, including representations similar to those made in
Section 2.25 hereof.
(g) Legend. Each and every stock certificate representing
shares of AmeriPath Stock issued to the Seller shall bear the following
(or similar) restrictive legend, together with such other legend(s) as
the Purchaser shall in its discretion deem appropriate:
"The shares represented by this certificate (the
"Shares") are subject to each and every one of the terms,
conditions and restrictions set forth in the Shareholders'
Agreement dated as of February 29, 1996 (the "Shareholders'
Agreement"), as amended, including, but not limited to, any
restrictions on transferability, any rights of first refusal
and any option of the Purchaser to "call" or purchase such
Shares, and may not, in whole or in part, be sold,
transferred, pledged, gifted, hypothecated or otherwise
disposed of in any manner other than in accordance with the
terms of the Shareholders' Agreement, a copy of which is on
file and available for inspection at the principal offices of
the Issuer presently located at 000 Xxxxxxx Xxxxx Xxxx, Xxxxx
000, Xxxx Xxxxxxxxxx, Xxxxxxx 00000."
(h) Representations. In the event any shares of AmeriPath
Stock issued pursuant to the Stock Right have not been registered for
resale under the Securities Act, and such registration is required for
the Seller to effect the sale or transfer of such shares, the Seller
shall, prior to each issuance by AmeriPath to the Seller of the
AmeriPath Stock,
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20
deliver to the Purchaser a letter of representation, if requested
by the Purchaser, making the statements set forth in Section
2.25 hereof.
(i) Antidilution; Adjustments Upon Changes in Capitalization
or Merger. Subject to any required action by the stockholders of the
Purchaser, the number of shares of AmeriPath Stock covered by the Stock
Right, and the aggregate number of shares which have been authorized
for issuance hereunder, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of AmeriPath Stock
resulting from a stock dividend or through any recapitalization,
reclassification, stock split-up, combination or exchange of shares
(other than any such combination or exchange of AmeriPath Stock through
which shares are issued to effect an acquisition of another Person).
Such adjustment shall be made by the Board of Directors of AmeriPath,
whose reasonable good faith determination in that respect shall be
final, binding and conclusive. Except as expressly provided herein, no
issuance by the Purchaser of shares of stock of any class, or
securities convertible into shares of stock of any class (whether in
connection with an acquisition, employee benefit, stock or stock option
plan, private or public offering of securities or otherwise), shall
affect, and no adjustment by reason thereof shall be made with respect
to, the number of shares of AmeriPath Stock subject to this Stock
Right. Price per share calculations used in this Agreement shall also
be adjusted to reflect changes in the capitalization of the Purchaser
such that the value of such shares before such adjustment event shall
equal the value of such shares after the adjustment event.
(j) Reservation of Shares. The Purchaser will at all times
reserve for issuance and delivery all shares of AmeriPath Stock from
time to time issuable hereunder. All such shares shall be duly
authorized and, when issued, shall be validly issued, fully paid and
non-assessable and free of all preemptive rights.
(k) Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued hereunder, but the
Purchaser shall round down to the nearest whole number the number of
shares of AmeriPath Stock required to be issued and delivered in
accordance herewith.
(l) Failure to Deliver. If the Seller becomes obligated to
sell any AmeriPath Stock to the Purchaser as a result of a Call under
this Agreement, and fails to deliver such stock (or the certificates
evidencing such stock) in accordance with the terms of this Agreement,
the Purchaser may, at the sole and absolute discretion of the Board of
Directors of AmeriPath, in addition to all other remedies available to
the Purchaser, tender to the Seller the purchase price for such shares
as is herein specified. Upon tender of the purchase price to the
Seller, the Purchaser, upon written notice to the Seller, may cancel on
its books the certificate or certificates evidencing the shares of
AmeriPath Stock so called, and thereupon all of the Seller's rights in
and to such AmeriPath Stock shall terminate.
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21
(m) Put Option of Seller. Notwithstanding anything to the
contrary set forth in this Agreement, the Seller shall have an
exclusive and irrevocable option, exercisable by notice to the
Purchaser given within ten (10) days of the fifth anniversary of the
Closing Date, to sell to the Purchaser for $15.00 per share (and thus
to require the Purchaser to purchase) all the AmeriPath Stock owned or
held by the Seller, if, and only if, the Purchaser has not, prior to
such date, consummated a Qualified IPO. The Purchaser hereby
irrevocably agrees to purchase and acquire such AmeriPath Stock on the
terms and subject to the conditions set forth in this Section 1.3(m),
provided, however, if the Purchaser is legally prohibited from
purchasing all of the Seller's AmeriPath Stock at a purchase price of
$15.00 per share, then (i) the Non-Competition Covenant of Section 6.10
hereof and the restrictions and agreements set forth therein, shall
immediately terminate and expire and be of no further force and effect,
and (ii) the rights of the Purchaser to the trade names "CPI" and
"Cutaneous Pathology & Immunofluorescence Laboratory" shall be
immediately transferred to the Seller and the Purchaser's rights
thereto and therein shall immediately cease, terminate and expire.
(n) Bring-Along Provision. Until a Qualified IPO, if there is
a Sale of Control, the Purchaser shall, not less than forty (40) days
prior to the scheduled date of consummation of the proposed Sale of
Control, deliver a notice (the "Sale Participation Notice") to the
Seller containing the following information:
a. the aggregate number of shares of
AmeriPath Stock or other AmeriPath securities
proposed to be so sold and the scheduled date of
closing;
b. the terms and conditions of the proposed
sale, including the identity (i.e., name, occupation
and address) of the proposed purchaser(s) and the per
share price to be paid for the shares of AmeriPath
Stock or other AmeriPath securities to be sold and
the amount, type and nature of the consideration to
be paid therefor; and
c. the total number of shares of AmeriPath
Stock held by all stockholders prior to the
consummation of the Sale of Control on a fully
diluted basis (including the exercise of all
outstanding options to purchase AmeriPath Stock and
the conversion of all securities convertible into
AmeriPath Stock).
Subject to compliance with subsections (ii) and (iii) hereof,
the Seller shall have the right and option (but not the
obligation) to elect to participate in any such Sale of
Control, and if properly effected the Purchaser shall arrange
for such participation in such Sale of Control (other than a
Qualified IPO), on the same terms and conditions as the other
stockholders and pro rata according to the following formula:
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22
Total number of shares owned by the Seller
before the sale
Total number of shares to be X
purchased ------------------------------------------
Total number of shares owned before
the Sale of Control by all stockholders
participating in such Sale of Control on a
fully diluted basis (assuming exercise of
all outstanding options and conversion of
all convertible securities that are to be
exercised, converted or sold in connection
with such Sale of Control)
To the extent such formula yields a fractional number of
shares, then the number of shares the Seller may sell in a
Sale of Control shall be rounded down to the nearest whole
number of shares. The maximum number of shares which the
Seller shall be entitled to elect to include and sell in a
Sale of Control, in accordance with the foregoing formula, is
referred to herein as the "Maximum Share". To the extent that
AmeriPath Preferred Stock is sold in connection with any such
Sale of Control without conversion into AmeriPath Stock, the
price per share paid for AmeriPath Stock to other stockholders
participating in such Sale of Control shall be determined by
dividing the aggregate consideration paid to holders of such
Preferred Stock, less any amount attributable to any accrued
but unpaid dividends, by the number of shares of AmeriPath
Stock into which such Preferred Stock could then be converted.
(i) In order to effect an election to participate in
a Sale of Control, the Seller shall provide and deliver
written notice (an "Election Notice") to AmeriPath, not later
than ten (10) days after delivery of the Sale Participation
Notice to the Seller. Such Election Notice shall contain the
irrevocable agreement of the Seller to sell a specified number
of shares of AmeriPath Stock, which shall be not less than 100
shares and not more than the Seller's Maximum Share, in the
Sale of Control (such number of shares elected to be sold in
the Sale of Control by the Seller being referred to herein as
the "Elected Share"), in accordance with the terms and
conditions of the Sale of Control. The Seller's failure to
deliver an Election Notice, in proper form, within such ten
(10) day period shall conclusively constitute an election not
to participate in the Sale of Control. The Seller may elect to
sell and transfer in a Sale of Control less than his Maximum
Share (but not less than 100 shares), in which case the
Purchaser shall have the right to sell the balance of the
Seller's Maximum Share (as aggregated with the balance of all
other Maximum Shares not exercised in whole or in part by
other stockholders).
(ii) The Seller shall cooperate, fully, promptly and
in good faith, with all reasonable requests of the Purchaser
in connection with the documentation and closing of the Sale
of Control. This includes (i) entering into a purchase and
sale agreement (or counterpart thereto) in form provided by
the Purchaser (and making any required representations and
warranties, customary for a minority shareholder, therein),
and (ii) at the closing of a Sale of Control (or earlier if
requested by the Purchaser), the Seller shall present to the
Purchaser, for delivery to the purchaser(s) at closing, all
share certificates for AmeriPath Stock included in the
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23
Elected Share and to be sold in the Sale of Control,
in proper form for transfer. Such AmeriPath Stock shall be
transferred at closing free and clear of all Liens, security
interests and encumbrances or adverse Claims of any kind or
character, other than any applicable transfer restrictions
under the Shareholders' Agreement, securities laws, this
Agreement or as otherwise noted on the certificates of the
AmeriPath Stock included in the Elected Share. All reasonable
fees and expenses incurred by the Purchaser in connection with
the Sale of Control (including the reasonable fees and
expenses of counsel) shall be shared by each participating
stockholder and the Seller (based upon the proportionate share
the Elected Share bears to the total number of shares sold in
the Sale of Control), and the Purchaser may withhold and
deduct the Seller's proportionate share of such fees and
expenses from the purchase price delivered at closing, and the
Seller's purchase price to be received in exchange for the
sale of his Elected Share shall be net of such proportionate
amount of fees and expenses.
(iii) Summit Ventures III, L.P. and Summit Investors,
II, L.P. shall evidence their agreement to comply with this
Section 1.3(n) by executing an approval certificate (the
"Approval Certificate") in the form of Exhibit 1.3 hereto.
(o) Subscription Rights. In the event that the Purchaser
issues additional securities to its stockholders, other than in
connection with a public offering, an acquisition, an employee benefit,
stock or stock option plan, or in connection with a stock split, stock
dividend, recapitalization, reclassification, stock split-up,
combination, merger or exchange of shares or a similar transaction, the
Seller shall have the right to subscribe for additional shares of
AmeriPath Stock, on the same terms as other stockholders, so as to keep
his proportionate ownership of the AmeriPath Stock the same after the
issuance as it was immediately prior to such issuance.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND CP&I
The Seller hereby makes the following representations and warranties to
the Purchaser, each of which shall be deemed material (and the Purchaser, in
executing, delivering and consummating this Agreement, has relied and will rely
upon the correctness and completeness of each of such representations and
warranties notwithstanding any independent investigation):
2.1 Corporate Organization, Qualification, etc. CP&I is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Ohio with full corporate power and authority to carry on its business
as it is now being conducted and proposed to be conducted, and to own, operate
and lease its properties and assets. CP&I is duly qualified or licensed to do
business in good standing in the jurisdictions set forth on Schedule 2.1
attached hereto, those being every jurisdiction in which the conduct of CP&I's
business, the ownership
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or lease of its properties, the proposed conduct of its business or ownership or
lease of its properties, require it to be so qualified or licensed and the
failure to be so qualified or licensed would have a Material Adverse Effect (as
defined in Section 12.3). CP&I's articles of incorporation have not been amended
or supplemented since April 15, 1976, and are in full force and effect as of the
date hereof. True, complete and correct copies of CP&I's articles of
incorporation and by-laws, as presently in effect, are attached hereto as
Exhibit 2.1.
2.2 Subsidiaries. Except as set forth on Schedule 2.2, CP&I has no
Subsidiaries (as defined in Section 12.3) nor any investment or other interest
in, or any outstanding loan or advance to or from, any Person, including any
officer, director or shareholder, other than cash or cash equivalent
investments.
2.3 Capital Stock. As of the date hereof, the authorized capital stock
of CP&I consists of FIVE HUNDRED (500) Common shares, without par value. The
stock record book of CP&I has been delivered to the Purchaser for inspection
prior to the date hereof and is complete and correct, and all requisite Federal
and State documentary stamps have been affixed thereon and canceled. The CP&I
Shares constitute all of the issued and outstanding shares of capital stock of
CP&I, and all of the CP&I Shares are owned beneficially and of record by the
Seller.
2.4 Corporate Record Books. The corporate minute books of CP&I have
been made available to the Purchaser, are complete and correct and contain all
of the proceedings of the shareholders and directors of CP&I.
2.5 Title to Stock. All of the issued and outstanding shares of the
capital stock of CP&I that are, and at the Closing will be, owned by the Seller
are duly authorized, validly issued, fully paid and nonassessable, and are free
of all Liens (as defined in Section 12.3). Upon delivery of the Purchase Price
to the Seller at the Closing, assuming the Purchaser buys in good faith without
notice of any adverse claim (as defined in Section 8-302 of the Uniform
Commercial Code), the Seller will convey and the Purchaser will acquire good
title to the CP&I Shares, free and clear of all Liens or contractual
restrictions or limitations whatsoever, other than any created by the Purchaser
or arising under applicable federal and state securities laws.
2.6 Options and Rights. There are no outstanding subscriptions,
options, warrants, rights, securities, contracts, commitments, understandings or
arrangements under which CP&I is bound or obligated to issue any additional
shares of its capital stock or rights to purchase shares of its capital stock.
There are no agreements, arrangements or understandings between the Seller
and/or CP&I and any other Person (other than the Purchaser) regarding the CP&I
Shares (or the transfer, disposition, holding or voting thereof).
2.7 Authorization, Etc. CP&I has full power and authority and the
Seller has full capacity to enter into this Agreement, the Employment Agreement,
the Escrow Agreement, the Management Agreement, the Trust Agreement, the Option
Agreement and the agreements and documents contemplated hereby to which CP&I or
the Seller is a party, and perform their respective obligations hereunder and
thereunder. The execution, delivery and performance of this
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Agreement, the Employment Agreement, the Escrow Agreement, the Management
Agreement, the Trust Agreement, the Option Agreement and all other agreements
and transactions contemplated hereby have been duly authorized by the Board of
Directors of CP&I and no other corporate proceedings on its part are necessary
to authorize this Agreement and the other agreements and transactions
contemplated hereby. The Seller is entering into this Agreement, the Employment
Agreement, the Escrow Agreement, the Trust Agreement, the Acquisition Agreement
and the Option Agreement on the Seller's own volition, free from any undue
influence or coercion. Upon execution and delivery of this Agreement, the
Employment Agreement, the Escrow Agreement, the Management Agreement, the Trust
Agreement, the Option Agreement and the Acquisition Agreement by the parties
hereto this Agreement, the Employment Agreement, the Escrow Agreement, the
Management Agreement, the Trust Agreement, the Option Agreement, the Acquisition
Agreement and all other agreements contemplated hereby shall constitute the
legal, valid and binding obligation of each of CP&I and the Seller party hereto,
enforceable against each such party in accordance with their respective terms,
except to the extent that the enforcement thereof may be limited by applicable
(i) bankruptcy, reorganization, insolvency, and similar laws affecting the
enforcement of creditors' rights and (ii) equitable principles.
