EXHIBIT 10.1
EXECUTION COPY
PARTNERSHIP INTEREST PURCHASE AGREEMENT
BY AND AMONG
DEL MAR GENPAR, INC. AND DEL MAR ACQUISITION, INC.,
AS THE BUYERS;
SURGICAL VENTURES, INC.,
AS THE SELLER;
AND
XXXXX X. XXXXXX, M.D.
PARTNERSHIP INTEREST PURCHASE AGREEMENT
TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE.................................................................... 2
1.1 Purchase and Sale of the Purchased Interests................................................... 2
1.2 Closing Date................................................................................... 2
1.3 Consideration.................................................................................. 2
1.4 Closing Deliveries............................................................................. 3
1.5 Further Assurances............................................................................. 4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLER AND XXXXXX.............................. 4
2.1 Organization................................................................................... 4
2.2 Authority...................................................................................... 5
2.3 Formation Documents............................................................................ 5
2.4 Capitalization................................................................................. 5
2.5 Title to Securities............................................................................ 6
2.6 No Subsidiaries................................................................................ 6
2.7 Title to Assets................................................................................ 6
2.8 Condition and Sufficiency of Assets............................................................ 7
2.9 Accounts Receivable............................................................................ 7
2.10 No Violation................................................................................... 7
2.11 Governmental Authorizations.................................................................... 8
2.12 Financial Statements........................................................................... 8
2.13 Absence of Undisclosed Liabilities............................................................. 8
2.14 Absence of Certain Changes..................................................................... 9
2.15 Taxes.......................................................................................... 11
2.16 Litigation..................................................................................... 12
2.17 Compliance with Laws........................................................................... 12
2.18 Licenses....................................................................................... 12
2.19 Payors......................................................................................... 12
2.20 Medical Staff Matters.......................................................................... 12
2.21 Health Care Legal Matters...................................................................... 13
2.22 Environmental Matters.......................................................................... 15
2.23 Employee Matters............................................................................... 16
2.24 Employee Benefit Plans......................................................................... 16
2.25 Partnership Contracts.......................................................................... 18
2.26 Intellectual Property.......................................................................... 19
2.27 Competing Interests............................................................................ 19
2.28 No Conflict of Interest........................................................................ 19
2.29 Illegal Payments............................................................................... 19
2.30 Insurance...................................................................................... 20
2.31 Accredited Investor; Disclosure Materials...................................................... 20
2.32 Investment Intent.............................................................................. 20
2.33 Restricted Securities.......................................................................... 21
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2.34 Full Disclosure................................................................................ 21
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYERS......................................... 21
3.1 Organization................................................................................... 21
3.2 Authority...................................................................................... 21
3.3 No Violation................................................................................... 22
3.4 Governmental Authorizations.................................................................... 22
3.5 Litigation..................................................................................... 22
3.6 No Brokers..................................................................................... 22
3.7 Accredited Investor............................................................................ 22
3.8 Investment Intent.............................................................................. 22
3.9 Restricted Securities.......................................................................... 22
3.10 Full Disclosure................................................................................ 23
ARTICLE IV COVENANTS AND AGREEMENTS............................................................. 23
4.1 Conduct of Business............................................................................ 23
4.2 Access and Information......................................................................... 25
4.3 Supplemental Disclosure........................................................................ 25
4.4 Assistance with Licenses and Filings........................................................... 25
4.5 Substitution Guarantor......................................................................... 25
4.6 Fulfillment of Conditions by the Sellers....................................................... 25
4.7 Fulfillment of Conditions by the Buyers........................................................ 25
4.8 Distributions in Excess of Required Capital.................................................... 26
4.9 Consent to Transfers........................................................................... 26
4.10 Publicity...................................................................................... 26
4.11 Audit.......................................................................................... 26
4.12 Transaction Costs.............................................................................. 26
4.13 No-Shop Provisions............................................................................. 27
4.14 Nondisclosure.................................................................................. 27
4.15 Certain Tax Matters............................................................................ 27
4.16 Employees and Employee Benefits................................................................ 28
4.17 Treatment of Partnership Assets After Closing.................................................. 28
4.18 Mutual Walk-Away............................................................................... 28
ARTICLE V CLOSING CONDITIONS................................................................... 29
5.1 Conditions to Obligations of the Buyers........................................................ 29
5.2 Conditions to Obligations of the Seller and Xxxxxx............................................. 30
ARTICLE VI INDEMNIFICATION...................................................................... 31
6.1 Indemnification of the Buyers.................................................................. 31
6.2 Indemnification of the Sellers................................................................. 33
6.3 Survival....................................................................................... 33
6.4 Notice......................................................................................... 34
6.5 Defense of Claims.............................................................................. 34
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6.6 Determination of Losses........................................................................ 35
ARTICLE VII MISCELLANEOUS........................................................................ 36
7.1 Termination.................................................................................... 36
7.2 Notices........................................................................................ 37
7.3 Attorneys' Fees and Costs...................................................................... 37
7.4 Brokers........................................................................................ 37
7.5 Severability................................................................................... 38
7.6 Counterparts................................................................................... 38
7.7 Interpretation................................................................................. 38
7.8 Assignment..................................................................................... 38
7.9 Entire Agreement, Amendment.................................................................... 38
7.10 Specific Performance, Remedies Not Exclusive................................................... 38
7.11 GOVERNING LAW.................................................................................. 39
7.12 Drafting....................................................................................... 39
7.13 Usage.......................................................................................... 39
7.14 Certain Definitions............................................................................ 39
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EXECUTION COPY
PARTNERSHIP INTEREST PURCHASE AGREEMENT
This Partnership Interest Purchase Agreement (this "Agreement") is made
and entered into as of December 2, 2005 (the "Effective Date"), by and among Del
Mar GenPar, Inc., a Nevada corporation ("GenPar"); Del Mar Acquisition, Inc., a
Nevada corporation ("Newco" and, together with GenPar, each individually a
"Buyer" and collectively the "Buyers"); Surgical Ventures, Inc., a California
corporation (the "Seller"); and Xxxxx X. Xxxxxx, M.D., an individual residing in
and licensed to practice medicine in the State of California ("Xxxxxx").
RECITALS
WHEREAS, the Seller is the legal and beneficial owner and holder of record
of a general partnership interest in Elite Surgical Centers, Del Mar L.P., a
California limited partnership (the "Partnership"), having a Percentage Interest
(as defined in the Partnership Agreement (as defined in Section 5.1(j))) of 1%
(the "GP Interest"), and is the sole general partner named in the Partnership
Agreement;
WHEREAS, the Seller is also the legal and beneficial owner and holder of
record of a limited partnership interest having a Percentage Interest of 60%;
WHEREAS, the remaining limited partnership interest in the Partnership,
having an aggregate Percentage Interest of 39%, is legally and beneficially
owned and held of record by the Persons (as defined in Section 2.16) identified
as "Non-Selling Limited Partners" in Schedule 2.4 to this Agreement;
WHEREAS, the Partnership engages in the business of operating the Elite
Surgical Center Del Mar located at 00000 Xx Xxxxxx Xxxx, Xxxxx 00, Xxx Xxxxx, XX
00000 (the "Business");
WHEREAS, the Seller desires to sell to GenPar, and GenPar desires to
purchase from the Seller, the GP Interest, on the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, the Seller also desires to sell to Newco, and Newco desires to
purchase from the Seller, a limited partnership interest having a Percentage
Interest of 50% (the "LP Interest" and, together with the GP Interest, the
"Purchased Interests"), on the terms and subject to the conditions set forth in
this Agreement;
WHEREAS, Xxxxxx owns 100% of the issued and outstanding stock of the
Seller and will receive substantial direct and indirect benefits from the
transactions contemplated by this Agreement, and the Buyers have required that
Xxxxxx enter into this Agreement as a condition to the Buyers' execution hereof;
and
WHEREAS, Xxxxxx owns 100% of the issued and outstanding stock of Elite
Surgical Management, Inc., a California corporation ("Elite"), which provides
certain services to the
Partnership, and desires to cause Elite to sell to Surgical Center Management,
Inc., a Nevada corporation and an Affiliate of the Buyers ("SCMI"), and SCMI
desires to purchase from Elite, the Elite Assets (as defined in Section 1.4(g));
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 Purchase and Sale of the Purchased Interests.
(a) Pursuant to the terms and subject to the conditions set forth
herein, GenPar hereby agrees to purchase from the Seller, and the Seller
hereby agrees to sell to GenPar, the GP Interest, for the consideration
set forth in Section 1.3(a).
(b) Pursuant to the terms and subject to the conditions set forth
herein, Newco hereby agrees to purchase from the Seller, and the Seller
hereby agrees to sell to Newco, the LP Interest, for the consideration set
forth in Section 1.3(b).
1.2 Closing Date. The consummation of the sale and purchase of the
Purchased Interests (the "Closing") will take place at the offices of Vsource,
Inc., a Delaware corporation and indirect parent of the Buyers ("VSCE"), located
at 0000 Xxxxxxx Xxxxxx, Xxxxx 000, Xx Xxxxx, Xxxxxxxxxx 00000, at 11:00 a.m.
local time on January 31, 2006, or at such other date, time and place as is
mutually agreed among the parties or, if all of the conditions to the
obligations of the parties set forth in Article V have not been satisfied or
waived by January 31, 2006, and there is no agreement among the parties as to
another day, on the day that is two business days following the date on which
all such conditions (other than those conditions to be satisfied at the time of
the Closing) have been satisfied or waived (such date being herein called the
"Closing Date"). The Closing will be effective as of 12:01 a.m. on the Closing
Date.
1.3 Consideration.
(a) As consideration in full for the sale and purchase of the GP
Interest, GenPar will pay to the Seller an aggregate of $25,000 (the "GP
Purchase Price"). The GP Purchase Price will be payable at the Closing by
the transfer by GenPar to the Seller of the Series A GP Shares (as defined
below).
(b) As consideration in full for the sale and purchase of the LP
Interest, Newco will pay to the Seller an aggregate of $1,250,000 (the "LP
Purchase Price"). The LP Purchase Price will be payable at the Closing by
the issuance by Newco to the Seller of the Series A LP Shares and the
Series B Shares (each as defined below).
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(c) "Series A Preferred Stock" means the Series A Exchangeable
Preferred Stock, par value $0.01 per share, of Newco, the Certificate of
Designation of which will be substantially in the form of Exhibit A
attached hereto;
(d) "Series A GP Shares" means the 2,500 shares of Series A
Preferred Stock that will be issued to GenPar by Newco prior to the
Closing, and which will be transferred to the Seller by GenPar at the
Closing as full consideration for the sale and purchase of the GP
Interest;
(e) "Series A LP Shares" means the 29,375 shares of Series A
Preferred Stock that will be issued to the Seller by Newco at the Closing
as partial consideration for the sale and purchase of the LP Interest;
(f) "Series B Preferred Stock" means the Series B Exchangeable
Redeemable Preferred Stock, par value $0.01 per share, of Newco, the
Certificate of Designation of which will be substantially in the form of
Exhibit B attached hereto (the "Series B Certificate of Designation");
(g) "Series B Shares" means the 19,125 shares of Series B Preferred
Stock that will be issued to the Seller by Newco at the Closing as partial
consideration for the sale and purchase of the LP Interest;
1.4 Closing Deliveries. At the Closing:
(a) GenPar will transfer to the Seller the Series A GP Shares, and
will deliver to the Seller certificates representing the Series A GP
Shares, duly endorsed for transfer or accompanied by a stock power duly
executed in blank, and any other documents that are necessary to transfer
to the Seller good title to the Series A GP Shares;
(b) Newco will issue to the Seller the Series A LP Shares and the
Series B Shares, and will deliver to the Seller certificates representing
the Series A LP Shares and the Series B Shares and any other documents
that are necessary to transfer to the Seller good title to the Series A LP
Shares and the Series B Shares;
(c) the Seller will execute and deliver to the Buyers any documents
that are necessary to transfer to GenPar and Newco good title to the GP
Interest and the LP Interest, respectively, including, without limitation,
the Assignment of GP Interest and the Assignment of LP Interest (as
defined in Sections 5.1(m) and (n), respectively);
(d) GenPar will be admitted to the Partnership as successor general
partner in accordance with Section 12.19 of the Partnership Agreement;
(e) Newco will be admitted to the Partnership as a limited partner
in accordance with Section 12.8 of the Partnership Agreement;
(f) the Seller will transfer and deliver to GenPar the originals or
copies of all of the books, records, ledgers, electronic media,
proprietary information and other data and all other written or electronic
depositories of information of and relating to the Partnership;
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(g) Xxxxxx will cause Elite to execute and deliver to SCMI any
documents that are necessary to transfer to SCMI good title to, a valid
leasehold interest in or a valid and enforceable right to use, as
applicable, any and all assets owned, leased or otherwise used by Elite,
in connection with its provision of services to the Partnership or
otherwise (collectively, the "Elite Assets"), including, without
limitation, a Xxxx of Sale, substantially in the form of Exhibit C
attached hereto (the "Xxxx of Sale"), which Xxxx of Sale will include a
complete and accurate listing of all of the Elite Assets; and
(h) the Buyers and the Seller will execute and deliver the documents
required to be delivered by each of them pursuant to Article V.