2.8 No Violation. The execution and delivery by CP&I and the Seller of
this Agreement, the Employment Agreement, the Escrow Agreement, the Management
Agreement, the Trust Agreement, the Option Agreement, the Acquisition Agreement
and any and all other agreements contemplated hereby to which CP&I or the Seller
is a party, and the fulfillment of and compliance with the respective terms
hereof and thereof by CP&I and the Seller do not and will not, except as set
forth on Schedule 2.8 attached hereto, (a) conflict with or result in a breach
of the terms, conditions or provisions of, (b) constitute a default or event of
default under (with due notice, lapse of time or both), (c) result in the
creation of any Lien upon the capital stock or assets of CP&I pursuant to, (d)
give any third party the right to accelerate any obligation under, (e) result in
a violation of, or (f) require any authorization, consent, approval, exemption
or other action by or notice to any court or Authority pursuant to, the articles
of incorporation or by-laws of CP&I or any Regulation, Order or Contract (as
defined in Section 12.3) to which CP&I or the Seller is subject. CP&I and the
Seller will comply with all applicable Regulations and Orders in connection with
the execution, delivery and performance of this Agreement, the Employment
Agreement, the Escrow Agreement, the Management Agreement, the Trust Agreement,
the Option Agreement, the Acquisition Agreement and the transactions
contemplated hereby.
2.9 Financial Statements. Attached as Exhibit 2.9 hereto are the
following financial statements of CP&I: (i) balance sheets (prepared on a cash
basis) for the fiscal years ended December 31, 1994 and December 31, 1995 (the
"Balance Sheets"), (ii) income statements (prepared on a cash basis) for the
fiscal years ended December 31, 1994 and December 31, 1995 (the "Income
Statements"), and (iii) balance sheet and income statement (prepared on a cash
basis) for the six months ended June 30, 1996 (collectively, together with the
Balance Sheets and the Income Statements, the "Financial Statements"). The
balance sheets included in the Financial Statements fairly present the financial
position of CP&I on a cash basis as at the respective dates thereof, and the
income statements included in the Financial Statements (x) fairly present the
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results of operations for the periods therein referred to, on a cash basis
(except as stated therein or in the notes or schedules thereto) applied on a
consistent basis, and (y) fairly present the financial condition of CP&I at the
respective date of on a cash basis, and for the period covered by, such
statements; provided, however, that such Financial Statements are compilations
which have not been prepared in accordance with GAAP. Except as set forth on
Schedule 2.9(a) attached hereto, CP&I has no liability, whether accrued,
absolute or contingent, of a type required to be reflected on a balance sheet or
described in the notes thereto in accordance with GAAP, other than (i)
liabilities incurred since December 31, 1995, in the ordinary course of business
consistent with past practice, (ii) liabilities reflected in the June 30, 1996
balance sheet, (iii) liabilities covered by insurance or reinsurance (a complete
and detailed description of which is provided in Schedule 2.9(b)) and (iv)
liabilities that would typically be reflected in footnotes of financial
statements prepared in accordance with GAAP. Schedule 2.9(c) contains a complete
list of the accounts payable of CP&I at September 30, 1996.
2.10 Employees. CP&I has been for the past four years, and currently
is, in compliance with all Federal, State and local Regulations and Orders
affecting employment and employment practices of CP&I (including those
Regulations promulgated by the Equal Employment Opportunity Commission),
including terms and conditions of employment and wages and hours. Except as set
forth on Schedule 2.18, CP&I does not maintain any "pension" and "welfare"
benefit plans within the respective meanings of sections 3(2) and 3(1) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
2.11 Absence of Certain Changes. Since December 31, 1995, there has not
been (a) any Material Adverse Change (as defined in Section 12.3) in respect of
CP&I; (b) any damage, destruction or loss, whether covered by insurance or not,
having a Material Adverse Effect, with regard to CP&I's properties and business;
(c) any payment by CP&I to, or any notice to or acknowledgment by CP&I of any
amount due or owing to, CP&I's self-insured carrier, if any, in connection with
any self-insured amounts or liabilities under health insurance covering
employees of CP&I, in each case, in excess of a reserve therefor on the balance
sheet for the fiscal year ended December 31, 1995 included in the Financial
Statements; (d) any declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) in respect of CP&I's capital
stock (other than distributions made in accordance with past practices), or any
redemption or other acquisition of such capital stock by CP&I; (e) except as set
forth in Schedule 2.11, any increase in the rate of compensation or in the
benefits payable or to become payable by CP&I to its directors, officers,
employees or consultants (other than fees of professionals in connection with
the transactions contemplated hereby); (f) any amendment, modification or
termination of any existing, or entering into any new, contract, agreement,
arrangement or plan relating to any salary, bonus, insurance, pension, health or
other employee welfare or benefit plan for or with any directors, officers,
employees or consultants of CP&I other than in the ordinary course of business
consistent with past practice; (g) any entry into any material Contract not in
the ordinary course of business, including without limitation relating to any
borrowing or capital expenditure other than in the ordinary course of business
consistent with past practice; (h) any disposition by CP&I of any asset other
than in the ordinary course of
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business consistent with past practice; or (i) any change by CP&I in accounting
methods or principles (except as noted in Schedule 2.11).
2.12 Contracts.
(a) Except as set forth in Schedule 2.12 hereto, CP&I is
neither a party to nor subject to any written or oral:
(i) pension, profit sharing, bonus, retirement, stock
option, stock purchase or other plan providing for deferred or
other compensation to employees or any other employee benefit
plan (other than as set forth in Schedule 2.18 hereto), or any
Contract with any labor union;
(ii) employment or consultation agreement, or other
compensation Contract, commitment or arrangement, which is not
terminable on notice of 30 days' or less by CP&I without
penalty or other financial obligation (and, except as set
forth on Schedule 2.12, no officer or employee of CP&I
receives total salary, bonus and other compensation from CP&I
of $30,000.00 or more per annum).
(iii) Contract containing covenants or agreements
limiting the freedom of CP&I or any of its employees to
compete in any line of business presently conducted by CP&I
with any Person or to compete in any such line of business in
any area;
(iv) Contract with the Seller or with any affiliate
or relative of the Seller (except for any Contract disclosed
in Schedule 2.12 pursuant to clauses (ii) or (iii) of this
Section 2.12(a));
(v) Contract relating to or providing for loans to
officers, directors, employees or Affiliates;
(vi) Contract under which CP&I has advanced or
loaned, or is obligated to advance or loan, funds to any
Person;
(vii) Contract relating to the incurrence, assumption
or guarantee of any indebtedness, obligation or liability (in
respect of money or funds borrowed), or otherwise pledging,
granting a security interest in or placing a Lien on any asset
of CP&I;
(viii) guarantee or endorsement of any obligation
other than endorsements of instruments in the ordinary course
of business consistent with past practice;
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(ix) Contract under which CP&I is lessee of or holds
or operates any property, real or personal, owned by any other
party, except for any lease of real or personal property under
which the aggregate annual rental payments do not exceed
$7,500.00;
(x) Contract pursuant to which CP&I is lessor of or
permits any third party to hold or operate any property, real
or personal, owned or controlled by CP&I;
(xi) assignment, license, indemnification or Contract
with respect to any intangible property (including, without
limitation, any Proprietary Rights (as defined in Section
12.3));
(xii) warranty Contract with respect to its services
rendered (or to be rendered) or its products sold or leased;
(xiii) Contract which prohibits, restricts or limits
in any way the payment of dividends or distributions by CP&I;
(xiv) Contract under which it has granted any Person
any registration rights (including piggyback rights) with
respect to any securities;
(xv) Contract for the purchase, acquisition or supply
of inventory and other property and assets, whether for resale
or otherwise in excess of $7,500.00;
(xvi) Contracts with independent agents, brokers,
dealers or distributors other than Contracts terminable by
CP&I without penalty;
(xvii) sales, commissions, advertising or marketing
Contracts;
(xviii) Contracts providing for "take or pay" or
similar unconditional purchase or payment obligations;
(xix) Contracts with Persons with which, directly or
indirectly, the Seller also has a Contract;
(xx) Contract with a hospital, physician or other
health care provider or Person pursuant to which the cost of
providing health care services to the patients covered by such
Contract is assumed in whole or in part by such provider; or
(xxi) any other Contract which is material to CP&I's
operations or business prospects, except those which (x) were
made in the ordinary course of business, (y) are terminable on
30 days' or less notice by CP&I without penalty
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or other financial obligation, and (z) in each case,
involve aggregate payments by or to CP&I of $7,500.00 or less.
(b) Except as set forth on Schedule 2.8, no consent of any
party to any Contract is required in connection with the execution,
delivery or performance of this Agreement, or the consummation of the
transactions contemplated hereby.
(c) CP&I has performed in all material respects all
obligations required to be performed by it and is not in default in any
respect under or in breach of nor in receipt of any claim of default or
breach under any material Contract to which CP&I is subject (including
without limitation all performance bonds, warranty obligations or
otherwise); no event has occurred which with the passage of time or the
giving of notice or both would result in a default, breach or event of
non-compliance under any material Contract to which CP&I is subject
(including without limitation all performance bonds, warranty
obligations or otherwise); CP&I does not have any present expectation
or intention of not fully performing all such obligations; CP&I does
not have any knowledge of any breach or anticipated breach by the other
parties to any such Contract to which it is a party.
2.13 True and Complete Copies. Copies of all written Contracts and
documents delivered and to be delivered hereunder by the Seller or CP&I are and
will be true and complete copies of such agreements, contracts and documents.
2.14 Title and Related Matters.
(a) CP&I has good title to all of the properties and assets
reflected as owned by it in the balance sheet for the fiscal year ended
December 31, 1995 included in the Financial Statements or acquired
after the date thereof and except for properties sold or otherwise
disposed of since the date thereof in the ordinary course of business,
free and clear of all Liens, except Permitted Liens (as defined in
Section 12.3).
(b) CP&I will on the Closing Date own, good title to all the
personal property and assets, tangible or intangible, used in its
laboratory business except as to those assets leased or licensed, all
of which leases or licenses are in good standing and no party is in
default thereunder. Except as set forth on Schedule 2.14, none of the
assets belonging to or held by CP&I will be, on the Closing Date,
subject to any (i) Contracts of sale or lease, or (ii) Liens other than
Permitted Liens. Except for normal breakdowns and servicing
requirements, all machinery and equipment regularly used by CP&I in the
conduct of its laboratory business is in good operating condition and
repair, ordinary wear and tear excepted.
(c) There has not been since December 31, 1995, and will not
be prior to the Closing Date, any sale, lease, or any other disposition
or distribution by CP&I of any of its assets or properties and any
other assets now or hereafter owned by it, except (i) transactions in
the ordinary and regular course of business, (ii) the transactions
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contemplated by Section 4.9, and (iii) as otherwise consented to by the
Purchaser. At the Closing, CP&I will own, or have the right to use, all
properties and assets that are currently used in connection with the
non-medical practice business of the Seller.
(d) Schedule 2.14 attached hereto also sets forth a
description of all real and personal property in excess of $1,000 owned
or leased by CP&I (as it relates to its laboratory business).
2.15 Litigation. Except as set forth in Schedule 2.15, there is no
Claim (as defined in Section 12.3) pending or, to the best knowledge of the
Seller and CP&I, threatened against either of the Seller or CP&I which, if
adversely determined, would have a Material Adverse Effect on CP&I. Nor is there
any Order outstanding against either the Seller or CP&I having, or which,
insofar as can reasonably be foreseen, in the future may have, a Material
Adverse Effect on CP&I. The Seller agrees to indemnify and hold the Purchaser
harmless from any loss, charge, expense, Claim or liability with respect to the
litigation set forth on Schedule 2.15.
2.16 Tax Matters.
(a) CP&I has filed all federal, state, and local tax reports,
returns, information returns and other documents (collectively, the
"Tax Returns") required to be filed with any federal, state, local or
other taxing authorities (each a "Taxing Authority", collectively, the
"Taxing Authorities") in respect of all relevant taxes, including
without limitation income, premium, gross receipts, net proceeds,
alternative or add-on minimum, ad valorem, value added, turnover,
sales, use, property, personal property (tangible and intangible),
stamp, leasing, lease, user, excise, duty, franchise, transfer,
license, withholding, payroll, employment, fuel, excess profits,
occupational and interest equalization, windfall profits, severance
(including interest and penalties) (collectively, the "Taxes") and in
accordance with all tax sharing agreements to which the Seller or CP&I
may be a party. Except as provided in Section 6.15, all Taxes required
to be paid on or prior to the Closing Date have been paid, including
any of CP&I's Taxes due as a result of the consummation of the
transactions contemplated by this Agreement. All Taxes which are
required to be withheld or collected by CP&I have been duly withheld or
collected and, to the extent required, have been paid to the proper
Taxing Authority or properly segregated or deposited as required by
applicable laws. There are no Liens for Taxes upon any property or
assets of CP&I except for liens for Taxes not yet due and payable.
Neither the Seller nor CP&I has executed a waiver of the statute of
limitations on the right of the Internal Revenue Service or any other
Taxing Authority to assess additional Taxes or to contest the income or
loss with respect to any Tax Return. The basis of any depreciable
assets, and the methods used in determining allowable depreciation
(including cost recovery), is correct and in compliance with the
Internal Revenue Code of 1986, as amended and the regulations
thereunder (the "Code").
(b) No audit of CP&I or CP&I's Tax Returns by any Taxing
Authority is currently pending or threatened, and no issues have been
raised by any Taxing Authority
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in connection with any Tax Returns. No material issues have
been raised in any examination by any Taxing Authority with respect to
CP&I which reasonably could be expected to result in a proposed
deficiency for any other period not so examined, and there are no
unresolved issues or unpaid deficiencies relating to such examinations.
The items relating to the business, properties or operations of CP&I on
the Tax Returns filed by or on behalf of CP&I for all taxable years
(including the supporting schedules filed therewith), available copies
of which have been supplied to the Purchaser, state accurately the
information requested with respect to CP&I and such information was
derived from the books and records of CP&I, except for the Tax
Liability referred to in Section 6.15.
(c) CP&I has not made nor has become obligated to make, nor
will as a result of any event connected with the Closing become
obligated to make, any "excess parachute payment" as defined in Section
280G of the Code (without regard to subsection (b)(4) thereof).
2.17 Compliance with Law and Applicable Government Regulations. CP&I is
presently complying in respect of its operations, equipment, practices, real
property, plants, laboratories, structures, and other property, and all other
aspects of its business and operations, with all applicable Regulations and
Orders, including, but not limited to, Health Care Laws (as defined in Section
12.3), all Regulations relating to the safe conduct of business, environmental
protection, quality and labeling, antitrust, Taxes, consumer protection, equal
opportunity, discrimination, health, sanitation, fire, zoning, building and
occupational safety where such failure or failures would individually or in the
aggregate have a Material Adverse Effect. There are no Claims pending, nor to
the best knowledge of CP&I are there any Claims threatened, nor has the Seller
received any written notice, regarding any violations of any Regulations and
Orders enforced by any Authority claiming jurisdiction over CP&I, including any
requirement of OSHA or any pollution and environmental control agency (including
air and water).
(a) Schedule 2.17(a) attached hereto sets forth all permits,
licenses, provider numbers, orders, franchises and approvals
(collectively, "Permits") from all Federal, state, local and foreign
governmental regulatory bodies held by CP&I for its laboratory
business. The Permits listed on Schedule 2.17(a) are the only Permits
that are required for CP&I to conduct its laboratory business as
presently conducted, except for those the absence of which would not
have any Material Adverse Effect in respect of CP&I. Each such Permit
is in full force and effect and, to the best of the knowledge of CP&I,
no suspension or cancellation of any such Permit is threatened and
there is no basis for believing that such Permit will not be renewable
upon expiration.
(b) CP&I has licenses to provide health care services in the
jurisdictions set forth in Schedule 2.17(b) hereto, which such licenses
are all those necessary to conduct the laboratory business of CP&I in
the jurisdictions in which CP&I presently operates. Except as set forth
on Schedule 2.17(b), neither the Seller nor CP&I is aware of any event,
transaction, correspondence or circumstance (other than lapse of time)
which would
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have, or could foreseeably have, a Material Adverse Effect on one or
more of such licenses.