1.5 Further Assurances. At or after the Closing, and without further
consideration, the Seller will execute and deliver to Newco or GenPar such
further instruments of conveyance and transfer as either of them may reasonably
request in order more effectively to convey and transfer the GP Interest to
GenPar or the LP Interest to Newco, respectively, or for aiding, assisting,
collecting and reducing to possession any of the Purchased Interests and
exercising rights with respect thereto. The parties agree to cooperate
reasonably with each other and with their respective representatives in
connection with any steps required to be taken as part of their respective
obligations under this Agreement before and after the Closing, and shall (a)
furnish upon request to each other such further information; (b) execute and
deliver to each other such other documents; and (c) do such other acts and
things, all as any other party may reasonably request for the purpose of
carrying out the intent of this Agreement and the transactions contemplated
hereby, including, without limitation, providing any information necessary to
complete as well as execute one or more Federal Health Care Provider/Supplier
Enrollment Application CMS Form 855B.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND XXXXXX
As a material inducement to the Buyers to enter into this Agreement and
consummate the transactions contemplated hereby, the Seller and Xxxxxx, jointly
and severally, represent and warrant to the Buyers that the statements contained
in this Article II (subject to the disclosures contained in the Schedules
referenced herein) are true and correct as of the Effective Date. The
disclosures in any particular Schedule referenced herein shall qualify as
disclosures with respect to all other Schedules referenced herein only where
specifically cross-referenced or, in the absence of a specific cross-reference,
only where the disclosure made in any particular Schedule referenced herein is
sufficient on its face, without reference to attachments or underlying
documentation (excluding appendices to the Schedules, which shall be deemed part
of the Schedules), to alert the Buyers to the relevance of the disclosure to
such other Schedules referenced herein.
2.1 Organization. The Partnership is a limited partnership and the Seller
is a corporation, each duly organized, validly existing and in good standing
under the laws of the State of California, and each has full power to own its
properties and to conduct its business as presently conducted. The Partnership
is not qualified to do business in any foreign jurisdiction, and no such
qualification is now required or will be required prior to the Closing. Set
forth in Schedule 2.1 is
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a list of all fictitious business names under which the Partnership operates,
all of which are registered in the County of San Diego.
2.2 Authority. Each of the Seller and Xxxxxx has all requisite power,
authority and capacity, corporate, individual or otherwise, to execute, deliver
and perform under this Agreement and the other agreements, certificates and
instruments to be executed by the Seller or Xxxxxx in connection with or
pursuant to this Agreement (collectively, the "Seller Documents"). The
execution, delivery and performance by the Seller of each Seller Document to
which it is a party has been duly authorized by all necessary action, corporate
or otherwise, on the part of the Seller. This Agreement has been, and at the
Closing the other Seller Documents will be, duly executed and delivered by the
Seller and Xxxxxx (to the extent each is a party thereto). This Agreement is,
and, upon execution and delivery by the Seller and Xxxxxx at the Closing, each
of the other Seller Documents will be, a legal, valid and binding agreement of
the Seller and Xxxxxx (to the extent each is a party thereto), enforceable
against the Seller and Xxxxxx in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting the enforcement of creditors' rights
generally and subject to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
2.3 Formation Documents. The Seller or Xxxxxx has delivered to the Buyers
true, correct and complete copies of the Partnership's certificate of limited
partnership, all partnership agreements in effect during the last five years,
minute books and equity record books, as applicable. Such records include
minutes or consents reflecting all actions taken by the general partner or the
limited partners of the Partnership from the date of organization of the
Partnership through the Effective Date.
2.4 Capitalization.
(a) Set forth in Schedule 2.4 is a complete and accurate list of all
of the ownership interests in the Partnership and the capital account
balances associated therewith. The Purchased Interests have been duly
authorized and validly issued in compliance with all applicable Laws (as
defined in Section 2.17) and the provisions of the Partnership Agreement
or any applicable predecessor operating agreement of the Partnership, and
are fully paid and nonassessable and free of preemptive rights. The
Partnership does not have any equity interests reserved for issuance.
(b) There are no outstanding options, warrants, convertible or
exchangeable securities or other rights, agreements, arrangements or
commitments obligating the Seller or the Partnership, directly or
indirectly, to issue, sell, purchase, acquire or otherwise transfer or
deliver any equity interest in the Partnership, or any agreement,
document, instrument or obligation convertible or exchangeable therefor.
There are no agreements, arrangements or commitments of any character
(contingent or otherwise) pursuant to which any Person is or may be
entitled to receive any payment based on the revenues or earnings, or
calculated in accordance therewith, of the Partnership. There are no
voting trusts, proxies or other agreements or understandings to which the
Seller or the Partnership is a party or by which the Seller or the
Partnership is bound with respect to the voting of any equity interest in
the Partnership. Neither the GP Interest nor the LP Interest was issued in
violation of the
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Securities Act of 1933, as amended (the "1933 Act"), or any applicable
state securities Laws.
2.5 Title to Securities. The Seller owns of record and beneficially the
Purchased Interests, free and clear of any obligation, lien, claim, pledge,
security interest, liability, charge, contingency or other encumbrance or claim
of any nature (a "Lien") other than as provided in the Partnership Agreement.
Upon sale of the Purchased Interests and delivery of certificates (or other
transfer documents included in the Seller Documents) therefor to the Buyers
hereunder, GenPar will acquire the entire legal and beneficial interests in the
GP Interest and Newco will acquire the entire legal and beneficial interests in
the LP Interest, each free and clear of any Lien and subject to no legal or
equitable restrictions of any kind other than as provided in the Partnership
Agreement.
2.6 No Subsidiaries. The Partnership does not have any subsidiaries or own
any equity or debt interest or any form of proprietary interest in any Person,
or any obligation, right or option to acquire any such interest.
2.7 Title to Assets.
(a) Set forth in Schedule 2.7(a) is a complete and accurate list
(including the street address, where applicable) of: (i) all real property
owned by the Partnership; (ii) all real property leased by the
Partnership; (iii) each vehicle owned or leased by the Partnership; and
(iv) each other tangible asset owned or leased by the Partnership and
having a book value in excess of $5,000. No tangible or intangible asset
used in or associated with the Business is owned or leased by the Seller,
Xxxxxx or any Affiliate (as defined in Section 7.14(a)) of the Seller or
Xxxxxx (other than the Partnership).
(b) The Partnership has good and marketable title to all of the
assets it purports to own and used in connection with the Business, and
owns all of such assets free and clear of any Liens, other than Liens set
forth in Schedule 2.7(b), all of which will be released at or prior to the
Closing, and Permitted Liens (as defined in Section 7.14(e)). The
Partnership holds a valid leasehold interest in or otherwise has a valid
and enforceable right to use all of the assets used in connection with the
Business that it does not own.
(c) The real property owned or leased by the Partnership (the "Real
Property") is zoned for a classification that permits the continued use of
the Real Property in the manner currently used by the Partnership.
Improvements included in the assets of the Partnership were constructed,
and remain, in compliance with all applicable covenants, conditions,
restrictions and material Laws affecting the Real Property. Final
certificates of occupancy have been issued for the improvements on the
Real Property permitting the existing use of such improvements. There are
no actions pending or, to the Knowledge of the Seller or Xxxxxx,
threatened that would alter the current zoning classification of the Real
Property or alter any applicable covenants, conditions, restrictions or
material Laws that would adversely affect the use of the Real Property in
the Business. Neither the Partnership nor the Seller or Xxxxxx has
received notice from any insurance company or Governmental Entity (as
defined in Section 2.11) of any defects or inadequacies in the Real
Property or the improvements thereon that would adversely affect the
insurability or usability of the Real Property or such improvements or
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prevent the issuance of new insurance policies thereon at rates not
materially higher than present rates. To the Knowledge of the Seller or
Xxxxxx, no fact or condition exists that would result in the
discontinuation of necessary utilities or services to the Real Property or
the termination of current access to and from the Real Property. The
Seller is not a "foreign person" as that term is defined in Section 1445
of the Internal Revenue Code of 1986, as amended (the "Code"), and
applicable regulations.
2.8 Condition and Sufficiency of Assets. The assets of the Partnership,
including any assets held under leases or licenses: (i) include all assets used
in the Business; (ii) are in good condition and repair, ordinary wear and tear
excepted; (iii) have been properly and regularly maintained in all material
respects; (iv) conform in all material respects to all applicable Laws relating
to their construction, use, operation and maintenance; and (v) constitute all
assets used by the Partnership in the conduct of the Business.
2.9 Accounts Receivable. Set forth in Schedule 2.9 is a complete and
accurate schedule of the accounts receivable of the Partnership as of the
Effective Date, for dates of service commencing on or after __________ ___, 2005
(collectively and together with all accounts receivable of the Partnership
created after the Effective Date, the "Accounts Receivable"). The Accounts
Receivable represent or will represent valid obligations arising from sales
actually made or services actually performed by the Partnership in the ordinary
course of business. Except to the extent paid prior to the Closing Date, such
Accounts Receivable are or will be as of the Closing Date current and
collectible net of the respective reserves shown on the Latest Balance Sheet
(which reserves are adequate, commercially reasonable and calculated consistent
with past practices and will not represent a Material Adverse Effect in the
composition of such Accounts Receivable in terms of aging). Subject to such
reserves, each of such Accounts Receivable either has been or, to the Knowledge
of the Seller or Xxxxxx will be, collected in full, without any setoff, within
60 days after the day on which it first becomes due and payable. There is no
contest, claim, defense or right of setoff under any agreement with any account
debtor of an Account Receivable relating to the amount or validity of such
Account Receivable, other than returns in the ordinary course of business and
consistent with past practices of the Partnership or normal reductions pursuant
to contracts with the Payors (as defined in Section 2.19) which set forth lower
reimbursement rates than the gross amount of receivable invoiced.
2.10 No Violation. Except as set forth in Schedule 2.10, neither the
execution or delivery of the Seller Documents nor the consummation of the
transactions contemplated thereby, including without limitation the sale of the
Purchased Interests to the Buyers, will, to the Knowledge of the Seller or
Xxxxxx, conflict with or result in the breach of any term or provision of,
require any consent, approval, ratification, waiver, notification, license,
permit, order or other authorization (including any Governmental Authorization
(as defined in Section 2.11)) (collectively, "Consents") or violate or
constitute a default under (or an event that with notice or the lapse of time or
both would constitute a breach or default), or result in the creation of any
Lien on the Purchased Interests or the assets of the Partnership pursuant to, or
relieve any third party of any obligation to the Partnership or give any third
party the right to terminate or accelerate any obligation under, any charter
provision, bylaw, provision of the Partnership Agreement, Partnership Contract
(as defined in Section 2.25(a)), License (as defined in Section 2.18) or Law to
which the Seller or the Partnership is a party or by which any assets of the
Partnership or otherwise used in the Business is in any way bound or obligated.
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2.11 Governmental Authorizations. Except as set forth in Schedule 2.11, to
the Knowledge of the Seller or Xxxxxx, no Consent, franchise, grant,
identification or registration number, easement, variance, exemption or
certificate issued, granted, given or otherwise made available by or under the
authority of, or registration, qualification, designation, declaration or filing
with, any nation, state, county, city, town, village, district or other
jurisdiction of any nature; federal, state, local, municipal, foreign or other
government; governmental or quasi-governmental agency, authority, commission,
board or other body of any nature (including any governmental branch,
department, official or entity and any court or other tribunal); multi-national
organization or body; or body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power of any nature (collectively, each a "Governmental Entity"),
or required pursuant to any applicable Laws (collectively, each a "Governmental
Authorization"), is required on the part of the Seller or the Partnership in
connection with the sale and purchase of the Purchased Interests or any of the
other transactions contemplated by this Agreement.