2.18 ERISA and Related Matters.
(a) Benefit Plans; Obligations to Employees. Except as set
forth in Schedule 2.18 hereto, neither CP&I, nor any ERISA Affiliate of
CP&I, is a party to or participates in or has any liability or
contingent liability with respect to:
(i) any "employee welfare benefit plan" or "employee
pension benefit plan" or "multi-employer plan" (as those terms
are respectively defined in Sections 3(1), 3(2) and 3(37) of
ERISA);
(ii) any retirement or deferred compensation plan,
incentive compensation plan, stock plan, unemployment
compensation plan, vacation pay, severance pay, bonus or
benefit arrangement, insurance or hospitalization program or
any other fringe benefit arrangements for any employee,
director, consultant or agent, whether pursuant to contract,
arrangement, custom or informal understanding, which does not
constitute an "employee benefit plan" (as defined in Section
3(3) of ERISA); or
(iii) any employment agreement not terminable on 30
days' or less written notice, without further liability.
For purposes of this Section, the term "ERISA
Affiliate" shall mean any trade or business, whether or not
incorporated, that together with CP&I would be deemed a "single
employer" within the meaning of Section 4001(b)(i) of ERISA.
(b) Plan Documents and Reports. A true and correct copy of
each of the Benefit Plans listed on Schedule 2.18, and all contracts
relating thereto, or to the funding thereof, including, without
limitation, all trust agreements, insurance contracts, investment
management agreements, subscription and participation agreements and
record keeping agreements, each as in effect on the date hereof, has
been supplied to the Purchaser. In the case of any Benefit Plan that is
not in written form, the Purchaser has been supplied with an accurate
description of such Benefit Plan as in effect on the date hereof. A
true and correct copy of the three most recent annual reports and
accompanying schedules, the three most recent actuarial reports, and
the most recent summary plan description and Internal Revenue Service
determination letter with respect to each such Benefit Plan, to the
extent applicable, and a current schedule of assets (and the fair
market value thereof assuming liquidation of any asset which is not
readily tradeable) held with respect to any funded Benefit Plan has
been supplied to the Purchaser by CP&I, and there have been no material
changes in the financial condition in the respective Plans from that
stated in the annual reports and actuarial reports supplied.
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(c) Compliance with Laws; Liabilities. As to all Benefit
Plans, except as otherwise specified on Schedule 2.18, CP&I is in
compliance in all material respects with the terms of all Benefit plans
and every Benefit Plan is in compliance with all of the requirements
and provisions of ERISA and all other laws and regulations applicable
thereto, including without limitation the timely filing of all annual
reports or other filings required with respect to such Benefit Plans.
None of the assets of any Benefit Plan are invested in employer
securities or employer real property, as those terms are defined in
Section 407(d) of ERISA. There have been no "prohibited transactions"
(as described in Section 406 of ERISA or Section 4975 of the Code) with
respect to any Benefit Plan and neither CP&I nor any ERISA Affiliate of
CP&I has otherwise engaged in any prohibited transaction. There has
been no "accumulated funding deficiency" as defined in Section 302 of
ERISA, nor has any reportable event as defined in Section 4043(b) of
ERISA occurred with respect to any Benefit Plan. Actuarially adequate
accruals for all obligations or contingent obligations under the
Benefit Plans are reflected in CP&I's balance sheet for the fiscal year
ended December 31, 1995 included in Financial Statements provided to
the Purchaser and such obligations include a pro rata amount of the
contributions which would otherwise have been made in accordance with
past practices for the plan years which include the closing date.
2.19 Intellectual Property.
(a) Except as set forth on Schedule 2.19, CP&I has no trade
name, service xxxx, patent, copyright or trademark related to its
business.
(b) CP&I has the right to use each Proprietary Right listed in
Schedule 2.19, and except as otherwise set forth therein, each of such
Proprietary Rights is, and will be on the Closing Date, free and clear
of all royalty obligations and Liens. There are no Claims pending, or
to the best knowledge of the Seller, threatened, against the Seller
that its use of any of the Proprietary Rights listed on Schedule 2.19
infringes the rights of any Person. The Seller has no knowledge of any
conflicting use of any of such Proprietary Rights.
(c) CP&I is not a party in any capacity to any franchise,
license or royalty agreement respecting any Proprietary Right and there
is no conflict known to the Seller with the rights of others in respect
to any Proprietary Right now used in the conduct of its business.
(d) Internal Software Applications.
(i) Owned Software. The current software applications
used by CP&I in the operation of its business, as set forth
and described on Schedule 2.19(d) hereto (the "Software"), to
the extent it has been designed or developed by CP&I's
management information or development staff or by consultants
on CP&I's behalf, is original and capable of copyright
protection in the United States, and CP&I has
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complete rights to and ownership of such Software. To
the Seller's knowledge, no part of any such Software is an
imitation or copy of, or infringes upon, the software of any
other Person or violates or infringes upon any common law or
statutory rights of any other Person, including, without
limitation, contractual rights, copyrights and trade secrets.
CP&I has not sold, assigned, licensed, distributed or in any
other way disposed of or encumbered the Software.
(ii) Licensed Software. The Software, to the extent
it is licensed from any third party licensor or constitutes
"off-the-shelf" or "tailored" software, is held by CP&I
legitimately and is fully useable by the Purchaser without any
third party consent. All of CP&I's computer hardware regularly
used by CP&I in its business has legitimately-licensed
software installed therein.
(iii) No Errors; Nonconformity. The Seller and CP&I,
to the best of their respective knowledge, after due inquiry
of employees and agents of CP&I who work with or are
knowledgeable about CP&I's computers and software, warrant
that the Software is free from any significant software defect
or programming or documentation error, operates and runs in a
reasonable and efficient business manner.
2.20 Environmental Matters. Except as disclosed in Schedule 2.20: (a)
neither CP&I's business nor the operation thereof violates any applicable
Environmental Law (as defined in Section 12.3) in effect as of the date hereof
and no condition or occurrence (any accident, happening or event which occurs or
has occurred at any time prior to the Closing Date, which results in or could
result in a Claim against CP&I or the Purchaser or creates or could create a
liability or loss for CP&I or the Purchaser) which, with notice or the passage
of time or both, would constitute a violation of any Environmental Law; (b) CP&I
is in possession of all Environmental Permits (as defined in Section 12.3)
required under any applicable Environmental Law for the conduct or operation of
CP&I's laboratory business, and CP&I is in full compliance with all of the
requirements and limitations included in such Environmental Permits; (c) CP&I
has not stored or used and is not storing or using any pollutants, contaminants
or hazardous or toxic wastes, substances or materials on or at any of its
property or facilities except for inventories of chemicals which are used or to
be used in the ordinary course of CP&I's business (which inventories have been
sorted or used in accordance with all applicable Environmental Permits and all
Environmental Laws, including all so-called "Right to Know" laws); (d) CP&I has
not received any notice from any Authority or any private Person that CP&I's
business or the operation of any of its facilities is in violation of any
Environmental Law or any Environmental Permit or that it is responsible (or
potentially responsible) for the cleanup of any pollutants, contaminants, or
hazardous or toxic wastes, substances or materials at, on or beneath any of
CP&I's property, or at, on or beneath any land adjacent thereto or in connection
with any waste or contamination site; (e) To the knowledge of CP&I or the
Seller, CP&I is not the subject of any Federal, state, local, or private Claim
involving a demand for damages or other potential liability with respect to a
violation of Environmental Laws or under any common law theories relating to
operations or the condition of any facilities or property (including underlying
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groundwater) owned, leased, or operated by CP&I; (f) CP&I has not buried,
dumped, disposed, spilled or released any pollutants, contaminants or hazardous
or wastes, substances or materials on, beneath or adjacent to any of its
property or any property adjacent thereto in violation of any applicable
Environmental Law; (g) no by-products of any manufacturing process employed in
the operation of CP&I's business which may constitute pollutants, contaminants
or hazardous or toxic wastes, substances or materials under any Environmental
Law are currently stored or otherwise located on any of CP&I's property in a
manner that violates any applicable Environmental Law; (h) no property now or
previously owned, leased or operated by CP&I, is listed or proposed for listing
on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any
other federal or state list of sites requiring investigation or clean-up; (i)
there are no underground storage tanks, active or abandoned, including petroleum
storage tanks, on or under any property now or previously owned, leased or
operated by CP&I that would subject CP&I to Claims for violation of any
applicable Environmental Law; (j) CP&I has not directly transported or directly
arranged for the transportation of any Hazardous Material to any location which
is listed on the National Priorities List pursuant to CERCLA, on the CERCLIS or
on any federal or state list or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to material Claims
against CP&I for any remedial work, damage to natural resources or personal
injury, including Claims under CERCLA; and (k) there are no polychlorinated
biphenyls, radioactive materials or friable asbestos present at any property now
or previously owned or leased by CP&I that would subject CP&I to Claims for
violation of any applicable Environmental Law. CP&I has timely filed all reports
required to be filed with respect to all of its property and facilities and has
generated and maintained all required data, documentation and records under all
applicable Environmental Laws.
2.21 Dealings with Affiliates. Schedule 2.21 hereto sets forth a
complete list, including the parties, of all oral or written agreements and
arrangements to which CP&I is, will be or has been a party, at any time from
January 1, 1994 to the Closing Date, and to which any one or more Affiliates is
also a party, to the extent that either CP&I or any of such Affiliates will have
any rights or obligations or any liabilities thereunder after the Closing Date,
other than the Employment Agreement, this Agreement, the Contingent Note and the
Lease.
2.22 Banking Arrangements. Schedule 2.22 attached hereto sets forth the
name of each bank in or with which CP&I has an account, credit line or safety
deposit box, and a brief description of each such account, credit line or safety
deposit box, including the names of all Persons currently authorized to draw
thereon or having access thereto. CP&I has no liability or obligation relating
to funds or money borrowed by or loaned to CP&I (whether under any credit
facility, line of credit, loan, indenture, advance, pledge or otherwise), other
than accounts payable in the ordinary course of business consistent with past
practice.
2.23 Insurance. Schedule 2.23 attached hereto sets forth a list and
brief description, including dollar amounts of coverage, of all policies of
fire, liability, professional liability and other forms of insurance held by
CP&I as of the date hereof. Such policies are valid, outstanding and enforceable
policies, as to which premiums have been paid currently. Except as set forth in
Section 2.15, neither CP&I nor the Seller know of any event that has occurred
which might
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reasonably (a) form the basis for any Claim against CP&I not fully covered by
insurance for liability on account of any express or implied warranty or
tortious omission or commission, or (b) result in material increase in insurance
premiums of CP&I.
2.24 Consents. Schedule 2.24, annexed hereto, sets forth a complete
list of consents of Authorities required to be received by or on the part of
CP&I and the Seller to enable CP&I or the Seller to enter into and carry out
this Agreement in all material respects. All such requisite consents have been,
or prior to the Closing will have been, obtained.
2.25 Investment Representations. In the event, in connection with this
Agreement or any agreement or transaction contemplated hereby, AmeriPath offers
or sells, or is deemed to offer or sell, any securities of AmeriPath to the
Seller (including AmeriPath Stock pursuant to Section 1.3), then the Seller
hereby represents and warrants to AmeriPath as follows:
(a) The Seller has been offered, and up to the Closing Date
and the time(s) of issuance of the AmeriPath Stock shall be offered,
the opportunity to ask questions of, and receive answers from,
AmeriPath and its Subsidiaries, and the Seller has been given full and
complete access to all available information and data relating to the
business and assets of AmeriPath and its Subsidiaries, has obtained
such additional information about AmeriPath and its Subsidiaries which
the Seller has deemed necessary in order to evaluate the opportunities,
both financial and otherwise, with respect to AmeriPath and, except as
set forth herein, has not relied on any representation, warranty or
other statement concerning the Purchaser and its Subsidiaries in his
evaluation of the decision to consummate the transactions contemplated
herein. On the basis of the foregoing, the Seller is familiar with the
operations, business plans and financial condition of AmeriPath.
(b) The Seller understands, agrees and acknowledges that the
AmeriPath Stock has not been registered under the Securities Act or the
Securities Act of Ohio in reliance upon exemption provisions contained
therein which AmeriPath believes are available based upon
representations made herein by the Seller.
(c) The Seller understands that he must bear the economic risk
of the AmeriPath Stock, if and when issued to the Seller, for an
indefinite period of time because, except as provided in this
Agreement, (i) the Seller understands that AmeriPath proposes to issue
and deliver the shares of AmeriPath Stock issuable in accordance with
this Agreement, without compliance with the registration requirements
of the Securities Act, that for such purpose AmeriPath will rely upon
the representations, warranties, covenants and agreements contained
herein; and that such noncompliance with registration is not
permissible unless such representations and warranties are correct and
such covenants and agreements are performed at and as of the time of
issuance; (ii) the Seller understands that, under existing rules of the
SEC, there are substantial restrictions in the transferability of his
shares of AmeriPath Stock; his shares of AmeriPath Stock may be
transferred only if registered under the Securities Act or if an
exemption from such registration is available; the Seller may not be
able to avail himself of the provisions of
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Rule 144 promulgated by the SEC under the Securities Act with
respect to the transfer of such shares; (iii) the AmeriPath Stock may
not be sold, transferred, pledged, or otherwise disposed of without an
opinion of counsel for or reasonably satisfactory to AmeriPath that
registration under the Securities Act or any applicable state
securities laws is not required; and (iv) AmeriPath neither has an
obligation to register a sale of the AmeriPath Stock held by the Seller
nor has it agreed to do so in the future.
(d) The Seller is an "accredited investor", as such term is
defined in Rule 501 of Regulation D promulgated under the Securities
Act in that, as of the date of this Agreement, he either (a) (either
individually or jointly with his spouse) has a net worth in excess of
$1,000,000; or (b) had an individual income in excess of $200,000 in
each of the two most recent years or joint income with his spouse in
excess of $300,000 in each of those years, and reasonably expects
reaching the same income level in the current year.
(e) The Seller is a sophisticated investor familiar with the
type of risks inherent in the acquisition of securities such as the
shares of AmeriPath Stock and the Seller's financial position is such
that the Seller can afford to retain his shares of AmeriPath Stock for
an indefinite period of time without realizing any direct or indirect
cash return on the Seller's investment.
(f) The Seller is acquiring his shares of AmeriPath Stock for
the Seller's own account and not with a view to, or for sale in
connection with, the distribution thereof within the meaning of the
Securities Act.
(g) The Seller understands that the certificates evidencing
his shares of AmeriPath Stock, when and if issued, will bear
appropriate restrictive legends.
2.26 Accounts Receivable; Inventories. The accounts receivable of CP&I
reflected on Schedule 2.26 attached hereto on the date hereof are good, valid,
genuine and subsisting, arise out of bona fide sales and deliveries of goods,
performance of services or other business transactions and, to the best of the
Seller's knowledge, are collectible, subject to allowances, adjustments and
write-offs in the ordinary course of business consistent with past practice. The
inventories reflected on the balance sheets included in the Financial
Statements, and the inventories held by CP&I on the date hereof, (i) do not
include any items which are not usable or saleable in the ordinary course of
business of CP&I, and (ii) have been reflected on such balance sheets at the
lower of cost or market value (taking into account the usability or salability
thereof), in accordance with GAAP. All such inventories are owned free and clear
and are not subject to any Lien except to the extent reserved against or
reflected in the Financial Statements. Since December 31, 1995, inventories of
raw materials and supplies have been purchased by CP&I in the ordinary course of
business, consistent with anticipated seasonal requirements, and the volumes of
purchases thereof and orders therefor have not been reduced or otherwise changed
in anticipation of the transactions contemplated by this Agreement. CP&I is not
aware of any material adverse conditions affecting the supply of materials
available to CP&I, and, to the best
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knowledge of CP&I, the consummation of the transactions contemplated hereby will
not adversely affect any such supply.
2.27 Brokerage. Neither CP&I nor the Seller has employed any broker,
finder, advisor, consultant or other intermediary in connection with this
Agreement or the transactions contemplated by this Agreement who is or might be
entitled to any fee, commission or other compensation from CP&I or the Seller,
or from the Purchaser or its Affiliates, upon or as a result of the execution of
this Agreement or the consummation of the transactions contemplated hereby;
provided, however, that the Seller has engaged Haverford Healthcare Advisors
(the "Haverford"), to act as broker and financial consultant in connection with
the transactions contemplated by this Agreement, and in the event the
transactions contemplated by this Agreement are consummated, Haverford shall be
entitled to a specified fee to be paid by the Seller. The Seller is solely
responsible for paying the fees and expenses of Haverford.
2.28 Improper and Other Payments. Except as set forth on Schedule 2.28
hereto, (a) neither CP&I, any director, officer, employee thereof, nor, to
CP&I's knowledge, any agent or representative of CP&I nor any Person acting on
behalf of any of them, has made, paid or received any unlawful bribes, kickbacks
or other similar payments to or from any Person or Authority, (b) no improper
foreign payment (as defined in the Foreign Corrupt Practices Act) has been made,
and (c) the internal accounting controls of CP&I are believed by CP&I's
management to be adequate to detect any of the foregoing under current
circumstances.
2.29 Participation in Audits. Except as set forth in Schedule 2.29,
CP&I has not been informed of any Recoupment Claims (as hereinafter defined)
arising in connection with audits or reviews conducted by Medicaid, Medicare or
private insurance companies. To the best of the knowledge of CP&I and the Seller
there is no basis for any Recoupment Claims based upon cost reports, claims or
bills submitted or to be submitted in connection with services rendered by CP&I.
For purposes of this Section 2.29 the term "Recoupment Claim" shall mean any
recoupment or overpayment, set-off, penalty or fine, pending or to the knowledge
of CP&I and the Seller threatened by any third-party payor or governmental
authority having jurisdiction over CP&I for amounts arising from or related to
payments to CP&I for services rendered prior to the Closing.
2.30 Health Care Laws & Regulations.
(a) Fraud and Abuse. Except as set forth on Schedule 2.30(a),
to the best of the Seller's and CP&I's knowledge, CP&I and its
officers, directors, employees, shareholders and providers, have not
engaged in any activities which are prohibited under federal Medicaid
statues, 42 U.S.C. Section 1320a-7a and 7b, or the regulations
promulgated pursuant to such statutes or related state or local
statutes or regulations or which are prohibited by rules of
professional conduct or which otherwise could constitute fraud,
including but not limited to the following: (i) making or causing to be
made a false statement or representation of a material fact in any
application for any benefit or payment; (ii) making or causing to be
made any false statement or representation of a
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material fact for use in determining rights to any benefit or
payment; (iii) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any
benefit or payment on its behalf or on behalf of another, with intent
to secure such benefit or payment fraudulently; and (iv) soliciting,
paying or receiving any remuneration (including any kickback, bribe, or
rebate), directly or indirectly, overtly or covertly, in cash or in
kind or offering to pay such enumeration (a) in return for referring an
individual to a Person for the furnishing or arranging for the
furnishing of any item or service for which payment may be made in
whole or in part by Medicare or Medicaid, or (b) in return for
purchasing, leasing, or ordering or arranging for or recommending
purchasing, leasing, or ordering any good, facility, service, or item
for which payment may be made in whole or in part by Medicaid; subject,
in the case of (iv) to the lack of clarity in the law relating to the
marketing of Medicare risk products by brokers.
(b) Third-Party Payors. All Contracts with third-party payors
were entered into by CP&I in the ordinary course of business. CP&I will
have made available to the Purchaser, as of the Closing Date, an
accurate and complete list of all third-party payors which have
agreements with CP&I (as set forth on Schedule 2.30(b)), together with
accurate and complete copies of all such Contracts. Except as set forth
on Schedule 2.30(b), CP&I is in compliance with each third-party
payor's Contract, and CP&I has properly charged and billed in
accordance with the terms of those Contracts, including, where
applicable, billing and collection of all deductibles and co-payments.
(c) Compliance with Medicare and Medicaid Programs. CP&I has
timely and accurately filed all requisite claims and other reports
required to be filed in connection with all state and federal Medicare
and Medicaid programs in which CP&I participates due on or before the
Closing Date except to the extent that the failure to file such claims
and reports would not result in a Material Adverse Effect on CP&I.
Except as set forth on Schedule 2.30(c) hereto, there are no Claims
pending or, to CP&I's knowledge, threatened or scheduled before any
Authority, including without limitation, any intermediary, carrier, the
Administrator of the Health Care Financing Administration, the
Department of Health and Rehabilitative Services, the Agency for Health
Care Administration or any other state or federal agency with respect
to any Medicare and Medicaid claim filed by CP&I on or before the
Closing Date, or program compliance matters, which would have a
Material Adverse Effect on CP&I, or its assets, the operations or
utility thereof, or the consummation of the transactions contemplated
hereby. CP&I has delivered to the Purchaser accurate and complete
copies of any Claims, actions or appeals listed on Schedule 2.30(c).
Except for routinely scheduled reviews pursuant to CP&I's Medicare and
Medicaid Contracts, no valid review or program integrity review related
to CP&I has been conducted by any Authority in connection with the
Medicare or Medicaid programs and no such review is scheduled, or to
CP&I's knowledge, pending or threatened against or affecting CP&I, its
business, assets, or the consummation of the transactions contemplated
hereby.
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(d) Rate Limitations and Rates. Each facility currently
operated by CP&I charges rates and accordingly bills for services which
are legal and proper, and CP&I's standard and Medicare rates are set
forth on Schedule 2.30(d). Certain reimbursement rates established by
third-party payors are subject to retrospective adjustment, which
adjustments are set forth on said Schedule 2.30(d).
(e) Reimbursement Documentation. CP&I has filed when due any
and all cost reports and other documentation and reports, if any,
required to be filed by third-party payors and governmental agencies in
compliance with applicable contractual provisions and/or laws,
regulations and rules.
(f) Patient Referrals. No Person having a "financial
relationship" with CP&I, as that term is defined in 42 U.S.C. Section
1395nn, has referred patients or services directly or indirectly to
CP&I, other than referrals which comply with the requirements of 42
U.S.C. Section 1395nn and the regulations promulgated pursuant thereto.
2.31 Financial Condition at Closing. At and as of Closing, CP&I shall
have current assets less liabilities ("Positive Working Capital") of not less
than $141,000.00.
2.32 Disclosure. Neither this Agreement nor any of the exhibits,
attachments, or schedules hereto supplied to the Purchaser by or on behalf of
the Seller or CP&I with respect to the transactions contemplated hereby contains
any untrue statement of a material fact or omits a material fact necessary to
make each statement contained herein or therein not misleading in light of the
circumstances in which made.
2.33 Limitation. The Seller and CP&I make no representations or
warranties of any kind, express or implied, concerning the Management Agreement
(as hereinafter defined), notwithstanding anything to the contrary in this
Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as follows:
3.1 Corporate Organization, etc. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and to own, operate and lease its
properties and assets. The Purchaser is duly qualified or licensed to do
business in good standing in every jurisdiction in which the conduct of its
business, the ownership or lease of its properties, the proposed conduct of its
business or ownership or lease of its properties, require it to be so qualified
or licensed and the failure to be so qualified or licensed would have a Material
Adverse Effect on its business. True, complete and correct copies of the
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Purchaser's certificate of incorporation and by-laws, as presently in effect,
are attached hereto as Exhibit 3.1.
3.2 Subsidiaries. As of September 25, 1996, other than the subsidiaries
of the Purchaser listed in Schedule 3.2 hereto, the Purchaser has no
Subsidiaries.
3.3 Authorization, Etc. The Purchaser has full corporate power and
authority to enter into this Agreement, the Management Agreement, the Trust
Agreement, the Escrow Agreement and the Contingent Notes and to carry out the
transactions contemplated hereby and thereby. The Board of Directors of the
Purchaser has duly authorized the execution, delivery and performance of this
Agreement, the Employment Agreement, the Contingent Notes, the Management
Agreement, the Trust Agreement, the Escrow Agreement and the other agreements
and transactions contemplated hereby, and no other corporate proceedings on its
part are necessary to authorize this Agreement and the transactions
contemplated hereby and thereby. Upon execution and delivery of this Agreement,
the Employment Agreement, the Trust Agreement, the Management Agreement and the
Escrow Agreement by the parties hereto and thereto this Agreement, the
Employment Agreement, the Trust Agreement, the Management Agreement and the
Escrow Agreement shall, and upon issuance of the Contingent Notes in accordance
with the provisions hereof the Contingent Notes shall, constitute legal, valid
and binding obligations of the Purchaser, enforceable against the Purchaser in
accordance with their respective terms, except to the extent that the
enforcement thereof may be limited by applicable (i) bankruptcy, reorganization,
insolvency, and similar laws affecting the enforcement of creditors' rights and
(ii) equitable principles.
3.4 No Violation. The execution, delivery and performance by the
Purchaser of this Agreement, the Management Agreement, the Trust Agreement, the
Escrow Agreement, the Contingent Notes and all other agreements contemplated
hereby, and the fulfillment of and compliance with the respective terms hereof
and thereof by the Purchaser, do not (a) conflict with or result in a breach of
the terms, conditions or provisions of, (b) result in a violation of, or (c)
require any authorization, consent, approval, exemption or other action by or
notice to any Authority pursuant to, the certificate of incorporation or by-laws
of the Purchaser, or any Regulation to which the Purchaser is subject, or any
Contract or Order to which the Purchaser or its properties are subject. The
Purchaser will comply with all applicable Regulations and Orders in connection
with the execution, delivery and performance of this Agreement, the Employment
Agreement, the Management Agreement, the Trust Agreement, the Escrow Agreement,
the Contingent Notes, as applicable, and the transactions contemplated hereby
and thereby.
3.5 Governmental Authorities. The Purchaser has complied in all
material respects with all applicable Regulations and Orders in connection with
its execution, delivery and performance of this Agreement, the Trust Agreement,
the Management Agreement, the Contingent Notes and the agreements and
transactions contemplated hereby and thereby. The Purchaser is not required to
submit any notice, report, or other filing with any governmental authority in
connection with its execution or delivery of this Agreement, the Management
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Agreement, the Trust Agreement, the Contingent Notes or the consummation of the
transactions contemplated hereby and thereby. No authorization, consent,
approval, exemption or notice is required to be obtained by the Purchaser in
connection with its execution, delivery, and performance of this Agreement, the
Management Agreement, the Trust Agreement, the Contingent Notes and the
agreements and transactions contemplated hereby and thereby.
3.6 Issuance of AmeriPath Stock. All shares of AmeriPath Stock required
to be issued by AmeriPath to the Seller, in accordance with the terms and
subject to the conditions set forth in this Agreement, shall, upon issuance and
delivery, be duly authorized, validly issued, fully paid and non-assessable,
free and clear of all Liens and adverse Claims, except as provided in this
Agreement.
3.7 Financial Statements. Attached as Exhibit 3.7 hereto are the
following financial statements of AmeriPath ("American Laboratory Associates,
Inc.," the predecessor company): audited balance sheet, income statement, and
statement of cash flows and related notes thereto, for the fiscal years ended
December 31, 1995 and 1994 (the "Audited Financial Statements"), and (ii)
AmeriPath's consolidated balance sheet (unaudited), consolidated income
statement (unaudited) and statement of cash flows (unaudited), for the six month
period ended June 30, 1996 (collectively, together with the Audited Financial
Statements, the "AmeriPath Financial Statements"). The balance sheets included
in the AmeriPath Financial Statements fairly present the financial position of
AmeriPath in accordance with GAAP, as at the respective dates thereof, and the
income statements included in the Financial Statements (x) fairly present the
results of operations for the periods therein referred to, all in accordance
with GAAP applied on a consistent basis, and (y) fairly present the financial
condition of AmeriPath as of the respective dates and for the periods covered
by, such statements. As used in this Section 3.7, "AmeriPath" means and refers
to the predecessor business and operations of AmeriPath, before AmeriPath and
its subsidiaries were reorganized into a holding company structure (which took
place effective February 29, 1996).
3.8 Capitalization; Options. As of the date hereof, the authorized
capital stock of AmeriPath consists of (i) 8,000,000 shares of Common Stock and
(ii) 5,000,000 shares of Preferred Stock, $.01 par vale per share. The stock
record book of AmeriPath has been made available to CP&I for inspection prior to
the date hereof and is complete and correct, and all requisite Federal and State
documentary stamps have been affixed thereon and canceled. Except as set forth
on Schedule 3.8 hereof and other than securities issuable or to be issuable in
connection with acquisitions of pathology practices or the Purchaser's
predecessor there are no outstanding subscriptions, options, warrants, rights,
securities, contracts, commitments, understandings or arrangements under which
AmeriPath is bound or obligated to issue any additional shares of its capital
stock or rights to purchase shares of its capital stock. Except as set forth on
Schedule 3.8, other than the Shareholders' Agreement, agreements related to
acquisitions of pathology practices or the Purchaser's predecessor and the
Purchaser's credit facility, there are no agreements, arrangements or
understandings between the Purchaser and any other Person regarding the
AmeriPath Stock (or the transfer, disposition, holding or voting thereof). True,
correct and complete copies of the Shareholders' Agreement, the Purchaser's
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credit facility and each of the agreements referred to in Schedule 3.8 have been
furnished to the Seller.
3.9 Compliance with Material Laws and Regulations. AmeriPath is
presently complying in respect of its operations, equipment, practices, real
property, plants, laboratories, structures, and other property, and all other
aspects of its business and operations, with all applicable Regulations and
Orders, including, but not limited to, Health Care Laws, all Regulations
relating to the safe conduct of business, environmental protection, quality and
labeling, antitrust, Taxes, consumer protection, equal opportunity,
discrimination, health, sanitation, fire, zoning, building and occupational
safety where such failure or failures would individually or in the aggregate
have a Material Adverse Effect. There are no Claims pending, nor to the best
knowledge of AmeriPath are there any Claims threatened, nor has the Company
received any written notice, regarding any violations of any Regulations and
Orders enforced by any Authority claiming jurisdiction over AmeriPath,
including any requirement of OSHA or any pollution and environmental control
agency (including air and water). AmeriPath has licenses to provide health care
services in each jurisdiction in which it currently operates.
3.10 Litigation. Except as set forth in Schedule 3.10, there is no
Claim pending or, to the best knowledge of the Purchaser, threatened against the
Purchaser which, if adversely determined, would have a Material Adverse Effect
on the Purchaser. Nor is there any Order outstanding against the Purchaser
having, or which, insofar as can reasonably be foreseen, in the future may have,
a Material Adverse Effect on the Purchaser.
3.11 Insurance. Schedule 3.11 attached hereto sets forth a list and
brief description, including dollar amounts of coverage, of all policies of
fire, liability, professional liability and other forms of insurance held by
AmeriPath. Such policies are valid, outstanding and enforceable policies, as to
which premiums have been paid currently.
3.12 Disclosure. Neither this Agreement nor any of the exhibits,
attachments, or schedules supplied to the Seller by or on behalf of the
Purchaser with respect to the transactions contemplated hereby contains any
untrue statement of a material fact or omits a material fact necessary to make
each statement contained herein or therein not misleading.