2.12 Financial Statements. Attached as Schedule 2.12 are true and complete
copies of (a) the unaudited balance sheet of the Partnership (collectively, the
"Latest Balance Sheet") as of November 30, 2005 (the "Latest Balance Sheet
Date") and the related unaudited statements of operations and cash flow of the
Partnership for the nine months then ended; and (b) the audited balance sheets
of the Partnership as of December 31, 2003 and 2004 and the related audited
statements of operations and cash flow for the periods then ended (collectively,
the "Financial Statements"). The Financial Statements present fairly the
financial condition of the Partnership at the dates specified and the results of
its operations for the periods specified and have been prepared in accordance
with generally accepted accounting principles, consistently applied ("GAAP")
except, with respect to the unaudited Financial Statements, for the absence of
footnote disclosure and for changes resulting from normal year-end adjustments
for recurring accruals (which will not be material individually or in the
aggregate). The Financial Statements do not contain any items of a special or
nonrecurring nature, except as expressly stated therein. The Financial
Statements have been prepared from the books and records of the Partnership,
which accurately and fairly reflect the transactions of, acquisitions and
dispositions of assets by, and incurrence of Liabilities (as defined in Section
2.13(a)) by the Partnership.
2.13 Absence of Undisclosed Liabilities.
(a) The Partnership has no direct or indirect debts, obligations or
liabilities of any nature, whether absolute, accrued, contingent,
liquidated or otherwise, and whether due or to become due, asserted or
unasserted (collectively, "Liabilities") except for: (i) Liabilities
reflected on the Latest Balance Sheet, including any reserves (and, for
this purpose, a Liability shall be deemed to be included in a reserve if
it is the type of Liability for which such reserve was established,
regardless of whether such Liability is actually included in the reserve,
provided that the aggregate amount of all Liabilities actually included or
deemed to be included in the reserve do not exceed the aggregate amount of
the reserve reflected on the Latest Balance Sheet, and provided further
that if the aggregate amount of all such Liabilities actually included or
deemed to be included in the reserve exceeds the aggregate amount of such
reserve, this representation and warranty will be deemed breached only to
the extent of such excess); (ii) current Liabilities incurred in the
ordinary course of business and consistent with past practices after the
Latest Balance Sheet
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Date; (iii) Liabilities incurred in the ordinary course of business and
consistent with past practices under the Partnership Contracts and under
other agreements entered into by the Partnership in the ordinary course of
business that are not included within the definition of Partnership
Contracts set forth in Section 2.25, which Liabilities are not required by
GAAP to be reflected in the Latest Balance Sheet; and (iv) Liabilities
disclosed in the Schedules to this Agreement.
(b) Set forth in Schedule 2.13(b) is a complete and accurate list of
the principal balance of all long-term and short-term Liabilities of the
Partnership (other than trade accounts payable incurred in the ordinary
course of business and consistent with past practices) as of the Latest
Balance Sheet Date, as well as the name of the lender or creditor with
respect to each such Liability.
(c) For purposes of this Agreement, "ordinary course" Liabilities
include only liabilities and obligations incurred in the normal course of
business of the Partnership, consistent with past practices and amounts,
and do not include, without limitation, any Liabilities under an agreement
or otherwise that result from any breach or default (or event that with
notice or lapse of time would constitute a breach or default), tort,
infringement or violation of Law by the Partnership, the Seller or Xxxxxx.
2.14 Absence of Certain Changes. Since the Latest Balance Sheet Date,
except as set forth in Schedule 2.14, there has not been:
(a) any Material Adverse Effect with respect to the Partnership, or
with respect to the manner in which the Partnership conducts the Business;
(b) any declaration, setting aside or payment of any dividends or
distributions in respect of any equity interests in the Partnership or any
redemption, purchase or other acquisition by the Partnership of any of its
equity interests, except as contemplated by this Agreement;
(c) any payment or transfer of assets (including without limitation
any distribution or any repayment of indebtedness) to or for the benefit
of any equityholder of the Partnership, other than compensation and
expense reimbursements paid in the ordinary course of business and
consistent with past practice;
(d) any revaluation by the Partnership of any of its assets,
including the writing down or off of notes or Accounts Receivable and the
writing down of the value of inventory, other than in the ordinary course
of business and consistent with past practice;
(e) any entry by the Partnership into any commitment or transaction
material to the Partnership including, without limitation, incurring or
agreeing to incur capital expenditures or to make payments to customers
(other than pursuant to agreements listed in Schedule 2.25(a)) in excess
of $5,000, individually or in the aggregate;
(f) any increase in indebtedness for borrowed money, or any issuance
or sale of any debt securities, or any assumption, guarantee or
endorsement of any Liability of any other Person, or any loan or advance
to any other Person;
9
(g) any breach or default (or event that with notice or lapse of
time would constitute a breach or default), termination or threatened
termination under any Partnership Contract binding on the Partnership or
to which any asset of the Partnership is subject;
(h) any change by the Partnership in its accounting methods,
principles or practices;
(i) any increase in the benefits under, or the establishment or
amendment of, any bonus, insurance, severance, deferred compensation,
pension, retirement, profit sharing or other employee benefit plan, or any
increase in the compensation payable or to become payable to the Seller or
any officers or employees of the Partnership, except for annual merit
increases in salaries or wages in the ordinary course of business and
consistent with past practice;
(j) the termination of employment (whether voluntary or involuntary)
of any officer or key employee of the Partnership or the termination of
employment (whether voluntary of involuntary) of employees of the
Partnership in excess of historical attrition in personnel;
(k) any theft, condemnation or eminent domain proceeding or any
damage, destruction or casualty loss affecting any asset used in the
Business, whether or not covered by insurance;
(l) any sale, assignment or transfer of any asset used in the
Business, except sales of inventory or obsolete equipment in the ordinary
course of business and consistent with past practice;
(m) any waiver by the Partnership or any equityholder of the
Partnership of any rights related to the Business;
(n) any action other than in the ordinary course of business and
consistent with past practice, to pay, discharge, settle or satisfy any
claim or Liability;
(o) any settlement or compromise of any pending or threatened suit,
action, or claim relevant to the transactions contemplated by this
Agreement;
(p) any issuance, sale or disposition, or agreement to issue, sell
or dispose, of any equity interest in the Partnership, or any instrument
or other agreement convertible or exchangeable for any equity interest in
the Partnership;
(q) any authorization, recommendation, proposal or announcement of
an intention to adopt a plan of complete or partial liquidation or
dissolution of the Partnership;
(r) any acquisition, or investment in the equity or debt securities
of any Person (including in any joint venture or similar arrangement) by
the Partnership;
10
(s) any other transaction, agreement or commitment entered into or
affecting the Business or the Partnership, except in the ordinary course
of business and consistent with past practice; or
(t) any agreement or understanding to do or resulting in any of the
foregoing.
2.15 Taxes.
(a) The Partnership has filed or caused to be filed on a timely
basis all Tax returns that are or were required to be filed by it. The
Partnership has timely paid all Taxes that have become due and payable as
Taxes imposed on it, pursuant to such Tax returns or otherwise, or
pursuant to any assessment received by it, except such Taxes, if any, as
are being contested in good faith and as to which adequate reserves have
been provided in the Latest Balance Sheet.
(b) The Partnership has not requested or been granted an extension
of time for filing any Tax return that has not yet been filed.
(c) The charges, accruals and reserves with respect to Taxes on the
books of the Partnership are accurate. To the Knowledge of the Seller or
Xxxxxx, there exists no proposed tax assessment against the Partnership
except as disclosed in the Latest Balance Sheet. All Taxes that the
Partnership is or was required to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the
proper Governmental Entity.
(d) All Tax returns filed by the Partnership are true, correct, and
complete in all material respects.
(e) There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any claim for, or the period
for the collection or assessment of, Taxes due from or with respect to the
Partnership for any taxable period.
(f) No audit, examination or similar proceeding is pending or, to
the Knowledge of the Seller or Xxxxxx, threatened with respect to the
Partnership or any Tax return filed by the Partnership.
(g) The Partnership has never made an election to be taxed as an
association taxable as a corporation for federal income tax purposes.
(h) "Tax" or "Taxes" means any and all taxes, charges, fees, levies,
assessments, duties or other amounts payable to any federal, state, local
or foreign taxing authority or agency, including, without limitation: (i)
income, franchise, profits, gross receipts, minimum, alternative minimum,
estimated, ad valorem, value added, sales, use, service, real or personal
property, capital stock, license, payroll, withholding, disability,
employment, social security, workers compensation, unemployment
compensation, utility, severance, excise, stamp, windfall profits,
transfer and gains taxes; (ii) customs, duties, imposts, charges, levies
or other similar assessments of any kind; and (iii) interest, penalties
and additions to tax imposed with respect thereto.
11
2.16 Litigation. Except as set forth on Schedule 2.16, there are currently
no pending or, to the Knowledge of the Seller or Xxxxxx, threatened lawsuits,
administrative proceedings, reviews or formal or informal complaints or
investigations (collectively "Litigation"), in each case by any individual,
corporation, partnership, Governmental Entity or other entity (collectively, a
"Person") against or relating to the Partnership or any equityholder, officer,
employee or agent (in their capacities as such) of the Partnership or to which
any of the assets of the Partnership is subject. The Partnership is not subject
to or bound by any currently existing judgment, order, writ, injunction, decree,
ruling or charge. Neither the Seller nor Xxxxxx has any reason to believe that
any such Litigation may be brought or threatened against the Partnership. The
Seller is not a party to or subject to the provisions of any judgment, order,
writ, injunction, decree, ruling or charge of any court or Governmental Entity
prohibiting the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby. There are no malpractice
claims or Liabilities against the Partnership or the Seller and, to the
Knowledge of the Seller or Xxxxxx, no facts exist that might be the basis for a
malpractice claim or Liability against the Partnership or the Seller.
2.17 Compliance with Laws. The Partnership is currently complying with and
has at all times complied with each applicable federal, state, local or foreign
constitution, statute, law, code, ordinance, decree, order, rule or regulation
of any Governmental Entity and all orders and decrees of courts, tribunals and
arbitrators (collectively, "Laws"), in all material respects.
2.18 Licenses. The Partnership owns, possesses or holds from each
appropriate Governmental Entity all licenses, permits, authorizations,
approvals, quality certifications, franchises or rights (collectively,
"Licenses") issued by any Governmental Entity necessary to conduct the Business.
Set forth in Schedule 2.18 is a complete and accurate list of each such License.
No loss or expiration of any such License is pending or, to the Knowledge of the
Seller or Xxxxxx, threatened or reasonably foreseeable, other than expiration in
accordance with the terms thereof of Licenses that may be renewed in the
ordinary course of business without lapsing. Each such License is now and as of
the Closing will be in good standing and not subject to meritorious challenge.
2.19 Payors. Set forth in Schedule 2.19 is a complete and accurate list of
each third-party payor or provider that is doing or has done business with the
Partnership and accounted for 10% or more of the revenues of the Partnership for
the year ended December 31, 2004 or for the interim period ending on the Latest
Balance Sheet Date (collectively, the "Payors"). None of the Payors has
threatened, or notified the Seller or Xxxxxx of any intention, to terminate or
materially alter its relationship with the Partnership, or materially alter the
amount of the business that such Payor is presently doing with the Partnership,
and none of the Seller, Xxxxxx or the Partnership has any information, or is
aware of any facts, indicating that any Payor intends to do any of the
foregoing, either as a result of the transactions contemplated by this Agreement
or otherwise. Except as set forth in Schedule 2.19, there has been no change in
pricing or pricing structure (other than ordinary course changes consistent with
past practices) with any Payor and there has been no dispute with a Payor, in
each case since January 1, 2005.
2.20 Medical Staff Matters. Set forth in Schedule 2.20 is a list of all
providers in good standing on the medical staff of the Partnership. There are no
pending or, to the Knowledge of the Seller or Xxxxxx, threatened disputes with
applicants, staff members or health professional
12
affiliates and all appeal periods in respect of any medical staff member or
applicant against whom an adverse action has been taken have expired.