ARTICLE IV
COVENANTS OF THE SELLER
From the date hereof until the Closing, except as otherwise consented
to or approved by the Purchaser in writing, CP&I covenants and agrees that it
shall act, and the Seller shall cause CP&I to so act or refrain from acting
where required hereinafter, to comply with the following:
4.1 Regular Course of Business. CP&I shall operate its business
diligently and in good faith and in the ordinary and usual course, consistent
with past management practices; shall
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maintain its properties in good order and condition consistent with past
practice, shall maintain (except for expiration due to lapse of time) all
material leases and Contracts in effect without change except as expressly
provided herein; shall comply with the provisions of all Regulations and Orders
applicable to CP&I and the conduct of its respective business; shall not cancel,
release, waive or compromise any debt, Claim or right in its favor except in the
ordinary course of business; shall not alter the rate or basis of compensation
of any of its officers, directors or employees; shall maintain insurance
coverage as in effect on the date hereof up to the Closing Date; and shall
preserve the business of CP&I intact except as provided in Section 4.9, and use
its reasonable efforts to keep available for CP&I and the Purchaser the services
of the officers and employees of CP&I, and to preserve the good will of clients,
patients, suppliers and others having business relations with CP&I.
4.2 Amendments. No change or amendment shall be made in the articles of
incorporation or by-laws of CP&I. CP&I shall not merge with or into or
consolidate with any other corporation or Person, acquire substantially all of
the assets of any Person or change, except as provided in Section 4.9, the
character of its business.
4.3 Capital Changes; Pledges. Except as contemplated under this
Agreement, CP&I shall not issue or sell any shares of its capital stock of any
class or issue or sell any securities convertible into, or options, warrants to
purchase or rights to subscribe to, any shares of its capital stock and CP&I
shall not pledge or otherwise encumber any shares of its capital stock.
4.4 Dividends. CP&I shall not declare, pay or set aside for payment any
dividend or other distribution in respect of its capital stock to the extent
that any such distribution would result in a breach of Section 2.31, nor shall
CP&I, directly or indirectly, redeem, purchase or otherwise acquire any shares
of its capital stock.
4.5 Capital and Other Expenditures. CP&I shall not make any capital
expenditures, or commitments with respect thereto, except in the ordinary course
of business consistent with past practice.
4.6 Cash and Cash Equivalents. Cash and cash equivalents shall not be
expended to the extent such expenditure would result in a breach of Section
2.31.
4.7 Borrowing. CP&I shall not incur, assume or guarantee any
indebtedness, obligations or liabilities not reflected on the Financial
Statements (or the balance sheets included therein) except in the ordinary
course of business consistent with past practice or for purposes of consummation
of the transactions contemplated by this Agreement.
4.8 Other Commitments. Except as set forth in this Agreement or
incurred or transacted in the ordinary course of business, or permitted in
writing by the Purchaser, CP&I shall not enter into any transaction or make any
commitment or incur any obligation (including entering into any real property
leases).
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4.9 Transfer of Business. Prior to the Closing, CP&I shall transfer to
another Person certain of the assets and cause such person to assume all of the
liabilities relating to the medical practices of Drs. Michel, Xxxxxxx and
Wieselthier, other than those assets and liabilities of the laboratory business
as set forth on Schedule 4.9 hereto, which Schedule sets forth all the material
assets and liabilities to be retained by CP&I.
4.10 Interim Financial Information. To the extent prepared and
available, CP&I shall supply the Purchaser with unaudited financial statements
(including, without limitation, balance sheets and statements of revenues and
expenses) and information for each calendar month, promptly following the
conclusion of such month, and as the Purchaser may otherwise reasonably request.
4.11 Full Access and Disclosure.
(a) CP&I shall afford to the Purchaser and its counsel,
accountants and other authorized representatives reasonable access
during business hours to CP&I's facilities, properties, books and
records in order that the Purchaser may have full opportunity to make
such reasonable investigations as it shall desire to make of the
affairs of CP&I; and the Seller shall cause CP&I's officers, employees
and auditors to furnish such additional financial and operating data
and other information as the Purchaser shall from time to time
reasonably request including, without limitation, any internal control
recommendations applicable to CP&I made by CP&I's independent auditors
in connection with any examination of CP&I's Financial Statements and
books and records.
(b) From time to time prior to the Closing Date, CP&I shall
promptly supplement or amend information previously delivered to the
Purchaser with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have been
required to be set forth herein or disclosed.
(c) The Seller shall fully cooperate with any "due diligence"
examination performed by the Purchaser with respect to the business of
CP&I.
4.12 Confidentiality. The Seller and CP&I shall, and shall cause its
principals, officers and other personnel and authorized representatives to, hold
in confidence, and not disclose to any other party without the Purchaser's prior
consent, all written and oral information furnished or disclosed by or received
from the Purchaser or its officers, directors, employees, agents, counsel and
auditors in connection with the transactions contemplated hereby except as may
be required by applicable law or as otherwise contemplated herein.
4.13 Fulfillment of Conditions Precedent. CP&I and the Seller shall use
their reasonable efforts to obtain at their expense, on or prior to the Closing
Date, all such waivers, Permits, consents, approvals or other authorizations
from third parties and Authorities, and to do all things as may be necessary or
desirable in connection with the transactions contemplated by this
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Agreement in order to fully and expeditiously consummate the transactions
contemplated by this Agreement.
ARTICLE V
COVENANTS OF THE PURCHASER
The Purchaser hereby covenants and agrees with CP&I and the Seller that
prior to the Closing or the termination of this Agreement:
5.1 Confidentiality. The Purchaser shall, and shall cause its
principals, officers and other personnel and authorized representatives to, hold
in confidence, and not disclose to any other party without the Seller's prior
consent, all information received by it from the Seller or CP&I's officers,
directors, employees, agents, counsel and auditors in connection with the
transactions contemplated hereby except as may be required by applicable law or
as otherwise contemplated herein.
5.2 Full Access and Disclosure.
(a) The Purchaser shall afford to CP&I and the Seller, and
their counsel, accountants and other authorized representatives
reasonable access during business hours to the Purchaser's facilities,
properties, books and records in order that the Seller may have full
opportunity to make such reasonable investigations as they shall desire
to make of the affairs of the Purchaser; and the Purchaser shall cause
its officers, employees and auditors to furnish such additional
financial and operating data and other information as the Seller shall
from time to time reasonably request including, without limitation, any
internal control recommendations applicable to the Purchaser made by
the Purchaser's independent auditors in connection with any examination
of the Purchaser's financial statements and books and records.
(b) From time to time prior to the Closing Date, the Purchaser
shall promptly supplement or amend information previously delivered to
CP&I and/or the Seller with respect to any matter hereafter arising
which, if existing or occurring at the date of this Agreement, would
have been required to be set forth herein or disclosed.
(c) The Purchaser shall fully cooperate with any "due
diligence" examination performed by CP&I or the Seller with respect to
the business of the Purchaser. For purposes of this Section 5.2,
"Purchaser" shall mean and include AmeriPath and its Subsidiaries.
5.3 Fulfillment of Conditions Precedent. The Purchaser shall use its
reasonable efforts to obtain at its expense, on or prior to the Closing Date,
all such waivers, Permits, consents, approvals or other authorizations from
third parties and Authorities, and to do all things as may
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be necessary or desirable in connection with the transactions contemplated by
this Agreement in order to fully and expeditiously consummate the transactions
contemplated by this Agreement.
ARTICLE VI
OTHER AGREEMENTS
The parties hereto further agree, on or before the Closing Date, as
follows:
6.1 Further Assurances. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Regulations to consummate and
make effective the transactions contemplated by this Agreement. In furtherance
and not in limitation of the preceding sentence, the parties hereto shall use
reasonable efforts to cause the Closing to take place on or before October 30,
1996.
6.2 Agreement to Defend. In the event any action, suit, proceeding or
investigation of the nature specified in Sections 7.2 or 8.2 is commenced before
the Closing Date, all the parties hereto agree to cooperate and use reasonable
efforts to defend against and respond thereto.
6.3 Consents. Without limiting the generality of Section 6.1, each of
the parties hereto shall use reasonable efforts to obtain all permits,
authorizations, consents and approvals of all Persons and governmental
authorities necessary, proper or advisable in connection with the consummation
of the transactions contemplated by this Agreement prior to the Closing Date.
6.4 No Solicitation or Negotiation. Unless and until this Agreement is
terminated, except as may otherwise be required by Regulation or Order, neither
the Seller nor CP&I through its directors, officers, employees, representatives,
agents, advisors, accountants and attorneys shall initiate, solicit or
encourage, directly or indirectly, any inquiries or the making of any proposal
with respect to, or engage in negotiations concerning, or provide any
confidential information or data to any Person with respect to, or have any
discussions with any Persons relating to, any acquisition, business combination
or purchase of all or any significant asset of, or any equity interest in, CP&I,
or otherwise facilitate any effort or attempt to do or seek any of the
foregoing, and shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. Should CP&I or the Seller be contacted
with respect to any offer, inquiry or proposal, CP&I and the Seller shall
immediately advise the Purchaser in writing of the name, address and phone
number of the contact and the nature of the inquiry.
6.5 Public Announcements. Neither party hereto nor any Affiliate,
representative or shareholder of such Persons, shall disclose any of the terms
of this Agreement to any third party (other than the Purchaser's advisors and
senior lending group and the Seller's advisors) without the other party's prior
written consent unless required by any applicable law. The form, content
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and timing of any and all press releases, public announcements or publicity
statements (except for any disclosures under or pursuant to Federal or State
securities laws in connection with the registration of AmeriPath's securities or
otherwise) with respect to this Agreement or the transactions contemplated
hereby shall be subject to the prior approval of each party hereto. No press
releases, public announcements or publicity statements shall be released by
either party without prior mutual agreement.
6.6 Employment Agreements. The Seller shall enter into an employment
agreement in the form of Exhibit 6.6 hereto (the "Employment Agreement"). The
Purchaser hereby assumes and agrees to perform in accordance with their terms
(by or through CP&I), effective the Closing Date, the employment agreements with
Xxxx Xxxxxxx, M.D. and Xxxxx X. Xxxxxxxxxxx, M.D.
The parties hereto further agree, from and after the Closing Date, as
follows:
6.7 --DELETED--
6.8 Observer Rights. So long as the Seller is employed by an Affiliate
of AmeriPath and the Contingent Notes have not matured or been paid in full
(solely to the extent required to be paid under the Contingent Note), the Seller
shall have the right, at his expense, to attend all meetings of the Board of
Directors of AmeriPath as an observer. The Seller shall receive notices of all
meetings of the Board of Directors of AmeriPath, shall receive copies of all
materials supplied to the Directors of AmeriPath, and shall be entitled to
attend and participate in all meetings of the Board of Directors of AmeriPath;
provided, that the Seller shall have no right to vote on any matters submitted
to the Board of Directors (or any committee thereof). Nothing in this section
shall be deemed to prohibit AmeriPath from taking action by written consent of
the Board of Directors without notice to, or participation by, the Seller.
Furthermore, if the Directors of AmeriPath elect to convene a meeting without
notice, they shall use their best efforts to advise the Seller of such meeting,
but the failure or inability to advise the Seller of such meeting shall not
vitiate any action taken at such meeting. The Seller may be a member of the
physician's committee of AmeriPath, if and when such committee is constituted
from time to time.
6.9 Certain Tax Matters.
(a) The Seller shall cause CP&I to file all Tax Returns and
reports with respect to Taxes which are required to be filed prior to
the Closing date (a "Pre-Closing Tax Return"), and CP&I shall pay all
Taxes due in respect of, and all costs associated with the preparation
of, such Pre-Closing Tax Returns to the appropriate Taxing Authority.
In addition, the Seller shall cause CP&I to file all S corporation
income tax returns (federal form 1120S and comparable state and local
forms, where applicable) required to be filed after the Closing Date in
respect of a period beginning prior to the Closing Date. The Buyer
shall file, or cause CP&I to file, all other Tax Returns and reports
with respect to Taxes which are required to be filed on or after the
Closing Date, and Buyer and CP&I shall pay all Taxes due and costs
associated with such returns.
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(b) The parties hereto agree that there shall not be made any
election for the Company pursuant to Section 338(g) or 338(h)(10) of
the Code.
(c) CP&I shall elect, and the Purchaser and the Seller shall
each consent, pursuant to Section 1362(e)(3) of the Code, to allocate
tax items to CP&I's S short year and C short year (as defined in
Section 1362(e)(1) of the Code) pursuant to normal tax accounting rules
(i.e., using the closing of the books method) rather than by the pro
rata allocation method contained in Section 1362(e)2) of the Code.
(d) The Purchaser and CP&I agree to pay to the Seller the
amount of any federal, state and local income tax savings realized by
them (including with respect to the payment made pursuant to this
paragraph and any interest received by them) based on a final
determination of an adjustment (by reason of an amended return, claim
for refund, audit or other action) involving a decrease in CP&I's
taxable income for a taxable period ending after the Closing Date and a
corresponding increase in the federal, state or local, taxable income
of the Seller in respect of a taxable period ending on or before the
Closing Date.
(e) The Seller and CP&I agree to pay to the Purchaser the
amount of any federal, state and local income tax savings realized by
them (including with respect to the payment made pursuant to this
paragraph and any interest received by them) based on a final
determination of an adjustment (by reason of an amended return, claim
for refund, audit or other action) involving an increase in CP&I's
taxable income for a taxable period ending after the Closing Date and a
corresponding decrease in the federal, state or local, taxable income
of the Seller in respect of a taxable period ending on or before the
Closing Date.
6.10 Non-Competition Covenant.
(a) As a material and valuable inducement for the Purchaser to
enter into this Agreement, pay and deliver the Purchase Price
consideration and consummate the transactions provided for herein,
during the "Restricted Period" (as hereinafter defined), the Seller
agrees that he shall not, directly or indirectly, alone or as a
partner, officer, director, employee, consultant, agent, independent
contractor, member or stockholder of any Person:
(i) engage in the practice of pathology within any
County within the State of Ohio in which AmeriPath or an
AmeriPath Affiliate is then doing business (the "Restricted
Territory"); or
(ii) from any facility or location, whether within or
without the Restricted Territory, (x) perform pathology
services for any patient, laboratory or health care provider
located in the Restricted Territory or (y) perform pathology
services for any patient, laboratory or health care provider
who was or is a
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customer, client or patient of an AmeriPath Affiliate,
except that it shall not be a violation of this
Section 6.10 for the Seller to perform pathology services in
the Restricted Territory during the Restricted Period (a) as
an employee of a local, federal or state government or agency;
(b) in performing the Seller's duties as a member of the
United States military services or the National Guard; (c) on
a locum tenens basis or (d) for the Purchaser or any Affiliate
of the Purchaser. The Seller shall also be permitted to
perform medical services as a dermatologist on a part-time
basis for his own medical practice, and engage in any other
activities permitted by Section 3 of his Employment Agreement.
(b) As used in this Agreement, the term "Restricted Period"
shall mean and include the longer of (x) a period of five (5) years,
from the Closing to the fifth (5th) anniversary of the Closing, and (y)
during such time as the Seller is employed by an AmeriPath Affiliate
and so long as Seller is employed with CP&I or any AmeriPath Affiliate,
provided, however, should (i) AmeriPath fail to purchase Seller's
AmeriPath Stock in accordance with Section 1.3(m), or fail to make a
payment with respect to the Contingent Notes, and such failure
continues for more than ninety (90) days after notice from the Seller,
or (ii) there is a Loan Default (as defined in Section 12.3), upon
notice by the Seller, the Restricted Period shall equal zero (0) days.