2.21 Health Care Legal Matters.
(a) The Partnership has complied, and is in compliance, with all
applicable Laws regulating the financing, reimbursement, payment,
acquisition, construction, operation, maintenance or management of a
health care practice, facility, provider or payor, including, without
limitation: (i) 42 U.S.C. Sections 1320a-7, 7a and 7b, which are commonly
referred to as the "Federal Anti-Kickback Statute"; (ii) 42 U.S.C. Section
1395nn, which is commonly referred to as the "Xxxxx Statute"; (iii) 31
U.S.C Sections 3729-3733, which is commonly referred to as the "Federal
False Claims Act"; (iv) Titles XVIII and XIX of the Social Security Act,
implementing regulations and program manuals; and (v) 42 U.S.C. Sections
1320d-1320d-8 and 42 C.F.R. Sections 160, 162 and 164, which is commonly
referred to as "HIPAA" (the foregoing hereinafter collectively referred to
as "Health Care Laws"), applicable to the Business. The Partnership has
maintained all records required to be maintained in connection with the
Medicare and Medicaid programs established under Titles XVIII and XIX of
the Social Security Act, and such other similar federal, state or local
reimbursement or governmental programs, managed care plans and any other
private health care insurance programs and employee assistance programs,
as well as any future similar programs, for which the Partnership is
eligible (the foregoing hereinafter referred to collectively as the "Payor
Source Programs") as required by applicable Health Care Laws.
(b) Without limiting the foregoing, the Partnership has not, and
neither the Seller nor Xxxxxx has (with respect to the Partnership or the
Business), and to the Knowledge of the Seller or Xxxxxx none of the
Non-Selling Limited Partners has (with respect to the Partnership or the
Business), engaged in any activities that are prohibited under any Health
Care Laws or any other federal or state statutes related to false or
fraudulent claims, the regulations promulgated pursuant to such statutes,
or any related state or local statutes or regulations, including, without
limitation, the following:
(i) knowingly and willfully making or causing to be made any
false statement or representation of material fact in any
application for any benefit or payment;
(ii) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in
determining rights to any benefit or payment;
(iii) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to
any benefit or payment on its own behalf or on behalf of another,
with intent to fraudulently secure such benefit or payment; or
(iv) knowingly and willfully soliciting or receiving any
remuneration (including any kickback, bribe or rebate), directly or
indirectly, overtly or
13
covertly, in cash or in kind or offering to pay or receive such
remuneration in return for (A) referring an individual 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 any Payor
Source Programs; or (B) purchasing, leasing, or ordering or
arranging for or recommending the purchasing, leasing or ordering of
any good, facility, service or item for which payment may be made in
whole or in part by a Payor Source Program.
(c) The Partnership has no financial relationships (whether or not
memorialized in writing) with any physician or any immediate family member
of any physician in connection with the Business. For purposes of this
Section 2.21(c), the term "financial relationship" has the meaning set
forth in the Xxxxx Statute.
(d) The Partnership is certified for participation and reimbursement
and qualified as a participating provider under the Payor Source Programs
set forth in Schedule 2.21(d). The Partnership has current provider
numbers and provider agreements for such Payor Source Programs as are set
forth in Schedule 2.21(d). There are no pending appeals, overpayment
determinations, challenges, audits, litigation, or notices of intent to
open Payor Source Programs' claim determinations or other reports required
to be filed by the Partnership, except for such appeals of individual
claim denials that occur in the ordinary course of business. None of the
Seller, Xxxxxx or the Partnership has received any notice indicating that
the Partnership's qualification as a participating provider may be
terminated or withdrawn nor do any of them have any reason to believe that
such qualification may be terminated or withdrawn. The Partnership has
timely filed all claims or other reports required to be filed with respect
to the purchase of products or services by third-party payors (including
Payor Source Programs), and all such claims or reports are complete and
accurate in all respects. The Partnership has no Liability to any
third-party payor with respect thereto, except for Liabilities incurred in
the ordinary course of business.
(e) With respect to the Business, neither the Seller nor Xxxxxx,
nor, to the Knowledge of the Seller or Xxxxxx, any officer or employee of
the Partnership or any other party to any contract with the Partnership:
(i) has been convicted of or charged with any violations of
law related to Medicare, Medicaid, any other Federal Health Care
Program (as defined in 42 U.S.C. Section 1320a-7b(f)), or any other
Payor Source Program;
(ii) has been convicted of, charged with or investigated for
any violation of law related to fraud, theft, embezzlement, breach
of fiduciary responsibility, financial misconduct, obstruction of an
investigation or controlled substances;
(iii) is excluded, suspended or debarred from participation,
or is otherwise ineligible to participate, in any Payor Source
Program or has committed any violation of law which is reasonably
expected to serve as the basis for any such exclusion, suspension,
debarment or other ineligibility; or
14
(iv) has violated or is presently in violation of any Health
Care Laws.
2.22 Environmental Matters.
(a) Except as described in Schedule 2.22: (i) the properties,
operations and activities of the Partnership are and at all times have
been in compliance with all applicable Environmental Laws in all respects;
including without limitation by having all Licenses required to be
obtained or filed by the Partnership under any Environmental Law in
connection with any aspect of the operation of the Business, and the
Partnership is in compliance with the terms and conditions of all such
Licenses; (ii) none of the Real Property contains any Hazardous Material
in amounts exceeding the levels permitted by applicable Environmental Laws
as a result of the Partnership's operations or activities or, to the
Knowledge of the Seller or Xxxxxx, for any other reason; (iii) during the
past five years, the Partnership has not received any notices, demand
letters or requests for information from any Governmental Entity or other
Person indicating that the Partnership may be in violation of, or liable
under, any Environmental Law, or relating to any of its current or former
assets; (iv) except with respect to matters that have been fully resolved
with no continuing Liability to the Partnership, no reports have been
filed, or are required to be filed, by (or relating to) the Partnership
concerning any release of any Hazardous Material or the threatened or
actual violation of any Environmental Law; (v) no Person or property has
been exposed to Hazardous Material, and no Hazardous Material has been
disposed of, released or transported, in violation of any applicable
Environmental Law to or from any Real Property or as a result of any
activity of the Partnership; (vi) there have been no environmental
investigations, studies, audits, tests, reviews or other analyses
regarding compliance or noncompliance with any Environmental Law conducted
by or on behalf of, or which are in the possession of, the Partnership or
the Seller relating to the Business or the activities of the Partnership
or any of the Real Property that have not been delivered to the Buyers
prior to the Effective Date; (vii) there are no underground storage tanks
on, in or under any of the Real Property, and no underground storage tanks
have been closed or removed from any of the Real Property; (viii) there is
no asbestos present in any of the Real Property in violation of any
Environmental Law, (ix) neither the Partnership nor any of its assets is
subject to any Liabilities relating to any suit, settlement, Law, judgment
or claim asserted or arising under any Environmental Law; (x) the
Partnership has satisfied and is currently in compliance with all
financial responsibility requirements applicable to its operations and
imposed by any Governmental Entity under any Environmental Laws; and (xi)
there are no environmental conditions either (A) existing on the
Partnership's property or (B) resulting from the Partnership's operations
or activities, whether past or present, that would give rise to any
on-site or off-site remediation obligations under any Environmental Laws.
(b) As used herein, "Environmental Law" means any applicable Laws,
License or agreement with any Governmental Entity relating in any manner
to Hazardous Materials, pollution, contamination, or the protection of the
environment enacted or in effect in any and all jurisdictions in which the
Partnership owns property or conducts the Business.
15
(c) As used herein, "Hazardous Material" means any substance whether
solid, liquid or gaseous that: (i) is listed, defined, classified or
regulated as a "Hazardous Material," "hazardous material," hazardous
waste," extremely hazardous waste," toxic substance," "sludge,"
"pollutant," "contaminant," or is otherwise listed, defined classified or
regulated in similar fashion, such as dangerous, hazardous, or toxic, in
or pursuant to any Environmental Law; or (ii) is or contains asbestos,
radon, any polychlorinated biphenyl, urea formaldehyde foam insulation,
explosive or radioactive material, crude oil or any fraction thereof, or
motor fuel or other refined or process petroleum hydrocarbons.
2.23 Employee Matters. Set forth in Schedule 2.23 is a complete and
accurate list of all current employees of the Partnership, including date of
employment, current title and compensation, and date and amount of last increase
in compensation. There are no written or oral employment agreements between the
Partnership and any of its employees. All of the Partnership's employees are
employees at will and may be terminated by the Partnership, without prior
notice, for any reason or for no reason. In relation to its employees, both
present and former, the Partnership has: (a) complied with all obligations
imposed on it by all Laws relevant to the relations between it and its employees
or any disclosed trade union; (b) maintained adequate and suitable records
regarding the service of each of its employees; and (c) withheld all income tax
required by the Code or by applicable state and local Laws, and payments due for
social security contributions (including the employer's contributions) and any
other amount required to be withheld under any federal, state or local Laws,
from salaries, wages and bonuses paid by the Partnership, complied with all
withholding requirements and maintained proper records in respect of the
foregoing. The Partnership has no collective bargaining, union or labor
agreements, contracts or other arrangements with any group of employees, labor
union or employee representative and there is no organization effort currently
being made or, to the Knowledge of the Seller or Xxxxxx, threatened by or on
behalf of any labor union with respect to employees of the Partnership. The
Partnership has not experienced, and, to the Knowledge of the Seller or Xxxxxx,
there is no basis for, any strike, labor trouble, work stoppage, slow down or
other interference with or impairment of the Business.
2.24 Employee Benefit Plans.
(a) The Partnership has no "Employee Benefit Plans." The term
"Employee Benefit Plans" means (a) any "employee benefit plan" or "plan"
within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and (b) all plans or policies
providing for "fringe benefits" (including but not limited to vacation,
paid holidays, personal leave, employee discounts, educational benefits or
similar programs), and each other bonus, incentive compensation, deferred
compensation, profit sharing, stock, severance, retirement, health, life,
disability, group insurance, employment, stock option, stock purchase,
stock appreciation right, performance share, supplemental unemployment,
layoff, consulting, or any other similar plan, agreement, policy or
understanding (whether written or oral, qualified or nonqualified,
currently effective or terminated), and any trust, escrow or other
agreement related thereto, which (i) is, or has been within the past five
years, established, maintained or contributed to by the Partnership or any
other corporation or trade or business under common control with the
Partnership (an "ERISA Affiliate") as determined under Section 414(b),
(c), (m) or (o) of the Code, or with respect to which the
16
Partnership has or may have any Liability; or (ii) provides benefits, or
describes policies or procedures of the Partnership or any of its
Affiliates applicable, to any present or former officer, employee or
dependent thereof of the Partnership, regardless of whether funded. The
term "Employee Benefit Plans" also includes any written or oral
representations made to any present or former officer or employee of the
Partnership by the Partnership or its Affiliates promising or guaranteeing
any employer payment or funding for the continuation of medical, dental,
life or disability coverage for any period of time beyond the end of the
current plan year (except to the extent of coverage required under Code
Section 4980B) or a similar provision of state law.
(b) Neither the Seller nor the Partnership is party to any "multiple
employer plan" or "multi-employer plan" (as described or defined in ERISA
or the Code).
(c) Neither the Partnership, the Seller nor any ERISA Affiliate has
any formal plan or commitment, whether legally binding or not, to create
any Employee Benefit Plan that would affect any present or former officer
or employee of the Partnership, or any dependent or beneficiary thereof.
(d) There is no Employee Benefit Plan that is maintained or
contributed to by the Partnership, the Seller or any ERISA Affiliate with
respect to which the Partnership has or may have any Liability that is or
was subject to Part 3 of Title I of ERISA or Title IV of ERISA.
(e) The Buyers will not assume any Employee Benefit Plans of the
Partnership or take on any Liability relating to any Employee Benefit
Plans of the Partnership.
(f) The Partnership does not provide, nor is it obligated to
provide, benefits, including without limitation death, health, medical, or
hospitalization benefits (whether or not insured), with respect to current
or former officers or employees of the Partnership, or their dependents or
beneficiaries, beyond their retirement or other termination of employment
other than (i) coverage mandated by applicable Law; (ii) death benefits or
retirement benefits under any "employee pension benefit plan," as that
term is defined in Section 3(2) of ERISA; or (iii) deferred compensation
benefits accrued as liabilities on the books of the Partnership.
(g) No Liability under Title IV of ERISA or Section 412 of the Code
has been incurred (directly or indirectly) by the Partnership or any ERISA
Affiliate that has not been satisfied in full.
(h) Neither the Partnership nor any ERISA Affiliate maintains or has
ever participated in a multiple employer welfare arrangement as described
in Section 3(40)(A) of ERISA for which the Partnership may become liable
under ERISA.
(i) No Lien has been filed by any Person and no Lien exists by
operation of Law or otherwise on the assets of the Partnership relating
to, or as a result of, the operation or maintenance of any Employee
Benefit Plan, and neither the Seller nor
17
Xxxxxx has any Knowledge of the existence of facts or circumstances that
would result in the imposition of such Lien.