(c) The Seller further agrees that during the Restricted
Period, the Seller will not knowingly, directly or indirectly, (a)
solicit the employment of any employee, agent or consultant of any
AmeriPath Affiliate who was such at any time during the twelve (12)
months preceding the Seller's termination of employment with the
AmeriPath Affiliate, or (b) induce any employee of an AmeriPath
Affiliate to leave the employ of any such AmeriPath Affiliate, unless
in each case the Seller obtains the prior written consent of AmeriPath.
(d) The Seller covenants and agrees that the restrictions set
forth in this Section 6.10 are fair, reasonable and necessary to
protect the interests of AmeriPath and its Affiliates, such
restrictions were negotiated and bargained for and the consideration
delivered in connection with this Agreement reflects and assumes the
Seller's strict compliance with, and the enforceability by the
Purchaser of, these restrictions.
(e) The Seller acknowledges and agrees that the provisions of
Section 6.10 and Section 6.11 are material and of the essence to this
Agreement. In addition, if the scope of any restriction or covenant
contained in either such Section should be or become too broad or
extensive to permit enforcement thereof to its fullest extent, then
such restriction or covenant shall be enforced to the maximum extent
permitted by law, and the Seller hereby consents and agrees that (a) it
is the parties intention and agreement that the covenants and
restrictions contained herein be enforced as written, and (b) in the
event a court of competent jurisdiction should determine that any
restriction or covenant contained herein is too broad or extensive to
permit enforcement thereof to its fullest extent, the scope of any such
restriction or covenant may be modified accordingly in any
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51
judicial proceeding brought to enforce such restriction or covenant,
but should be modified to permit enforcement of the restrictions
and covenants contained herein to the maximum extent the
court, in its judgment, will permit.
6.11 Non-disclosure; Confidentiality.
(a) Confidential Information. By virtue of the Seller's
employment, association or involvement with an AmeriPath Affiliate, the
Seller may obtain confidential or proprietary information developed, or
to be developed, by an AmeriPath Affiliate. "Confidential Information"
means all proprietary or business sensitive information, whether in
oral, written, graphic, machine-readable or tangible form, and whether
or not registered, and including all notes, plans, records, documents
and other evidence thereof, including but not limited to all: patents,
patent applications, copyrights, trademarks, trade names, service
marks, service names, "know-how," client lists, details of client or
consulting contracts, pricing policies, operational methods, marketing
plans or strategies, product development techniques or plans,
procurement and sales activities, promotion and pricing techniques,
credit and financial data concerning customers, business acquisition
plans or any portion or phase of any scientific or technical
information, discoveries, computer software or programs used or
developed in whole or in part by any AmeriPath Affiliate (including
source or object codes), processes, procedures, formulas or
improvements of any AmeriPath Affiliate; algorithms; computer
processing systems and techniques; price lists; customer lists;
procedures; improvements, concepts and ideas; business plans and
proposals; technical plans and proposals; research and development;
budgets and projections; technical memoranda, research reports, designs
and specifications; new product and service developments; comparative
analyses of competitive products, services and operating procedures;
and other information, data and documents now existing or later
acquired by an AmeriPath Affiliate, regardless of whether any of such
information, data or documents qualify as a "trade secret" under
applicable Federal or State law. "Confidential Information" shall not
include (a) any information which is in the public domain during the
period of service by the Seller or becomes public thereafter, provided
such information is not in the public domain as a consequence of
disclosure by the Seller in violation of this Agreement, and (b) any
information not considered confidential information by similar
enterprises operating in the anatomical laboratory industry or
otherwise in the ordinary course.
(b) Non-Disclosure. The Seller agrees that, except as directed
by the Seller's employer (which employer is an AmeriPath Affiliate), as
required or otherwise contemplated under this Agreement or the
Employment Agreement or as otherwise required by law, court order,
subpoena or other legal process or as may be required to enforce his
rights under this Agreement or the Employment Agreement, he will not at
any time (during the term of the Seller's employment by an AmeriPath
Affiliate or at any time thereafter), except as may be expressly
authorized by the AmeriPath Affiliate, disclose to any Person or use
any Confidential Information whatsoever for any purpose whatsoever, or
permit any Person whatsoever to examine and/or make copies of any
Confidential
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Information prepared by him or that may come into his possession
or under his control by reason of his employment by an
AmeriPath Affiliate or by reason of any consulting services he has
performed or may in the future perform for an AmeriPath Affiliate. The
Seller further agrees that while employed at an AmeriPath Affiliate, no
Confidential Information shall be removed from the AmeriPath
Affiliate's business premises, without the prior written consent of
such AmeriPath Affiliate, except in connection with performing his
duties under the Employment Agreement.
6.12 Rule 144 Best Efforts. Following such time, if any, that AmeriPath
is or may become, and solely while AmeriPath is, a public company with its
securities registered under the Securities Act, and listed or quoted for trading
by a national securities exchange or inter-dealer quotation system, AmeriPath
will use its best efforts to see that AmeriPath is in compliance with the
requirements of Rule 144 under the Securities Act applicable to the issuer of
securities, so as to facilitate non-registered sales of AmeriPath Stock by the
Seller who then own AmeriPath Stock consistent with the requirements and
limitations of Rule 144. Nothing in this Section 6.12 shall be deemed as either
(i) any representation or warranty that Ameripath will become or remain a public
company with securities registered under the Securities Act, or (ii) any
covenant or agreement by AmeriPath to register, under federal or state
securities laws or otherwise, any AmeriPath securities issued to, or held by,
the Seller.
6.13 Exclusive Territory. Without the prior written consent of the
Seller (which shall not be unreasonably withheld), so long as the Seller is
employed by CP&I and the Contingent Note has not matured or been paid in full
(solely to the extent required under the Contingent Note), the Purchaser shall
not, directly or indirectly, alone or as a partner or shareholder of, lender to
or investor in another Person engage in, or acquire businesses or practices
within 150 miles of 00000 Xxxxxxx Xxxxxxxx 0, Xxxxx 000, Xxxxxxxxx, Xxxx, which
engage in the practice of pathology or any anatomical laboratory business that
competes with the business then conducted by CP&I; provided, however, that this
Section shall not apply to the acquisition of the practice of Xxxxx X. Xxxxxx,
M.D. solely to the extent of any clients, referrals, hospitals, medical
facilities or customers of such practice located within such 150 mile area on
the Closing Date.
6.14 First Rights. Upon (i) a Loan Default or (ii) the sale,
liquidation, closure, suspension or termination (in whole or in part) of the
business or operations of CP&I, the Seller shall be entitled to purchase all
(but not less than all) of the capital stock or assets of CP&I, upon the same
terms and conditions as either the Purchaser, or the Purchaser's senior lenders,
would sell to any other Person. The Seller's first purchase rights shall
terminate 120 days after the Purchaser has delivered notice to the Seller of the
proposed sale or transaction and the terms thereof, including the nature and
amount of consideration proposed to be paid.
6.15 Unpaid Tax Liability. Prior to the Closing, the Seller shall have
paid, settled or otherwise resolved to the satisfaction of AmeriPath, the unpaid
tax liability associated with the Seller's Subchapter S election and 1994
accounts receivable, other than any interest, penalties or other charges that
have not been assessed prior to the Closing (all of which shall be the sole
responsibility of the Seller).
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6.16 Trade Names. The Seller hereby agrees to lease to the Purchaser
for $10.00 per year the trade names "Cutaneous Pathology & Immunofluorescence
Laboratory" and "CPI". The term of the lease shall be the earlier of (i) such
time as the Contingent Note has been paid in full (solely to the extent required
under such note) or (ii) five years from the Closing Date. At the end of the
lease term, the Purchaser shall have the option to purchase the trade names for
$10.00 each. During the term of the tradename lease, AmeriPath shall use the
tradenames with respect to the business and operations of CP&I. Upon the
occurrence of (i) a Loan Default or (ii) a CP&I Termination, the lease of the
trade names shall terminate and expire and the trade names shall immediately and
automatically revert to the Seller and the Purchaser shall have no further
rights or interests in such names.
6.17 Access to Books. Following the Closing and until all contingent
consideration has been paid to the Seller, the Seller shall have reasonable
access to the books and records of CP&I and AmeriPath to verify the Operating
Earnings. AmeriPath shall cause CP&I to maintain such books and records as the
Seller may reasonably request in order to compute, verify and audit Operating
Earnings.
6.18 Deliveries After Closing. From time to time after the Closing, at
the Purchaser's request and without expense to CP&I and without further
consideration from the Purchaser or CP&I, the Seller shall execute and deliver
such other instruments of conveyance and transfer and take such other action as
the Purchaser reasonably may require to convey, transfer to and vest in the
Purchaser, and to put the Purchaser in possession of, any rights or property to
be sold, conveyed, transferred or delivered hereunder.
6.19 Post Closing Operations. Following the Closing, until all amounts
due under this Agreement (including Sections 1.2 and 1.3 hereof) and the
Contingent Note have been paid in full (only to the extent applicable targets
have been achieved), AmeriPath shall cause the business and operations of CP&I
to be conducted in the ordinary course, consistent with past practice, as a
stand-alone cost-center separate and distinct from AmeriPath and its other
Affiliates. Without limiting the generality of the foregoing, except as
contemplated in this Agreement, without the prior written consent of the Seller
(which consent may not be unreasonably withheld), AmeriPath shall not:
(a) cause or permit CP&I to convey, transfer, lease or otherwise
dispose of, in one or any series of transactions, all or any material
part of its assets, properties or business, dissolve, liquidate or
reorganize, engage in business with unreasonably small capital,
suspend, terminate or discontinue all or any material portion of its
business operations, seek relief under any bankruptcy, reorganization,
insolvency or other law for the relief of debtors, issue any securities
to any Person other than AmeriPath or otherwise engage in any
transaction that might adversely affect Operating Earnings of CP&I; or
(b) sell, assign, exchange, transfer or otherwise dispose of any
capital stock or other securities of CP&I held at any time by
AmeriPath.
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54
(c) cause or permit CP&I to merge or consolidate with or into
any other Person other than AmeriPath or an Affiliate of AmeriPath
controlled by AmeriPath, provided in each case that such Person
expressly assumes in writing CP&I's obligations under the Employment
Agreement with the Seller.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
Each and every obligation of the Purchaser under this Agreement shall
be subject to the satisfaction, on or before the Closing Date, of each of the
following conditions, unless waived in writing by the Purchaser:
7.1 Representations and Warranties; Covenants and Agreements. The
representations and warranties of the Seller contained in Article II and
elsewhere in this Agreement and all information contained in any exhibit,
certificate, schedule or attachment hereto or in any writing delivered by, or on
behalf of, the Seller or CP&I to the Purchaser, shall be true and correct when
made and shall be true and correct in all material respects on the Closing Date
as though then made, except as expressly provided herein. The Seller and CP&I
shall have performed and complied with all agreements, covenants and conditions
and shall have made all deliveries required by this Agreement to be performed,
delivered and complied with by them prior to the Closing Date. The Seller and
the president of CP&I shall have executed and delivered to the Purchaser a
certificate, dated the Closing Date, certifying to the foregoing.
7.2 No Injunction. No preliminary or permanent injunction or other
Order, decree or ruling issued by any Authority, or any Regulation promulgated
or enacted by any Authority shall be in effect, which would prevent the
consummation of the transactions contemplated hereby.
7.3 --DELETED--
7.4 --DELETED--
7.5 No Material Adverse Change. There shall have been no Material
Adverse Change since the date of this Agreement. The Purchaser shall have
received a certificate (which shall be addressed to the Purchaser), dated the
Closing Date, of the president and chief financial officer of CP&I, certifying
to the foregoing.
7.6 Opinion of Seller's Counsel. The Purchaser shall have received an
opinion of counsel to the Seller and CP&I (which will be addressed to the
Purchaser and its senior lenders), dated the Closing Date, in the form of
Exhibit 7.6 hereto.
7.7 Employment Agreements. The Seller shall have executed and delivered
to the Purchaser an Employment Agreement with CP&I in the form of Exhibit 6.6.
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7.8 Delivery of CP&I Share Certificates. The Seller shall have executed
and delivered to AmeriPath this Agreement, or a counterpart hereof,
and shall have delivered at the Closing stock certificates representing all of
the CP&I Shares, duly endorsed for transfer to the Purchaser, together with
stock powers duly executed in blank.
7.9 Shareholders' Agreement. At the Closing, the Seller shall have
executed and delivered to AmeriPath a counterpart signature page to that certain
Shareholders' Agreement, dated as of February 29, 1996, by and among AmeriPath
and each of the stockholders of AmeriPath (the "Shareholders' Agreement"),
pursuant to which the Seller agrees to be bound by the provisions of the
Shareholders' Agreement, in accordance with their terms, to the same extent as
if he had been an original signatory thereto (except as specifically set forth
in such counterpart).
7.10 Subordination Agreement. At the Closing, the Seller shall have
executed and delivered to the Purchaser the Subordination Agreement.
7.11 Other Agreements. The Seller shall have executed and delivered the
Trust Agreement, pursuant to which AmeriPath shall be the beneficiary of the
Trust and the Seller shall be the trustee (the "Trust Agreement"), Xxxx Xxxxxx
and Associates, M.D., Inc. shall have executed and delivered the Option
Agreement pursuant to which Xxxx Xxxxxx and Associates, M.D., Inc. has the
option to purchase the assets of the medical practice from CP&I (the "Option
Agreement"), and CP&I shall have executed and delivered the Management Agreement
pursuant to which AmeriPath shall provide certain management services to CP&I
(the "Management Agreement").
7.12 Transfer of Business. The Purchaser shall receive adequate proof
that certain of the assets and liabilities of the medical practices of Drs.
Michel, Xxxxxxx and Wieselthier had been properly transferred out of CP&I to
another Person.
7.13 Acquisition Agreement. The Seller shall have executed and
delivered to the Purchaser the Broker Fee Agreement between AmeriPath and the
Seller in the form of Exhibit 7.13 attached hereto the ("Acquisition
Agreement").
7.14 Escrow Agreement. The Seller shall have executed and delivered to
the Purchaser the Escrow Agreement.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLER
Each and every obligation of the Seller under this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by the Seller:
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8.1 Representations and Warranties; Performance. The representations
and warranties of the Purchaser contained in Article III and elsewhere in this
Agreement and all information contained in any exhibit, schedule or attachment
hereto, delivered by or on behalf of the Purchaser to the Seller, shall be
true and correct in all material respects when made and shall be true and
correct in all material respects on the Closing Date as though then made, except
as expressly provided herein. The Purchaser shall have performed and complied in
all material respects with all agreements, covenants and conditions required by
this Agreement to be performed and complied with by them prior to the Closing
Date. The Chief Operating Officer of the Purchaser shall have delivered to the
Seller a certificate, dated the Closing Date, certifying to the foregoing.
8.2 No Injunction. No preliminary or permanent injunction or other
Order, decree or ruling issued by any Authority, or any Regulation promulgated
or enacted by any Authority shall be in effect, which would prevent the
consummation of the transactions contemplated hereby.
8.3 Purchase Consideration. The Seller shall have received the
consideration (in the form of cash, AmeriPath Stock and Contingent Notes)
required to be delivered at Closing and to which the Seller is entitled pursuant
to Section 1.1 hereof.
8.4 Other Agreements. AmeriPath shall have executed and delivered to
the Seller the Management Agreement and the Trust Agreement.
8.5 Acquisition Agreement. AmeriPath shall have executed and delivered
to the Seller the Acquisition Agreement between AmeriPath and the Seller in the
form of Exhibit 7.14 attached hereto.
8.6 Opinion of Counsel. The Seller shall have received an opinion of
counsel to the Purchaser, dated the Closing Date, in the form of Exhibit 8.6
hereto.