(j) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in
any payment becoming due to any officer or employee of the Partnership; or
(ii) result, separately or in the aggregate, in an "excess parachute
payment" within the meaning of Section 280G of the Code.
2.25 Partnership Contracts.
(a) Schedule 2.25(a) sets forth a complete and accurate list of each
agreement (whether written or oral and including all amendments thereto)
relating to the Business or to which the Partnership is a party or a
beneficiary or by which the Partnership or any of its assets is bound
(collectively, the "Partnership Contracts"), including without limitation
the following: (i) all payor and provider contracts with any of the
Payors; (ii) management or similar or related agreements; (iii) agreements
pursuant to which the Partnership sells or distributes any services or
products; (iv) real property leases; (v) capital or operating leases or
conditional sales agreements relating to vehicles, equipment or other
assets of the Partnership; (vi) agreements evidencing, securing or
otherwise relating to any indebtedness for borrowed money for which the
Partnership is liable; (vii) agreements pursuant to which the Partnership
is entitled or obligated to acquire any assets from a third Person; (viii)
insurance policies; (ix) employment, consulting, noncompetition,
separation, collective bargaining, union or labor agreements or
arrangements; and (x) agreements with or for the benefit of any
equityholder, manager, director, officer or employee of the Partnership or
any Affiliate or immediate family member thereof.
(b) The Seller has delivered to the Buyers a copy of each written
Partnership Contract and a detailed written summary of each oral
Partnership Contract. Except as described in Schedule 2.25(b), (i) each
Partnership Contract is valid, binding and in full force and effect and
enforceable in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, fraudulent conveyance
or similar laws affecting the enforcement of creditors' rights generally
and subject to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity); (ii) the
Partnership has performed all of its obligations that have become due
under any Partnership Contract to which it is a party, and there exists no
breach or default (or event that with notice or lapse of time would
constitute a breach or default) on the part of the Partnership or any
other Person under any Partnership Contract; (iii) there has been no
termination or notice of default or, to the Knowledge of the Seller or
Xxxxxx, any threatened termination under any Partnership Contract; and
(iv) to the Knowledge of the Seller or Xxxxxx, no party to a Partnership
Contract intends to alter its relationship with the Partnership as a
result of or in connection with the acquisition contemplated by this
Agreement.
(c) Except as set forth in Schedule 2.25(c), none of the Partnership
Contracts will require Consent from the Partnership's counterparty or will
result in a breach, termination, termination right or change in any right
or obligation thereunder as a result
18
of the consummation of the transactions contemplated by this Agreement.
With respect to the Partnership Contracts identified in Schedule 2.25(c),
the Buyers will have the right to participate in any communication with
such counterparties in connection with obtaining the required approval.
(d) Neither any of the Partnership Contracts nor any other
agreements, understandings or proposed transactions to which the Seller,
Xxxxxx or the Partnership is a party will cause a Material Adverse Effect
on the Partnership's business or on the Seller's or Xxxxxx'x ability to
perform their obligations under this Agreement.
2.26 Intellectual Property. The Partnership does not own, or have any
license or use rights with respect to, any registered and unregistered
trademarks, service marks or trade names (except to the extent any of the
fictitious business names listed in Schedule 2.1 may be considered to be trade
names), or registered copyrights or patents, or applications for or licenses (to
or from the Partnership) with respect to any of the foregoing, or any computer
software or software licenses (other than commercial "shrink-wrap" software and
software licenses), in each case that are used in connection with the Business.
2.27 Competing Interests. Except as set forth in Schedule 2.27, neither
the Seller nor the Partnership, nor, to the Knowledge of the Seller or Xxxxxx,
any equityholder, director, general partner, officer, employee or agent of the
Partnership, any Affiliate of the Seller or the Partnership or any immediate
family member of Xxxxxx: (a) owns, directly or indirectly, an interest in any
Person that is a competitor, customer or supplier of the Partnership or that
otherwise has business dealings with the Partnership; or (b) is a party to, or
otherwise has any direct or indirect interest opposed to the Partnership under,
any Partnership Contract or other business relationship or arrangement (other
than investments in publicly traded equity securities constituting less than 1%
of the outstanding securities of that class).
2.28 No Conflict of Interest. The Partnership is not indebted, directly or
indirectly, to the Seller, Xxxxxx, any family member of Xxxxxx, any Affiliate of
any of the foregoing or any of the Partnership's equityholders, officers or
employees, in any amount whatsoever other than in connection with expenses or
advances of expenses incurred in the ordinary course of business and consistent
with past practices. None of the Seller, Xxxxxx, any family member of Xxxxxx,
any Affiliate of any of the foregoing or any of the Partnership's equityholders,
officers or employees is indebted, directly or indirectly, to the Partnership,
nor does any of the foregoing have any direct or indirect ownership interest in
any entity with which the Partnership has a business relationship. The
Partnership is not a guarantor or indemnitor of any indebtedness of any other
Person.
2.29 Illegal Payments. Neither the Partnership nor any equityholders,
general partners, officers, employees or agents, or any Affiliate or immediate
family member of any of the foregoing, has: (a) used any funds of the
Partnership for contributions, gifts or entertainment in violation of applicable
Law, or for other purposes, including relating to political activity, in
violation of applicable Law; or (b) made any payment for the account or benefit,
or using funds, of the Partnership in violation of applicable Law to foreign or
domestic government officials or employees or to foreign or domestic political
parties or campaigns or violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended.
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2.30 Insurance. The Partnership has maintained and now maintains insurance
on the Business and all of its assets of a type customarily insured, covering
property damage and loss of income by fire or other casualty, as well as
adequate insurance protection against all Liabilities, claims and risks against
which it is customary to insure, including, without limitation, professional
liability insurance. Set forth in Schedule 2.30 is a complete and accurate list
of all policies, bonds and other forms of insurance currently owned or held by
or on behalf of or providing insurance coverage to the Partnership, the Business
or the assets of the Partnership, and its officers, employees or agents, along
with a description of all claims and their current status made under any such
policy. All such policies are issued by insurers of recognized responsibility
and insure the Partnership, the Business and the assets of the Partnership
against such losses and risks, and in such amounts, as are customary in the case
of companies of established reputation engaged in the same or similar businesses
and similarly situated. All such policies are in full force and effect, and the
Partnership has not done or omitted to do or suffered anything to be done which
has or might render such policies void or voidable or that would cause or allow
any claims under any such policies to be denied. The Partnership has not
received a notice of default under any such policy or received written notice of
any pending or threatened termination or cancellation, coverage limitation or
reduction, or material premium increase with respect to any such policy. To the
Knowledge of the Seller or Xxxxxx, there are no circumstances likely to give
rise to any claim under any such policies. Neither the Seller nor Xxxxxx has
received any communications that would cause the Seller or Xxxxxx to believe
that the Partnership will not be able to continue to maintain such insurance
policies with the same coverage for substantially the same premium amount.
2.31 Accredited Investor; Disclosure Materials. The Seller is an
"accredited investor" as such term is defined in Rule 501(a) promulgated under
the 1933 Act, who by reason of its business and financial experience has such
knowledge, sophistication and experience in business and financial matters as to
be capable of evaluating the merits and risks of, and could be reasonably
assumed to have the capacity to protect its own interests in connection with, an
investment in the Series A GP Shares, the Series A LP Shares and the Series B
Shares (collectively, the "Newco Shares") and, having had access to or having
been furnished with all such information as it has considered necessary, has
concluded that it is able to bear those risks. The Seller acknowledges that (a)
it has not received, and will not receive, any prospectus, placement memorandum
or any similar disclosure materials with respect to the Newco Shares; (b) it has
had access to or been furnished with copies of the most recent Annual Report on
Form 10-K and each subsequent Quarterly Report on Form 10-Q and Current Report
on Form 8-K, in each case filed by VSCE with the Securities and Exchange
Commission; (c) such information is the only disclosure information that is
available or that has been or will be provided by the Buyers in connection with
the transactions contemplated by this Agreement; (d) such information is
sufficient for the Seller to be capable of evaluating the merits and risks of an
investment in the Newco Shares; and (e) the Seller has reviewed such information
and has concluded that it is able to bear those risks.
2.32 Investment Intent. The Seller is acquiring the Newco Shares for its
own account and not with a view to or for sale in connection with any
distribution of any of the Newco Shares within the meaning of Section 2(11) of
the 1933 Act.
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2.33 Restricted Securities. The Seller understands that the Newco Shares
constitute "restricted securities" within the meaning of Rule 144 promulgated
under the 1933 Act and may not be sold, pledged or otherwise disposed of unless
they are subsequently registered under the 1933 Act and applicable state
securities laws or unless an exemption from registration is available. The
Seller understands that the Newco Shares, and any securities issued in respect
thereof or exchange therefor, may bear one or more of the following restrictive
legends substantially in the form provided below:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OF 1933"; and
(b) any legend required by the securities laws of any state to the
extent such laws are applicable to the shares represented by the
certificate so legended.
2.34 Full Disclosure. No representation or warranty of the Seller
contained in this Agreement, and nothing set forth herein or in the exhibits
attached hereto, or in any document furnished or to be furnished to the Buyers
at the Closing, or in any other information or materials delivered by the Seller
or the Partnership to the Buyers (when read together), contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein not misleading in light
of the circumstances under which they were made. The Seller and Xxxxxx have
disclosed to the Buyers all facts and information material to the proposed
purchase of the Purchased Interests that are known to such parties.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
The Buyers, jointly and severally, represent and warrant to the Seller
that the statements contained in this Article III (as supplemented by the
Schedules referenced herein, if any) are true and correct as of the Effective
Date.
3.1 Organization. Each of the Buyers is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada.
3.2 Authority. Each of the Buyers has all requisite power and authority,
corporate or otherwise, to execute, deliver and perform under this Agreement and
the other agreements, certificates and instruments to be executed by the Buyers
in connection with or pursuant to this Agreement (collectively, the "Buyer
Documents"). The execution, delivery and performance by each Buyer of each Buyer
Document to which it is a party has been duly authorized by all necessary
action, corporate or otherwise, on the part of such Buyer. This Agreement has
been, and at the Closing the other Buyer Documents will be, duly executed and
delivered by each Buyer (to the extent each is a party thereto). This Agreement
is, and, upon execution and delivery by the Buyers at the Closing, each of the
other Buyer Documents will be, a legal, valid and binding agreement of each
Buyer (to the
21
extent each is a party thereto), enforceable against such Buyer in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance or similar laws affecting the
enforcement of creditors' rights generally and subject to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity).
3.3 No Violation. The execution, delivery and performance of the Buyer
Documents by the Buyers will not conflict with or result in the breach of any
term or provision of, or violate or constitute a default under any charter
provision or bylaw or under any material agreement, order or Law to which any
Buyer is a party or by which any Buyer is in any way bound or obligated.
3.4 Governmental Authorizations. Except to the extent required in
connection with any of the Governmental Authorizations required on the part of
the Seller or the Partnership as described in Schedule 2.11, or as required by
any applicable securities Laws, no Governmental Authorization is required on the
part of any Buyer in connection with the transactions contemplated by this
Agreement.
3.5 Litigation. There are no pending or, to the Knowledge of the Buyers,
threatened, lawsuits, administrative proceedings, arbitrations, reviews or
formal or informal complaints or investigations by any Person that in any manner
challenges or seeks to prevent, enjoin, alter or materially delay any of the
transactions contemplated by this Agreement.
3.6 No Brokers. No Buyer has dealt with any broker or consultant with
respect to the purchase and sale of the Purchased Interests, or with any other
Person who may claim a commission or finder's fee arising out of this Agreement
or any of the transactions contemplated hereby, except that the Buyers have paid
a consulting fee of $25,000 to Xxxxxx Xxxx.
3.7 Accredited Investor. Each of the Buyers is an "accredited investor" as
such term is defined in Rule 501(a) promulgated under the 1933 Act, who by
reason of its business and financial experience has such knowledge,
sophistication and experience in business and financial matters as to be capable
of evaluating the merits and risks of, and could be reasonably assumed to have
the capacity to protect its own interests in connection with, an investment in
the Purchased Interests and, having had access to or having been furnished with
all such information as it has considered necessary, has concluded that it is
able to bear those risks.
3.8 Investment Intent. GenPar is acquiring the GP Interest for its own
account and not with a view to or for sale in connection with any distribution
of the GP Interest within the meaning of Section 2(11) of the 1933 Act. Newco is
acquiring the LP Interest for its own account and not with a view to or for sale
in connection with any distribution of the LP Interest or any portion thereof
within the meaning of Section 2(11) of the 0000 Xxx.
3.9 Restricted Securities. The Buyers understand that the Purchased
Interests constitute "restricted securities" within the meaning of Rule 144
promulgated under the 1933 Act and may not be sold, pledged or otherwise
disposed of unless they are subsequently registered
22
under the 1933 Act and applicable state securities laws or unless an exemption
from registration is available.
3.10 Full Disclosure. No representation or warranty of the Buyers
contained in this Agreement, and nothing set forth herein or in the exhibits
attached hereto, or in any document furnished or to be furnished to the Seller
at the Closing, or in any other information or materials delivered by the Buyers
to the Seller (when read together), contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made.
ARTICLE IV
COVENANTS AND AGREEMENTS
4.1 Conduct of Business. Prior to the Closing, unless the Buyers otherwise
consent in writing, the Seller will cause the Partnership to:
(a) operate in the ordinary course of business and consistent with
past practices and use its commercially reasonable efforts to preserve the
goodwill of the Partnership and of its officers, employees, customers,
suppliers, Governmental Bodies and others having business dealings with
the Partnership;
(b) use its commercially reasonable efforts to preserve intact the
business organization of the Partnership, to keep available the services
of the Partnership's present officers and key employees, consultants,
advisors and managers and to maintain satisfactory relationships with
Payors, agents, insurers, reinsurers, suppliers and other Persons having
business relationships with the Partnership;
(c) except as specifically contemplated by this Agreement, not
engage in any transaction outside the ordinary course of business,
including without limitation by making any expenditure, investment,
commitment or distribution of assets to any of its partners or entering
into any agreement or arrangement of any kind;
(d) maintain a level of collectible receivables acceptable to the
Buyers in their sole and absolute discretion;
(e) maintain cash on hand as of the Closing Date equal to at least
$100,000 plus the Retained Expenses (as defined below) (the "Required
Capital"); the Buyers acknowledge and agree that the Seller may cause the
Partnership to distribute its cash on hand in excess of the Required
Capital to the Partnership's equityholders immediately prior to the
transfer of the Purchased Interests to the Buyers as contemplated by this
Agreement; the "Retained Expenses" means an amount sufficient to satisfy
all Liabilities incurred or accrued by the Partnership prior to the
Closing Date that are (i) normal recurring expenses, incurred in the
ordinary course of business and consistent with past practices, which
accrued more than 30 days prior to the Closing Date; or (ii) any other
Liabilities which relate to services provided to the Partnership, products
purchases by the
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Partnership or any other obligation which was not incurred in the ordinary
course of business and consistent with past practices prior to the Closing
Date;
(f) satisfy all of its Liabilities other than trade accounts payable
incurred in the ordinary course of business and consistent with past
practices prior to the Closing, including, without limitation, the
Liabilities set forth in Schedule 2.13(b).
(g) maintain all insurance policies and all Licenses that are
required for the Partnership to carry on the Business;
(h) maintain all Partnership Contracts in the usual, regular and
ordinary manner and consistent with past practices;
(i) not approve or make any change in the list in Schedule 2.20 of
providers in good standing on the medical staff of the Partnership, as
listed;
(j) maintain books of account and records in the usual, regular and
ordinary manner and consistent with past practices;
(k) not acquire by merger, consolidation or acquisition of stock or
assets any Person or make any investment in any other Person either by
purchase of stock or securities, contributions to capital, property
transfer or purchase of any amount of property or assets (other than
supplies in the ordinary course of business and consistent with past
practice);
(l) not amend the Partnership Agreement or alter through merger,
liquidation, reorganization, restructuring or in any other fashion the
Partnership's structure or ownership;
(m) not authorize or make any new expenditure not permitted under
the current budget provided to the Buyers prior to the Effective Date,
including without limitation any capital lease or non-ordinary course
lease, except in the ordinary course of business up to the amounts
contemplated by such budget;
(n) not make any tax election, settle or compromise any Tax
Liability or consent to the extension of time for the assessment or
collection of any Tax;
(o) not enter into any exclusive arrangements with suppliers or
customers, unless such arrangements are terminable by the Partnership upon
no more than 30 days' notice, or incur or agree to incur any payments to
customers (other than pursuant to agreements listed in Schedule 2.25(a))
in excess of $5,000;
(p) not enter into any noncompetition or most favored nation
agreement that binds the Partnership;
(q) not enter into any collective bargaining agreement; and
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(r) not take or willfully omit to take any action that would result
in a breach (as of the Closing) of the representations and warranties set
forth in Section 2.14.
Notwithstanding the foregoing, the Partnership will be permitted prior to the
Closing to make distributions to its partners of amounts estimated to be owed by
such partners for federal and state income Taxes relating to the income of the
Partnership through the Closing Date.
4.2 Access and Information. Prior to the Closing, the Seller and Xxxxxx
will cause the Partnership to permit the Buyers and its representatives to have
reasonable access to the Partnership's equityholders, officers, employees,
agents, assets and properties and, prior to and after the Closing, all relevant
books, records and documents of or relating to the Business and the assets of
the Partnership during normal business hours and will furnish to the Buyers such
information, financial records and other documents relating to the Partnership,
the Business and the assets of the Partnership as the Buyers may reasonably
request. The Seller and Xxxxxx will cause the Partnership to permit the Buyers
and their representatives reasonable access to the Partnership's accountants,
auditors, customers and suppliers for consultation or verification of any
information obtained by the Buyers and will use, and will cause the Partnership
to use, commercially reasonable best efforts to cause such Persons to cooperate
with the Buyers and their representatives in such consultations and in verifying
such information. The Seller and Xxxxxx will have the right to participate in
any contact with such Persons.
4.3 Supplemental Disclosure. Prior to the Closing but as soon as
practicable after the discovery thereof, the Seller and Xxxxxx will supplement
or amend each of the Schedules hereto with respect to any matter that arises or
is discovered after the Effective Date that, if existing or Known by the Seller
or Xxxxxx on the Effective Date, would have been required to be set forth or
listed in the Schedules hereto.
4.4 Assistance with Licenses and Filings. The Seller and Xxxxxx will
assist the Buyers in obtaining any Licenses, or any consents to assignment or
change in control related thereto, that the Buyers will require in connection
with the continued operation of the Business after the Closing.
4.5 Substitution Guarantor. GenPar will use its commercially reasonable
efforts to assist the Seller and Xxxxxx in removing themselves from any personal
guarantees made by them with respect to the leases identified in Schedule 4.5,
including, without limitation, by becoming a substitution guarantor with respect
thereto.
4.6 Fulfillment of Conditions by the Sellers. The Seller and Xxxxxx will
take all reasonable steps within their power to cause to be fulfilled the
conditions precedent to the Buyers' obligations to consummate the transactions
contemplated hereby that are dependent on the actions of the Seller or Xxxxxx.
4.7 Fulfillment of Conditions by the Buyers. The Buyers will take all
reasonable steps within their power to cause to be fulfilled the conditions
precedent to the obligations of the Seller and Xxxxxx to consummate the
transactions contemplated hereby that are dependent on the actions of the
Buyers.
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4.8 Distributions in Excess of Required Capital. Notwithstanding the
approval of any distribution of cash allowed under Section 4.1(e), the Seller
shall remit to the Partnership the amount of any Liability or expense included
in the definition of Retained Expenses that is paid by the Partnership after the
Closing Date. The parties acknowledge and agree that the amount of any Liability
or expense included in the definition of Retained Expenses subsequently paid by
the Partnership shall result in a reduction in the amount distributed to the
Seller as a distribution under the Partnership Agreement. If a distribution from
the Partnership is not made to the Seller within 90 days from and after the date
the Partnership pays any Liability or expense included in the definition of
Retained Expenses, the Seller shall remit the sum of any such Liability or
expense paid by the Partnership directly to the Partnership. The Sellers and
Xxxxxx are jointly and severally liable for any amounts due to the Partnership
under this Section 4.8.
4.9 Consent to Transfers. The Seller consents to (a) the sale, purchase
and transfer of the Purchased Interests as contemplated by this Agreement; (b)
the admission of GenPar as successor general partner of the Partnership with
respect to the GP Interest; and (c) the admission of Newco as a limited partner
of the Partnership with respect to the LP Interest.
4.10 Publicity. The Buyers, the Seller and Xxxxxx will cooperate with each
other in the development and distribution of all news releases and other public
disclosures relating to the transactions contemplated hereby. Neither the Seller
nor Xxxxxx, nor any Buyer, will issue or make, or allow to have issued or made,
any press release or public announcement concerning the transactions
contemplated hereby without giving the other party a reasonable opportunity to
comment on such release or announcement in advance, consistent with applicable
Law and stock market requirements. Notwithstanding the foregoing, nothing
contained herein will prohibit VSCE from making any disclosure required pursuant
to applicable securities Laws.
4.11 Audit. Within five business days after the Effective Date, the Seller
and Xxxxxx will, at the Seller's sole expense, engage a nationally-known
independent certified public accounting firm reasonably acceptable to the Buyers
and the Seller to prepare the audited financial statements contemplated by
Section 2.12(b), which will be prepared in accordance with GAAP. Within 45 days
after the Closing, the Buyers will reimburse the Seller for the reasonable
actual costs incurred by the Seller for such engagement; provided, however, that
the Buyers will not be obligated to make any such reimbursement payment if this
Agreement is terminated by the Buyers pursuant to Section 7.1(a)(ii), (iii) or
(iv) prior to the Closing; further provided, that such reimbursement will only
be for costs associated with the engagement for the preparation of the audited
financial statements, and not any costs associated with the preparation of the
Partnership's internal financial statements required prior to such engagement.
4.12 Transaction Costs. The Buyers will pay all transaction costs and
expenses (including legal, accounting and other professional fees) that they
incur in connection with the negotiation, execution and performance of this
Agreement and the transactions contemplated hereby. Except as provided in
Section 4.11, the Seller and Xxxxxx will pay all transaction costs and expenses
(including legal, accounting and other professional fees) that they incur or
that are incurred by the Partnership in connection with the negotiation,
execution and performance of this Agreement and the transactions contemplated
hereby.
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4.13 No-Shop Provisions. The Seller hereby covenants and agrees that (a)
it will not, and will not permit any of its Affiliates (including the
Partnership) to, initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal relating to, or that may reasonably be
expected to lead to, any Competing Transaction (as defined below), or enter into
discussions or negotiate with any Person in furtherance of such inquiries or to
obtain a Competing Transaction, or endorse or agree to endorse any Competing
Transaction, or authorize or permit any of the officers or employees of the
Partnership or any investment banker, financial advisor, attorney, accountant or
other representative retained by the Seller or Xxxxxx, or any of their
Affiliates (including the Partnership) to take any such action; and (b) the
Seller will promptly notify the Buyers of all relevant terms of any such
inquiries and proposals received by it or any of its Affiliates (including the
Partnership) or by any such officer, employee, investment banker, financial
advisor, attorney, accountant or other representative relating to any of such
matters, and if such inquiry or proposal is in writing, the Seller will promptly
deliver or cause to be delivered to the Buyers a copy of such inquiry or
proposal. For purposes of this Agreement, "Competing Transaction" means any of
the following (other than the transactions contemplated by this Agreement)
involving the Partnership: (i) any merger, consolidation, share exchange,
business combination or similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of the assets of the Partnership
(other than sales of inventory in the ordinary course of business and consistent
with past practice); or (iii) any offer, sale or other transfer of any equity
interest in the Partnership.
4.14 Nondisclosure. The Seller acknowledges and agrees that all customer,
prospect and marketing lists, sales data, pricing, product information,
Intellectual Property and other confidential information of the Partnership
(collectively, "Confidential Information") are valuable assets constituting part
of the assets of the Partnership and, following the Closing, will be owned by
the Buyers (through the Partnership), except to the extent any such customer,
prospect or marketing list, Intellectual Property or Confidential Information is
also used by the Seller or its Affiliates in connection with their respective
businesses, which businesses do not compete with the Business, in which case
such customer, prospect or marketing lists, Intellectual Property or
Confidential Information will be jointly owned by the Buyers and the Seller or
its applicable Affiliate; provided, however, that the following shall in any
event be owned exclusively by the Buyers (through the Partnership): (a) sales
data, pricing and product information with respect to the Partnership's
products, (b) Intellectual Property identified in Schedule 2.27, and (c) any
other Intellectual Property or Confidential Information used in the Business
prior to the Effective Date. The Seller agrees, and agrees to use reasonable
efforts to cause its representatives, to treat the Confidential Information,
together with any other confidential information furnished to it by the Buyers,
as confidential and not to make use of such information for its own purposes or
for the benefit of any other Person (other than the Partnership prior to the
Closing or the Buyers after the Closing).