8.7 Approval Certificate. The Seller shall have received the Approval
Certificate evidencing the agreement of Summit Investors, II, L.P. and Summit
Ventures III, L.P. to comply with Section 1.3(n) hereto.
8.8 Escrow Agreement. The Purchaser shall have executed and delivered
to the Seller the Escrow Agreement.
ARTICLE IX
CLOSING
9.1 Closing. Unless this Agreement shall have been terminated or
abandoned pursuant to the provisions of Article X hereof, a closing of the
transactions contemplated by this Agreement (the "Closing") shall be held on
October 15, 1996, or on such other date which is mutually
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57
agreed upon in writing following the satisfaction or waiver of the conditions to
closing set forth in Article VII and Article VIII hereof (the "Closing Date").
9.2 Closing Deliveries. At the Closing,
(a) the Seller and CP&I shall deliver or cause to be
delivered to the Purchaser:
(i) a certificate or certificates evidencing all of
the CP&I Shares, duly endorsed for transfer with all necessary
transfer stamps affixed;
(ii) copies of all consents and approvals required
7.12;
(iii) the Opinion of Counsel required by Section 7.6;
(iv) the Officer's Certificates required by Sections
7.1 and 7.5;
(v) the Employment Agreement required by Section 7.7;
(vi) the counterpart signature page to the
Shareholders' Agreement required by Section 7.9;
(vii) the Subordination Agreement required by Section
7.10;
(viii) the Management Agreement, Option Agreement and
Trust Agreement required by Section 7.11;
(ix) the Acquisition Agreement required by Section
7.13;
(x) the Escrow Agreement required by Section 7.14;
(xi) a certificate, signed by the secretary of CP&I,
as to the articles of incorporation and by-laws of CP&I, the
resolutions adopted by the board of directors and shareholders
of CP&I in connection with this Agreement and the incumbency
of certain officers of CP&I, in form acceptable to the
Purchaser;
(xii) certificates issued by the appropriate
governmental authorities evidencing the good standing, with
respect to both the conduct of business and the payment of all
franchise taxes, of CP&I as of a date not more than ten (10)
days prior to the Closing Date, as a corporation organized
under the laws of the State of Ohio and as a foreign
corporation authorized to do business under the laws of the
various jurisdictions where it is so qualified.
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(xiii) such other certified resolutions, documents
and certificates as are required to be delivered by the Seller
or CP&I pursuant to the provisions of this Agreement.
(b) The Purchaser shall deliver to the Seller:
(i) the consideration (in the form of cash, AmeriPath
Stock and Contingent Notes) required to be paid or delivered
to the Seller at Closing in accordance with Section 1.1.
(ii) the Officer's Certificate required by Section
8.1; and
(iii) the Management Agreement and Trust Agreement
required by Section 8.4;
(iv) the Acquisition Agreement required by Section
8.5;
(v) the Opinion of Counsel required by Section 8.6;
(vi) the Approval Certificate required by Section
8.7;
(vii) the Escrow Agreement required by Section 8.8;
(viii) a certificate, signed by the secretary of
AmeriPath, as to the resolutions adopted by the board of
directors of AmeriPath in connection with this Agreement and
the incumbency of certain officers of AmeriPath;
(ix) such other certified resolutions, documents and
certificates as are required to be delivered by the Purchaser
pursuant to the provisions of this Agreement.
ARTICLE X
TERMINATION AND ABANDONMENT
10.1 Methods of Termination. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time:
(a) by mutual consent of the Purchaser and the Seller;
(b) by the Purchaser or the Seller if the Closing has not
occurred on or before October 30, 1996; provided, however, that if any
party has breached or defaulted with respect to its respective
obligations under this Agreement on or before such date, such
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breaching or defaulting party may not terminate this Agreement
pursuant to this Section 10.1(b), 10.1(c) or 10.1(d), as applicable,
and the non-breaching or non-defaulting party to this Agreement shall
at its option enforce its rights against such breaching or defaulting
party and seek any remedies against such party, in either case as
provided hereunder and by applicable law; or
(c) by the Purchaser if as of the Closing Date (including any
extensions) any of the conditions specified in Article VII hereof shall
not have been satisfied or if CP&I or the Seller is otherwise in
default under this Agreement; or
(d) by the Seller if as of the Closing Date (including any
extensions) any of the conditions specified in Article VIII hereof
shall not have been satisfied or if the Purchaser is otherwise in
default under this Agreement.
10.2 Procedure Upon Termination. In the event of termination and
abandonment pursuant to Section 10.1 hereof, and subject to the proviso
contained in Section 10.1(b), this Agreement shall terminate and shall be
abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:
(a) each party shall redeliver all documents and other
material of any other party relating to the transactions contemplated
hereby, whether obtained before or after the execution hereof, to the
party furnishing the same;
(b) all information received by any party hereto with respect
to the business of any other party or CP&I (other than information
which is a matter of public knowledge or which has heretofore been or
is hereafter published in any publication for public distribution or
filed as public information with any governmental authority) shall not
at any time be used for the advantage of, or disclosed to third parties
by, such party to the detriment of the party furnishing such
information; and
(c) no party hereto shall have any further liability or
obligation to any other party under or in connection with this
Agreement; provided, however, the non-breaching or non-defaulting party
shall not be foreclosed from bringing a Claim or cause of action or
otherwise recovering from the breaching or defaulting party.
ARTICLE XI
SURVIVAL; INDEMNIFICATION
11.1 Survival. All of the representations and warranties contained
herein or in any instrument or document delivered or to be delivered pursuant to
this Agreement, shall survive the execution of this Agreement and the Closing
until:
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(1) with respect to the representations and
warranties in Sections 2.16 (tax matters), 2.18 (ERISA
matters), 2.20 (environmental matters) and 2.30 (health care
regulatory matters), until sixty (60) days following the
expiration of the applicable statute of limitations;
(2) with respect to the representations and
warranties in Sections 2.3 (capitalization), 2.4 (title to the
CP&I Shares) and 2.6 (options and rights on capital stock),
these representations shall survive and continue forever and
without limitation; and
(3) with respect to all other representations and
warranties, March 31, 1998, except for representations,
warranties and indemnities for which an indemnification Claim
shall be pending as of March 31, 1998, in which event such
indemnities shall survive with respect to such Claim until the
final disposition thereof.
11.2 Indemnification by the Seller. Subject to this Article XI, the
Purchaser shall be indemnified and held harmless by the Seller, at all times
after the date of this Agreement, against and in respect of any and all damage,
loss, deficiency, liability, obligation, commitment, cost or expense (including
the reasonable fees and expenses of counsel) resulting from, or in respect of,
any of the following:
(a) Any misrepresentation, breach of warranty, or
non-fulfillment of any obligation on the part of the Seller or CP&I
under this Agreement, or contained in any schedule or exhibit to this
Agreement or any certificate, schedule or other instrument required to
be provided by the Seller or CP&I hereunder;
(b) Any and all liabilities of CP&I of any nature whether
accrued, absolute, contingent or otherwise, and whether known or
unknown, existing at the Closing Date to the extent that:
(i) such liabilities are not reflected in the
balance sheet for the quarter ended June 30,
1996 included in the Financial Statements
and such liabilities should have been, in
accordance with GAAP, reflected in, reserved
for, or disclosed in footnotes to such
balance sheet;
(ii) such liabilities were not disclosed in this
Agreement (or the schedules or exhibits
hereto) and, taking into account any
materiality, knowledge, dollar amount,
timing or other limitations set forth
herein, should have been disclosed in this
Agreement (or the schedules exhibits hereto)
in accordance with the terms hereof;
(iii) such liabilities (x) did not arise in the
ordinary course of business consistent with
past practice of CP&I after June 30, 1996
and (y)
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were not required to be disclosed in
this Agreement (or the schedules or exhibits
hereto) in accordance with the terms hereof.
(c) All demands, assessments, judgments, costs and reasonable
legal and other expenses arising from, or in connection with any Claim
incident to any of the foregoing.
11.3 Indemnification by the Purchaser. Subject to this Article XI, the
Seller and their heirs, assigns, representatives and agents shall be indemnified
and held harmless by the Purchaser, at all times after the date of this
Agreement, against and in respect of any and all damage, loss, deficiency,
liability, obligation, commitment, cost or expense (including the reasonable
fees and expenses of counsel) resulting from, or in respect of, any
misrepresentation, breach of warranty, or non-fulfillment of any obligation on
the part of the Purchaser under this Agreement, the Contingent Note or the
Employment Agreement, any document relating thereto or contained in any schedule
or exhibit to this Agreement, the Contingent Note or the Employment Agreement or
from any misrepresentation in or omission from any certificate, schedule, other
agreement or instrument by the Purchaser hereunder or thereunder. The Purchaser
shall also indemnify the Seller and Drs. Xxxxxxx and Wieselthier with respect to
any damages, losses, deficiencies, liabilities, obligations, commitments, costs
or expenses (including the reasonable fees and expenses of counsel) incurred by
the Seller, Xx. Xxxxxxx or Xx. Xxxxxxxxxxx, as the case may be, in connection
with the structure of the transaction contemplated by this Agreement resulting
from the employment of such Person by CP&I or any AmeriPath Affiliate and the
violation or alleged violation (only if alleged by a Person not affiliated with
the Seller, Xx. Xxxxxxx or Xx. Xxxxxxxxxxx) of any Health Care Laws due to the
structure of this transaction; provided, however, that AmeriPath shall have the
right to assume and control the defense of any such actions with counsel of
reputable standing (subject to the limitations set forth in (x) the fourth
sentence of the first paragraph of Section 11.4 and (y) the third paragraph of
Section 11.4).
11.4 Third-Party Claims. Except as otherwise provided in this
Agreement, the following procedures shall be applicable with respect to
indemnification for third-party Claims. Promptly after receipt by the party
seeking indemnification hereunder (hereinafter referred to as the "indemnitee")
of notice of the commencement of any (a) Tax audit or proceeding for the
assessment of Tax by any taxing authority or any other proceeding likely to
result in the imposition of a Tax liability or obligation or (b) any action or
the assertion of any Claim, liability or obligation by a third party (whether by
legal process or otherwise), against which Claim, liability or obligation the
other party to this Agreement (hereinafter the "indemnitor") is, or may be,
required under this Agreement to indemnify such indemnitee, the indemnitee will,
if a Claim thereon is to be, or may be, made against the indemnitor, notify the
indemnitor in writing of the commencement or assertion thereof and give the
indemnitor a copy of such Claim, process and all legal pleadings. The indemnitor
shall have the right to participate in the defense of such action with counsel
of reputable standing. The indemnitor shall have the right to assume and control
the defense of such action unless such action (i) is reasonably likely to result
in injunctions or other equitable remedies in respect of the indemnitee or its
business; (ii) is reasonably likely to result in liabilities of a substantial
nature (in relation to liabilities indemnified hereunder) which, taken with
other then existing Claims under this Article XI, would not be fully indemnified
hereunder; or (iii) is reasonably likely to have adverse impact on the business
or
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financial condition of the indemnitee after the Closing Date (including an
effect on the Tax liabilities, earnings or ongoing business relationships of the
indemnitee); provided, that nothing herein shall affect the Seller's rights,
under Section 1.1(k) to control all aspects of the defense or settlement of
Claims subject to the Escrow Agreement with respect to Section 2.30 hereof. The
indemnitor and the indemnitee shall cooperate in the defense of such Claims. In
the case that the indemnitor shall assume or participate in the defense of such
audit, assessment or other proceeding as provided herein, the indemnitee shall
make available to the indemnitor all relevant records and take such other action
and sign such documents as are necessary to defend such audit, assessment or
other proceeding in a timely manner. If the indemnitee shall be required by
judgment or a settlement agreement to pay any amount in respect of any
obligation or liability against which the indemnitor has agreed to indemnify the
indemnitee under this Agreement, the indemnitor shall promptly reimburse the
indemnitee in an amount equal to the amount of such payment plus all reasonable
expenses (including legal fees and expenses) incurred by such indemnitee in
connection with such obligation or liability subject to this Article XI.
Prior to paying or settling any Claim against which an indemnitor is,
or may be, obligated under this Agreement to indemnify an indemnitee, the
indemnitee must first supply the indemnitor with a copy of a final court
judgment or decree holding the indemnitee liable on such claim or failing such
judgment or decree, and must first receive the written approval of the terms and
conditions of such settlement from the indemnitor. An indemnitor shall have the
right to settle any Claim against it, subject to the prior written approval of
the indemnitee, which approval shall not be unreasonably withheld; provided,
that nothing herein shall affect the Seller's rights to control all inspects of
the defense or settlement of Claims subject to the Escrow Agreement.
An indemnitee shall have the right to employ its own counsel in any
case, but the fees and expenses of such counsel shall be at the expense of the
indemnitee unless (a) the employment of such counsel shall have been authorized
in writing by the indemnitor in connection with the defense of such action or
Claim, (b) the indemnitor shall not have employed, or is prohibited under this
Section 11.4 from employing, counsel in the defense of such action or Claim, or
(c) such indemnitee shall have reasonably concluded that there may be defenses
available to it which are contrary to, or inconsistent with, those available to
the indemnitor, in any of which events such fees and expenses of not more than
one additional counsel for the indemnified parties shall be borne by the
indemnitor.
11.5 Deductible. Notwithstanding the foregoing provisions of this
Article XI, except for the next succeeding sentence of this Section 11.5, no
indemnification pursuant to this Article XI shall be required of an indemnifying
party hereunder unless and until the aggregate amount due the indemnified party
for all Claims under this Article XI shall exceed $125,000.00 (the
"Deductible"), and then only to the extent in excess of the Deductible.
Notwithstanding the foregoing, (i) no Claim (regardless of amount) that arises
out of a breach of any of the representations or warranties contained in
Sections 2.3 (capitalization), 2.5 (title to CP&I Shares), 2.6 (options and
rights on capital stock), 2.31 (Positive Working Capital as of Closing), 6.15
(tax liability) or Claims arising under common law fraud shall at any time be
subject to the Deductible or Section 11.7 hereof.
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11.6 Benefits. In the event either party is required to make one or
more payments (an "Indemnification Payment") with respect to any indemnification
obligation provided hereunder, and such payment results in the realization of a
net reduction in the other party's federal, state, local or foreign income or
franchise tax liability (a "Net Tax Benefit"), then the amount of the
Indemnification Payment shall be adjusted, on a fair and equitable basis, to
reflect the amount of the Net Tax Benefit.
11.7 Maximum Liability. Notwithstanding the foregoing provisions of
this Article XI, except as provided in the last sentence of Section 11.5 above,
the maximum liability in connection with any and all Claims for indemnification
or breach or violation of representations or warranties under this Agreement
shall be $4,000,000.00.
11.8 Insurance. The Purchaser shall be entitled to indemnification
under this Agreement, only to the extent that the aggregate amount of its claims
exceeds the amount of any payment received by CP&I or the Purchaser under any
insurance policy that may be maintained by CP&I or the Purchaser to cover losses
relating to such claim.
11.9 Notice of Claims. Any person seeking indemnification under this
Agreement shall give to the indemnitor prompt written notice of any claim or
potential claim hereunder. Such notice shall contain a description of any claim,
event or facts known to the indemnitee which do or may give rise to a claim by
the indemnitee against the indemnitor based on this Agreement, stating the
nature and basis of said claims or events and the amounts thereof, to the extent
know.
11.10 Time Bar. No claim for indemnification may be made by the
Purchaser for breach of representations and warranties on any matter after the
expiration of that period of time which, under Section 11.1, is the period that
the representation and warranty for that matter "survives."