4.15 Certain Tax Matters.
(a) The Partnership will terminate on the Closing Date pursuant to
Section 708(b)(1)(B) of the Code. Consequently, the Partnership will close
its books as of the Closing Date and will allocate its "profits" and
"losses" for the period from January 1, 2006 through, and including, the
Closing Date to the Seller and the Non-Selling Limited
27
Partners. The Buyers will not be allocated any "profits" or "losses" of
the Partnership for any period ending on or prior to the Closing Date.
(b) The Partnership will timely prepare and file its final federal
income tax information return for the taxable year ending on the Closing
Date. The Buyers will have the right to review and approve such return
prior to its being filed with the Internal Revenue Service.
(c) The Buyers, the Partnership, and the Seller will cooperate, as
and to the extent reasonably requested by the other party, in connection
with the filing of Tax Returns pursuant to this Section 4.15 and any
audit, litigation or other proceeding with respect to Taxes, and the
Buyers and the Seller shall each be entitled at their own expense to
participate in any such audit, litigation or other proceeding to the
extent that such party would be liable for any additional Taxes owing.
Such cooperation shall include, upon the other party's request, the
provision of records and information which are reasonably relevant to any
such audit, litigation or other proceeding and making employees reasonably
available on a mutually convenient basis to provide additional information
and explanation as may be reasonably requested of any material provided
hereunder. The Buyers will cause the Partnership to retain relevant books
and records concerning Tax matters of the Partnership and relating to any
Tax periods prior to or including the Closing Date until the expiration of
the applicable statutes of limitation and shall abide by all record
retention agreements entered into with any taxing authority.
4.16 Employees and Employee Benefits. Nothing contained in this Agreement
or any of the documents contemplated hereby will affect the status of any of the
Partnership's employees or any of the Employee Benefit Plans identified in
Schedule 2.24. From and after the Closing Date, the Partnership (or any legal
successors) will have sole and absolute discretion over the promotion,
retention, termination and other terms and conditions of the employment of the
employees of the Partnership.
4.17 Treatment of Partnership Assets After Closing. After the Closing,
unless Xxxxxx otherwise consents in writing, such consent not to be unreasonably
withheld or delayed, the Buyers will take all steps within their power to
prevent the Partnership from permitting any Lien with respect to any asset used
in the Business, including, without limitation, any account receivable, License
or improvement on any of the Real Property.
4.18 Mutual Walk-Away. Beginning on the first Mandatory Redemption Date
(as defined in the Series B Certificate of Designation), if (a) the closing bid
price for the common stock, par value $0.01 per share, of VSCE (the "Parent
Common Stock"), for a period of five consecutive trading days, is less than the
closing bid price for the Parent Common Stock on the Effective Date; and (b) all
dividend and mandatory redemption payments due and payable on or after such
Mandatory Redemption Date pursuant to the terms of the Series B Certificate of
Designation have not been made (to the extent allowed pursuant to all applicable
Laws), then the Seller will have the right, at its sole option, to repurchase
the Purchased Interests from the Buyers in exchange for the return of all Newco
Shares then outstanding.
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ARTICLE V
CLOSING CONDITIONS
5.1 Conditions to Obligations of the Buyers. The obligations of the Buyers
under this Agreement are subject to the satisfaction at or prior to the Closing
of the following conditions, but compliance with any such conditions may be
waived by the Buyers in writing:
(a) All representations and warranties of the Seller and Xxxxxx
contained in this Agreement are true and correct in all respects at and as
of the Closing, without regard to any supplemental disclosure provided
pursuant to Section 4.3, with the same effect as though such
representations and warranties were made at and as of the Closing (rather
than as of the Effective Date as provided in the first paragraph of
Article II).
(b) The Seller and Xxxxxx have performed and complied in all
respects with all the covenants and agreements required by this Agreement
to be performed or complied with by them at or prior to the Closing.
(c) All necessary Consents listed in Schedule 2.25(c) or required
under any applicable Laws have been obtained and will be effective as of
the Closing, and all necessary contractual or governmental notices have
been given.
(d) The Buyers have approved of the calculation of the amount to be
distributed under Section 4.1(e).
(e) As of the Closing Date, there is no pending or threatened
litigation by any Person seeking to enjoin any aspect of the operation of
the Business or the consummation of the transactions contemplated by this
Agreement, or otherwise affecting the Partnership.
(f) As of the Closing Date, there has not occurred any Material
Adverse Effect with respect to the Partnership since the Latest Balance
Sheet Date.
(g) The Buyers have received evidence satisfactory to the Buyers in
their sole and absolute discretion of the release of the Partnership from
any obligation concerning (including any guarantee of) any Liability of
the Seller or Xxxxxx and any indebtedness of the Partnership not reflected
in the Latest Balance Sheet or incurred since the Latest Balance Sheet
Date in the ordinary course of business and consistent with past practice.
(h) The Seller has delivered to the Buyers executed UCC Termination
Statements or other releases satisfactory to the Buyers in their sole and
absolute discretion to evidence the release of any Liens on the assets of
the Partnership or on the Purchased Interests.
(i) The Seller has delivered to the Buyers the audited financial
statements contemplated by Section 2.12(b), prepared in accordance with
GAAP.
(j) GenPar, Newco, the Seller and each of the Non-Selling Limited
Partners will have entered into an Amended and Restated Agreement of
Limited Partnership of Del
29
Mar Surgical Center, L.P., dated as of the Effective Date, by and among
GenPar, as the general partner, and Newco, the Seller and each of the
Non-Selling Limited Partners, as limited partners, in form and substance
mutually satisfactory to GenPar, Newco and the Seller (the "Partnership
Agreement").
(k) Xxxxxx will have caused Elite to execute and deliver to SCMI any
documents that are necessary to transfer to SCMI good title to the Elite
Assets, including, without limitation, the Xxxx of Sale.
(l) The Seller will have executed and delivered to the Buyers the
Registration Rights Agreement, substantially in the form of Exhibit D
attached hereto (the "Registration Rights Agreement").
(m) The Seller will have executed and delivered to Newco the
Assignment of GP Interest, substantially in the form of Exhibit E attached
hereto (the "Assignment of GP Interest").
(n) The Seller will have executed and delivered to GenPar the
Assignment of LP Interest, substantially in the form of Exhibit F attached
hereto (the "Assignment of LP Interest").
(o) The Seller will have caused the Partnership to execute and
deliver to SCMI the Management Services Agreement, substantially in the
form of Exhibit G attached hereto (the "Management Services Agreement").
(p) The Seller will have caused the Partnership to execute and
deliver, and each of Elite and Clinicis, Inc. will have executed and
delivered, to SCMI the Termination of Management Agreements, substantially
in the form of Exhibit H attached hereto (the "Termination Agreement").
(q) The Seller will have executed and delivered to the Buyers the
Release, substantially in the form of Exhibit I attached hereto.
(r) The Seller and Xxxxxx will have delivered to the Buyers a
closing certificate, substantially in the form of Exhibit J attached
hereto.
(s) The Seller will have delivered to the Buyers a certificate of
the secretary of the Seller, substantially in the form of Exhibit K
attached hereto.
(t) The Seller and Xxxxxx will have delivered to the Buyers a legal
opinion of counsel to the Seller and Xxxxxx, substantially in the form of
Exhibit L attached hereto.
(u) The Seller and Xxxxxx will have used their best efforts to
provide to the Buyers an estoppel certificate from the lessor of the Real
Property, substantially in the form of Exhibit M attached hereto.
5.2 Conditions to Obligations of the Seller and Xxxxxx. The obligations of
the Seller and Xxxxxx under this Agreement are subject to the satisfaction at or
prior to the Closing of the
30
following conditions, but compliance with any such conditions may be waived by
the Seller in writing:
(a) All representations and warranties of the Buyers contained in
this Agreement are true and correct in all respects at and as of the
Closing with the same effect as though such representations and warranties
were made at and as of the Closing (rather than as of the Effective Date
as provided in the first paragraph of Article III).
(b) Each of the Buyers has performed and complied in all respects
with all the covenants and agreements required by this Agreement to be
performed or complied with by it at or prior to the Closing.
(c) All necessary Consents under any applicable Laws have been
obtained and all necessary governmental notices have been given.
(d) VSCE will have executed and delivered to the Seller the
Registration Rights Agreement.
(e) Newco will have executed and delivered to the Seller the
Assignment of GP Interest.
(f) GenPar will have executed and delivered to the Seller the
Assignment of LP Interest.
(g) SCMI will have executed and delivered to the Seller the
Management Services Agreement.
(h) The Buyers will have delivered to the Seller a closing
certificate substantially in the form of Exhibit N attached hereto.
(i) The Buyers will have delivered to the Seller and Xxxxxx a
certificate of the secretary of each of the Buyers, substantially in the
form of Exhibit O attached hereto.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification of the Buyers. Notwithstanding any investigation by
the Buyers or its representatives or any supplemental disclosure under Section
4.3, the Seller and Xxxxxx will, jointly and severally, indemnify and hold the
Buyers, their Affiliates and their respective directors, officers, employees and
agents (collectively, the "Buyer Parties") harmless from any and all
Liabilities, obligations, claims, contingencies, damages, costs and expenses,
including all court costs, litigation expenses and reasonable attorneys' fees
(collectively, "Losses"), that any Buyer Party may suffer or incur as a result
of or relating to:
(a) the breach of any representation or warranty made by the Seller
or Xxxxxx in this Agreement or pursuant hereto or any allegation by a
third party that, if true, would constitute such a breach (and, for the
purposes of determining under this Section 6.1(a)
31
whether there is a breach of any representation or warranty and the amount
of any Losses arising therefrom:
(i) a representation or warranty shall be considered breached
if such representation or warranty was not true and correct when
given, without regard to any supplemental disclosure provided
pursuant to Section 4.3 and without regard to whether the condition
to close set forth in Section 5.1(a) is satisfied;
(ii) a representation or warranty shall be considered breached
if (A) such representation or warranty was true and correct when
given, without regard to any supplemental disclosure provided
pursuant to Section 4.3 and without regard to whether the condition
to close set forth in Section 5.1(a) is satisfied; (B) such
representation or warranty becomes untrue at or prior to Closing;
and (C) the Sellers fail to make necessary supplemental disclosure
regarding such representation or warranty pursuant to Section 4.3 at
or prior to Closing;
(iii) a representation or warranty shall be considered
breached if (A) such representation or warranty was true and correct
when given, without regard to any supplemental disclosure provided
pursuant to Section 4.3; (B) such representation or warranty becomes
untrue at or prior to Closing; (C) the Sellers make supplemental
disclosure regarding such representation or warranty pursuant to
Section 4.3 at or prior to Closing; and (D) the condition to close
set forth in Section 5.1(a) is satisfied without being waived by the
Buyers;
(iv) a representation or warranty shall not be considered
breached if (A) such representation or warranty was true and correct
when given, without regard to any supplemental disclosure provided
pursuant to Section 4.3; (B) such representation or warranty becomes
untrue at or prior to Closing; (C) the Sellers make supplemental
disclosure regarding such representation or warranty pursuant to
Section 4.3 at or prior to Closing; and (D) the condition to close
set forth in Section 5.1(a) is not satisfied, but the Buyers
expressly waive such condition or otherwise proceed with the
Closing;
(v) the Seller and Xxxxxx will be deemed to make all of their
representations and warranties herein on behalf of their affiliated
legal predecessors in the ownership and operation of the Business,
and "Losses" shall include any Losses suffered or incurred as a
result of any act or omission by any such legal predecessors);
(b) the breach of any covenant or agreement made by the Seller or
Xxxxxx in this Agreement or pursuant hereto or any allegation by a third
party that, if true, would constitute such a breach, except that,
following the Closing, the Seller and Xxxxxx will have no liability for
any breach of any covenant set forth in Sections 4.3 or 4.6 even if such
breach occurs prior to the Closing; or
(c) the items listed in Schedule 6.1(c).
32
For purposes of indemnification pursuant to this Section 6.1, all materiality
and Knowledge qualifiers will be excluded from and given no effect in each
representation and warranty set forth in Article II and each covenant and
agreement set forth in Article IV.