11.11 Exclusive Remedy. Except for actions to enforce specific
performance of rights or obligations hereunder, the right to make a claim for
indemnification pursuant to this Article XI shall be the sole and exclusive
remedy of the Purchaser with respect to any matter referred to in Section 11.2
and of the Seller with respect to any matter referred to in Section 11.3, and no
other claim, action, suit or proceeding shall be initiated or maintained against
the Seller or his assets or the Purchaser or its assets, as the case may be, in
respect of any matter referred to in Section 11.2 or 11.3 respectively,
notwithstanding that a remedy may not be available under this Article by virtue
of the lapse of time, limitation on the amounts that may be claimed, the
Deductible or otherwise.
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ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by a written agreement
signed by CP&I, the Purchaser and the Seller.
12.2 Entire Agreement. This Agreement, including the schedules and
exhibits hereto and the documents, annexes, attachments, certificates and
instruments referred to herein and therein, embodies the entire agreement and
understanding of the parties hereto in respect of the agreements and
transactions contemplated by this Agreement and supersedes all prior agreements,
representations, warranties, promises, covenants, arrangements, communications
and understandings, oral or written, express or implied, between the parties
with respect to such transactions. There are no agreements, representations,
warranties, promises, covenants, arrangements or understandings between the
parties with respect to such transactions, other than those expressly set forth
or referred to herein.
12.3 Certain Definitions.
"Affiliate" means, with regard to any Person, (a) any Person,
directly or indirectly, controlled by, under common control of, or
controlling such Person, (b) any Person, directly or indirectly, in
which such Person holds, of record or beneficially, five percent or
more of the equity or voting securities, (c) any Person that holds, of
record or beneficially, five percent or more of the equity or voting
securities of such Person, (d) any Person that, through Contract,
relationship or otherwise, exerts a substantial influence on the
management of such Person's affairs, (e) any Person that, through
Contract, relationship or otherwise, is influenced substantially in the
management of their affairs by such Person, or (f) any director,
officer, partner or individual holding a similar position in respect of
such Person.
"Authority" means any governmental, regulatory or
administrative body, agency, arbitrator or authority, any court or
judicial authority, any public, private or industry regulatory agency,
arbitrator authority, whether international, national, federal, state
or local.
"Claim" means any action, claim, obligation, liability,
expense, lawsuit, demand, suit, inquiry, hearing, investigation, notice
of a violation, litigation, proceeding, arbitration, or other dispute,
whether civil, criminal, administrative or otherwise, whether pursuant
to contractual obligations or otherwise.
"Contract" means any agreement, contract, commitment,
instrument or other binding arrangement or understanding, whether
written or oral.
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"Environmental Law" means any Regulation, Order, or
governmental requirement, which relates to or otherwise imposes
liability or standards of conduct concerning mining or reclamation of
mined land, discharges, emissions, releases or threatened releases of
noises, odors or any pollutants, contaminants or hazardous or toxic
wastes, substances or materials, whether as matter or energy, into
ambient air, water, or land, or otherwise relating to the manufacture,
processing, generation, distribution, use, treatment, storage,
disposal, cleanup, transport or handling of pollutants, contaminants,
or hazardous wastes, substances or materials, including (but not
limited to) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act
of 1986, as amended, the Resource Conservation and Recovery Act of
1976, as amended, the Toxic Substances Control Act of 1976, as amended,
the Federal Water Pollution Control Act Amendments of 1972, the Clean
Water Act of 1977, as amended, any so-called "Superlien" law, and any
other similar Federal, state or local statutes.
"Environmental Permit" shall mean Permits, certificates,
approvals, licenses and other authorizations relating to or required by
Environmental Law and necessary or desirable for the Corporation's
business.
"GAAP" means generally accepted accounting principles, applied
on a consistent basis as practiced in the United States.
"Health Care Laws" means any Federal, state, or local
Regulation or Order, of any Authority, which relates to or otherwise
imposes liability or standards of conduct concerning the licensure,
certification, qualification, or operation of a health maintenance
organization, pharmacy, home health agency or other aspect of a
Corporation's business subject to such Health Care Laws, including but
not limited to statutes governing home health agencies; The Health
Maintenance Organization Act; the Ohio Pharmacy Act; the Ohio Drug and
Cosmetic Act; the Ohio Comprehensive Drug Abuse Prevention and Control
Act; the Patient Self-Referral Act; the Employee Health Care Access
Act; 21 U.S.C. Section 301-392, the Federal Food Drug and Cosmetic Act;
21 U.S.C. Section 821 et seq., the Federal Drug Abuse Act; Section
1128B of the Social Security Act; The Clinical Laboratory Improvement
Amendments of 1988; 42 U.S.C. Section 1320a-7b, 42 C.F.R. Part 1001, 42
CFR Chapter IV, Subchapter C; Sections 1876 or 1903 of the Social
Security Act; 45 CFR, Part 74; 45 CFR, Part 92; 42 CFR 455.109 Section
306 of the Clean Air Act; 42 U.S.C. Section 1857(h) et seq., Section
508 of the Clean Water Act; 33 U.S.C. Section 1368 et seq., Executive
Order 11738 and Environmental Protection Agency regulations; 40 CFR
Part 15, Title VI of the Civil Rights Act of 1964; 42 U.S.C. Section
2000 d et seq., Section 504 of the Rehabilitation Act of 1933; 29
U.S.C. Section 7940; Title IX of the Education Amendments of 1972, 20
U.S.C. Section 1681 et seq., the Age Discrimination Act of 1975; 42
U.S.C. Section 6101 et seq., Section 654 of OBRA '81; 42 U.S.C. Section
9849 and the Americans with Disabilities Act of 1990; P.L. 101-336,
OBRAs 1986 through 1993, as amended, and any other similar Federal,
state or local Regulations.
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"Lien" means any security interest, lien, mortgage, pledge,
hypothecation, encumbrance, Claim, easement, restriction or interest of
another Person of any kind or nature in respect of property.
"Loan Default" means (i) the Purchaser failed to make a
payment under the Contingent Notes within sixty days of such payment
being due and payable, (ii) the Purchaser failed to make a payment when
due under its senior lending facility and such payment default remained
uncured for 60 days or (iii) any default followed by the acceleration
of the indebtedness under the Purchaser's senior lending facility.
"Material Adverse Change" means any development or change
which has, had or would have a Material Adverse Effect.
"Material Adverse Effect" means, with respect to any Person,
any circumstances, state of facts or matters which has, or might
reasonably be expected to have, a material adverse effect in respect of
such Person's business, operations, properties, assets, condition
(financial or otherwise), financial results.
"Order" means any decree, judgment, award, order, injunction,
rule, consent of or by an Authority.
"Permitted Liens" means (i) statutory Liens (including in
respect of Taxes) not yet delinquent or being contested in good faith
(subject to the establishment of adequate reserves therefor), (ii) such
imperfections or irregularities of title, Liens, easements, charges or
encumbrances as do not detract from or interfere with the present use
of the properties or assets subject thereto or affected thereby,
otherwise impair in any material respect present business operations at
such properties; or do not detract in any material respect from the
value of such properties and assets, taken as a whole, or (iii) as
reflected in the balance sheet for the fiscal year ended December 31,
1995 included in Financial Statements or the notes thereto.
"Person" means any corporation, partnership, joint venture,
company, syndicate, organization, association, trust, entity, Authority
or natural person.
"Proprietary Rights" means any patent, patent application,
copyright, trademark, trade name, service xxxx, service name, trade
secret, know-how, confidential information or other intellectual
property or proprietary rights.
"Regulation" means any law, statute, rule, regulation,
ordinance, requirement, announcement or other binding action of or by
an Authority, other than an Order.
"Sale of Control" means any merger, share exchange,
recapitalization, sale, issue, exchange or other disposition of
AmeriPath Stock (or any securities convertible into or exchangeable or
exercisable for AmeriPath Stock) in any transaction, that results in
any
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Person (other than a Preferred Shareholder (as defined in the
Shareholders' Agreement) or Xxxxx X. New, each an "Excluded Person") or
any "group" of Persons (within the meaning of Section 13(d)(3) of the
Securities Exchange Act) (other than a group consisting entirely of
Excluded Persons) beneficially owning 40% or more of the issued and
outstanding AmeriPath Stock (or any securities convertible into or
exchangeable or exercisable for AmeriPath Stock) on a fully diluted
basis.
"Subsidiary" means any Person which the Purchaser or CP&I, as
the case may be, owns, directly or indirectly, 50% or more of the
outstanding stock or other equity interests.
12.4 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand or by overnight receipted courier
service:
(a) If to the Seller or CP&I, to:
Xxxx Xxxxxx, M.D., Inc.
00000 Xxxxxxx Xxxxxxxx 0, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxx, M.D., President
with a copy to:
Xxxxxxxxxx & Xxxxx LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxx, III, Esq.
or to such other person or address as the Seller or
CP&I shall furnish by notice to the Purchaser in writing.
(b) If to the Purchaser to:
AmeriPath, Inc.
000 Xxxxxxx Xxxxx Xxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxx X. New, President
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with a copy to:
Greenberg, Traurig, Hoffman,
Lipoff, Xxxxx & Xxxxxxx, P.A.
000 X. Xxx Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
or to such other person or address as the Purchaser shall
furnish by notice to the Seller in writing.
12.5 Waiver of Compliance; Consents. Any failure of any party hereto to
comply with any obligation, covenant, agreement or condition herein may be
waived in writing by the other parties hereto, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing.
12.6 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties,
except that the Purchaser may grant security interests in respect of its rights
hereunder, without the prior approval of the Seller. It is specifically
understood and agreed that AmeriPath may assign its rights hereunder to purchase
the CP&I Shares to the trust created pursuant to the Trust Agreement for the
purpose of acquiring such CP&I Shares; provided, however, that, in any such
event, (i) all agreements herein with respect to AmeriPath Stock shall continue
to relate to AmeriPath Stock, and not to the capital stock of any such trust,
and (ii) in any such event, AmeriPath shall remain obligated with respect to and
liable for, and shall be the guarantor of, the performance of each and every
obligation of AmeriPath hereunder (notwithstanding that its rights hereunder to
purchase the CP&I Shares have been assigned to such trust), including without
limitation Article XI hereof, and (iii) each representation and warranty
hereunder shall be deemed made (x) as to both AmeriPath and, to the extent
applicable, such trust and (y) jointly and severally by both AmeriPath and, to
the extent applicable, such trust.
12.7 Governing Law. The Agreement shall be governed by the internal
laws of the State of Florida as to all matters, including but not limited to
matters of validity, construction, effect and performance.
12.8 Consent to Jurisdiction; Service of Process. CP&I and the Seller
hereby irrevocably submit to the jurisdiction of the state or federal courts
located in Broward County, Florida in connection with any suit, action or other
proceeding arising out of or relating to this Agreement and the transactions
contemplated hereby, and hereby agree not to assert, by way of motion, as a
defense, or otherwise in any such suit, action or proceeding that the suit,
action or
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proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Agreement or the subject matter
hereof may not be enforced by such courts.
12.9 Injunctive Relief. The parties hereto agree that in the event of a
breach of any provision of this Agreement, the aggrieved party or parties may be
without an adequate remedy at law. The parties therefore agree that in the event
of a breach of any provision of this Agreement, the aggrieved party or parties
may elect to institute and prosecute proceedings in any court of competent
jurisdiction to enforce specific performance or to enjoin the continuing breach
of such provision, as well as to obtain damages for breach of this Agreement. By
seeking or obtaining any such relief, the aggrieved party shall not be precluded
from seeking or obtaining any other relief to which it may be entitled.
12.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.11 Headings. The article, section and subsection headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement (or any provision hereof).
12.12 Binding Effect. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the signatories to this
Agreement and each of their respective successors and permitted assigns.
12.13 Severability. Unless otherwise provided herein, if any provision
of this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
12.14 Expenses. All fees, costs and expenses (including, without
limitation, legal, auditing and accounting fees, costs and expenses) incurred in
connection with considering, pursuing, negotiating, documenting or consummating
this Agreement and the transactions contemplated hereby shall be borne and paid
solely by the party incurring such fees, costs and expenses.
12.15 Attorneys' Fees. If any party to this Agreement seeks to enforce
the terms and provisions of this Agreement, then the prevailing party in such
action shall be entitled to recover from the losing party all costs in
connection with such action, including without limitation reasonable attorneys'
fees, expenses and costs incurred at the trial court and all appellate levels.
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IN WITNESS WHEREOF, the parties hereto have made and entered into this
Agreement the date first hereinabove set forth.
PURCHASER:
AMERIPATH, INC.,
By: /s/ Xxxxxx X. Xxxx
------------------------------------------
Xxxxxx X. Xxxx, Chief Financial Officer
SELLER:
/s/ Xxxx Xxxxxx
-----------------------------------------------
XXXX XXXXXX, M.D.
XXXX XXXXXX, M.D., INC.
By: /s/ Xxxx Xxxxxx
--------------------------------------------
Xxxx Xxxxxx, M.D., President
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FIRST AMENDMENT TO THE
STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT to the Stock Purchase Agreement (the "Amendment")
is entered into as of January 13, 1997, by and among AMERIPATH, INC., a Delaware
corporation, ("AmeriPath"), AMERIPATH CLEVELAND, INC. f/k/a Xxxx Xxxxxx, M.D.,
Inc. (d/b/a Cutaneous Pathology & Immunofluorescence Laboratory), an Ohio
corporation ("CP&I"), and XXXX XXXXXX, M.D.
R E C I T A L S
A. The parties hereto entered into a Stock Purchase Agreement (the
"Agreement") dated as of October 15, 1996.
B. Section 12.1 of the Agreement provides that the Agreement may be
amended by a written instrument executed by each of the parties thereto.
C. AmeriPath has filed a registration statement with the Securities and
Exchange Commission with respect to the underwritten public offering of the
Common Stock of AmeriPath.
D. In connection with AmeriPath's under written public offering of its
Common Stock, the parties hereto desire to clarify the rights and obligations of
the parties under the Agreement and amend the terms of the Agreement in the
manner set forth in this Amendment.
A G R E E M E N T
In consideration of the foregoing premises and the mutual promises
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which is acknowledged hereby, the parties hereto, intending to be
bound legally, hereby agree as follows:
1. The recitals set forth above are true and correct in all respects
and are incorporated herein and made a part hereof.
2. All capitalized terms used in this Amendment without definition
shall have the meanings assigned thereto in the Agreement.
3. Section 6.19 of the Agreement is hereby deleted in its entirety and
replaced with the following language:
72
"6.19Post Closing Operations. Following the Closing, until all
amounts due under this Agreement (including Sections 1.2 and 1.3
hereof) and the Contingent Note have been paid in full (only to the
extent applicable targets have been achieved), AmeriPath shall cause
the business and operations of CP&I to be conducted in the ordinary
course, consistent with past practice, as a stand-alone cost-center
separate and distinct from AmeriPath and its other Affiliates."
4. The rights of Xx. Xxxxxx and the obligations of AmeriPath
under the former Section 6.19 are terminated by this Amendment and there
shall be no continuing rights or obligations under former Section 6.19 except
as it is hereby amended above. All other terms and conditions of the Agreement
shall remain unchanged.
IN WITNESS WHEREOF, the undersigned have each executed this Amendment
as of the date first above-written.
PURCHASER:
AMERIPATH, INC.
By: /s/ XXXXXX X. XXXX
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Xxxxxx X. Xxxx, Chief Financial Officer
SELLER:
/s/ XXXX XXXXXX, M.D.
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XXXX XXXXXX, M.D.
AMERIPATH CLEVELAND, INC. F/K/A XXXX
XXXXXX, M.D., INC.
By: /s/ XXXX XXXXXX, M.D.
------------------------------------------
Xxxx Xxxxxx, M.D., Managing Director
Attest: /s/ XXXXXX X. XXXX
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By: Xxxxxx X. Xxxx, Secretary