6.2 Indemnification of the Sellers. The Buyers will indemnify and hold the
Seller, its Affiliates, directors, officers, employees and agents and Xxxxxx
(collectively, the "Seller Parties") harmless from any and all Losses that any
Seller Party may suffer or incur as a result of or relating to:
(a) the breach of any representation or warranty made by the Buyers
in this Agreement or pursuant hereto or any allegation by a third party
that, if true, would constitute such a breach (and, for the purposes of
determining under this Section 6.2(a) whether there is a breach of any
representation or warranty and the amount of any Losses therefrom, the
Buyers will be deemed to make all of their representations and warranties
herein on behalf of their affiliated legal predecessors, and "Losses"
shall include any Losses suffered or incurred as a result of any act or
omission by any such legal predecessors);
(b) the breach of any covenant or agreement made by the Buyers in
this Agreement or pursuant hereto or any allegation by a third party that,
if true, would constitute such a breach; or
(c) any violation by Newco of any applicable securities Laws as a
result of the issuance or transfer of the Newco Shares pursuant to this
Agreement.
6.3 Survival.
(a) The representations and warranties of the Seller and Xxxxxx made
in or pursuant to this Agreement and the closing certificate attached
hereto as Exhibit H will survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
until the 24-month anniversary of the Closing; provided, that: (i) the
representations and warranties set forth in Sections 2.2 (Authority), 2.4
(Capitalization), 2.5 (Title to Securities), 2.19 (Payors), 2.20 (Medical
Staff Matters), and 2.21 (Health Care Legal Matters) will survive
indefinitely; (ii) any claim for indemnification pursuant to Section
6.1(a) will survive until such claim is finally resolved if the Buyers
notify the Sellers of such claim in reasonable detail prior to the date on
which such representation or warranty would otherwise expire hereunder;
and (iii) the representations and warranties set forth in Section 2.15
(Taxes) will survive until 60 days after expiration of the applicable
statute of limitation with respect thereto. Without limiting the
foregoing, no claim for indemnification pursuant to Section 6.1(a) based
on the breach or alleged breach of a representation or warranty may be
asserted by the Buyers after the date on which such representation or
warranty expires hereunder.
(b) The representations and warranties of the Buyers made in or
pursuant to this Agreement will survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby
until the 24-month anniversary of the Closing; provided, that: (i) the
representations and warranties set forth in Section 3.2 (Authority) will
survive indefinitely; and (ii) any claim for indemnification pursuant to
33
Section 6.2(a) will survive until such claim is finally resolved if the
Seller or Xxxxxx notifies the Buyers of such claim in reasonable detail
prior to the date on which such representation or warranty would otherwise
expire hereunder. Without limiting the foregoing, no claim for
indemnification pursuant to Section 6.2(a) based on the breach or alleged
breach of a representation or warranty may be asserted by the Seller or
Xxxxxx after the date on which such representation or warranty expires
hereunder.
(c) The covenants and agreements of the Buyers, the Seller and
Xxxxxx made in or pursuant to this Agreement will survive the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby indefinitely; provided, however, that (i) the
provisions of Section 4.13 (No-Shop Provisions) will survive only until
the earlier of the Closing Date or termination of this Agreement pursuant
to Section 7.1; and (ii) the provisions of Sections 4.19 (Treatment of
Partnership Assets After Closing) and 4.20 (Mutual Walk-Away) will survive
only until the earlier of (A) the first exercise by the Seller (or any
successor in interest) of any of its exchange rights with respect to any
of the Newco Shares; or (B) the first date on which all of the Newco
Shares have been redeemed by Newco.
6.4 Notice. Any party entitled to receive indemnification under this
Article VI (the "Indemnified Party") agrees to give prompt written notice to the
party or parties required to provide such indemnification (the "Indemnifying
Parties") upon the occurrence of any indemnifiable Loss or the assertion of any
claim or the commencement of any action or proceeding in respect of which such a
Loss may reasonably be expected to occur (a "Claim"), but the Indemnified
Party's failure to give such notice in a timely manner will not affect the
obligations of the Indemnifying Party under this Article VI except to the extent
that the Indemnifying Party is materially prejudiced thereby, subject to the
applicable survival provisions of Section 6.3. Such written notice will include
a reference to the event or events forming the basis of such Loss or Claim and
the amount involved, unless such amount is uncertain or contingent, in which
event the Indemnified Party will give a later written notice when the amount
becomes fixed.
6.5 Defense of Claims.
(a) The Indemnifying Party may elect to assume and control the
defense of any Claim, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of expenses related
thereto, if: (i) the Claim does not seek to impose any Liability on the
Indemnified Party other than money damages; and (ii) the Claim does not
relate to the Indemnified Party's relationship with any customer or
employee.
(b) If the conditions of Section 6.5(a) are satisfied and the
Indemnifying Party elects to assume and control the defense of a Claim,
then: (i) the Indemnifying Party will not be liable for any settlement of
such Claim effected without its consent, which consent shall be in the
Indemnifying Party's sole and absolute discretion if the Indemnifying
Party is solely liable for all Losses in connection with such Claim, and
which consent shall not be unreasonably withheld if both the Indemnifying
Party and the Indemnified Party are liable for Losses in connection with
such Claim; (ii) the Indemnifying Party
34
may settle such Claim without the consent of the Indemnified Party if the
Indemnifying Party acknowledges its obligation to indemnify the
Indemnified Party for any Losses resulting from such Claim, and the
Indemnified Party shall not unreasonably withhold its consent if both the
Indemnifying Party and the Indemnified Party are liable for Losses in
connection with such claim; and (iii) the Indemnified Party may employ
separate counsel and participate in the defense thereof, provided that the
Indemnified Party will be responsible for the fees and expenses of such
counsel unless: (A) the Indemnifying Party has failed to adequately assume
and actively conduct the defense of such Claim or to employ counsel with
respect thereto; or (B) in the reasonable opinion of the Indemnified
Party, a conflict of interest exists between the interests of the
Indemnified Party and the Indemnifying Party that requires representation
by separate counsel, in which case the fees and expenses of such separate
counsel will be paid by the Indemnifying Party.
(c) If the Indemnifying Party does not assume the control and
defense of any Claim, the Indemnified Party may assume the exclusive right
to defend, compromise or settle such Claim; provided (i) the Indemnifying
Party will not be bound by any determination of a Claim so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld) and (ii) the Indemnifying Party may employ separate
counsel and participate in the defense thereof, but the Indemnifying Party
will be responsible for the fees and expenses of such counsel.
(d) The Indemnifying Party or the Indemnified Party, as the case may
be, shall at all times use reasonable efforts to keep the Indemnified
Party or the Indemnifying Party, as the case may be, reasonably apprised
of the status of the defense of any Claim the defense of which it is
maintaining under this Section 6.5, and each shall reasonably cooperate in
good faith with the other with respect to the defense of any Claim.
6.6 Determination of Losses. The amount of any Loss subject to
indemnification under Section 6.1 or Section 6.2 shall be calculated net of (i)
any Tax Benefit actually realized (or the present value of any Tax Benefit to be
realized) by the Indemnified Party on account of such Loss and (ii) any
insurance proceeds actually received by the Indemnified Party on account of such
Loss. If the Indemnified Party receives a Tax Benefit after an indemnification
payment is made to it, then, to the extent such payment did not take into
account such Tax Benefit, the Indemnified Party shall promptly pay to the Person
or Persons that made such indemnification payment the amount of such Tax Benefit
at such time or times as and to the extent that such Tax Benefit is actually
realized by the Indemnified Party. For purposes hereof, "Tax Benefit" shall mean
any refund of Taxes paid or reduction in the amount of Taxes which otherwise
would have been paid, in each case computed at the highest marginal tax rates
actually applicable to the recipient of such benefit, and any dispute as to the
amount of a Tax Benefit, the present value thereof, or whether it is to be
realized shall be resolved by binding arbitration by a nationally recognized
public accounting firm reasonably acceptable to each party. The Indemnified
Party shall use reasonable efforts to recover under any insurance policy
covering any Loss, if reasonably requested by the Indemnifying Party and
provided that the Indemnifying Party pays all costs and expenses of the same,
including instituting litigation or otherwise pursuing any dispute in respect of
any such insurance recovery, if reasonably requested by the Indemnifying Party
and provided that the Indemnifying Party pays all costs and expenses of the
same; provided, that no Indemnified Party shall be required to obtain or
maintain any insurance for this
35
purpose and provided, further, that for purposes of this Section 6.6, any
insurance proceeds actually received by the Indemnified Party will be deemed
reduced by any premium increase that results from such Loss during the
three-year period following the claim and costs incurred by the Indemnified
Party with respect to the collection of such insurance proceeds. In the event
that an insurance recovery is actually received by any Indemnified Party with
respect to any Loss for which any such Person has been indemnified hereunder,
then a refund equal to the aggregate amount of such recovery (as adjusted
pursuant to this Section 6.6) shall be made promptly to the Person or Persons
that provided such indemnity payments to such Indemnitee; provided, that any
such Person or Persons who receives a refund shall promptly reimburse the
Indemnified Party for the amount of any reduction in the insurance recovery
occasioned by premium increases or collection costs during the three-year period
following the claim, as contemplated in this Section 6.6, that arise after any
such refund. No Indemnifying Party may delay the payment of any amount owing in
respect of any Claim for indemnification pursuant to this Article VI due to the
pendency of any Tax Benefit or insurance recovery, nor may any Indemnifying
Party offset against any amount owing in respect of any Claim any pending Tax
Benefit or insurance recovery.
ARTICLE VII
MISCELLANEOUS
7.1 Termination.
(a) This Agreement and the transactions contemplated hereby may be
terminated and abandoned at any time prior to the Closing Date: (i) by
mutual written consent of the Buyers and the Seller; (ii) by either the
Buyers, on the one hand, or the Seller, on the other hand, if a condition
to performance by the terminating party hereunder has not been satisfied
or waived prior to January 31, 2006; (iii) by the Buyers, upon any failure
or inability of the Seller or Xxxxxx to perform or comply with any of the
covenants or agreements to be performed or complied with by them, if such
failure or inability has not been satisfied or waived prior to January 31,
2006; (iv) by the Buyers, upon any breach by the Seller or Xxxxxx of any
of the representations or warranties contained in Article II or otherwise
made pursuant to this Agreement; or or (v) by either the Buyers, on the
one hand, or the Seller, on the other hand, at any time and for any reason
other than those provided in subsections (i) through (iv) of this Section
7.1(a) or for no reason at all, provided, however, that in the event of
any termination pursuant to this subsection (v), notwithstanding anything
to the contrary provided in Section 4.12, the terminating party will
reimburse the non-terminating party for all legal fees incurred incurred
by the non-terminating party through the date of or directly as a result
of such termination in connection with the negotiation, execution and
performance of this Agreement and the transactions contemplated hereby.
(b) Notwithstanding the provisions of Section 7.1(a), (i) the Buyers
may not terminate this Agreement if the Closing has not occurred because
of the Buyers' willful failure to perform or observe any of its covenants
or agreements set forth herein or if any Buyer is, at such time, in breach
of this Agreement; and (ii) the Seller may not terminate this Agreement if
the Closing has not occurred because of the willful failure of the Seller
or
36
Xxxxxx to perform or observe any of the covenants or agreements set forth
herein or if the Seller or Xxxxxx is, at such time, in breach of this
Agreement.
(c) If this Agreement is terminated pursuant to Section 7.1(a), all
further obligations of the parties hereunder will terminate and no party
will have any liability or obligation (for reimbursement of expenses or
otherwise) to any other party, except that the Buyers, on the one hand,
and the Seller and Xxxxxx, on the other hand, will remain liable to the
other for any breach of this Agreement by such parties occurring prior to
such termination and all legal remedies of the other parties in respect of
any such breach will survive such termination unimpaired.
7.2 Notices. All notices and other communications under this Agreement
must be in writing and will be deemed given (a) when delivered personally; (b)
on the fifth business day after being mailed by certified mail, return receipt
requested; (c) the next business day after delivery to a recognized overnight
courier; or (d) upon transmission and confirmation of receipt by a facsimile
operator if sent by facsimile, to the parties at the following addresses or
facsimile numbers (or to such other address or facsimile number as such party
may have specified by notice given to the other party pursuant to this
provision):
with copies (which will
if to the Buyers: not constitute notice) to:
c/o Vsource, Inc. Xxxxxx & Xxxx, L.L.P.
0000 Xxxxxxx Xxxxxx, Xxxxx 000 0000 Xxxx Xxxxxx, Xxxxx 0000
Xx Xxxxx, Xxxxxxxxxx 00000 Xxxxxx, Xxxxx 00000
Attention: General Counsel Attention: I. Xxxxx Xxxxxxxx
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
with copies (which will
if to the Seller or Xxxxxx: not constitute notice) to:
c/o Surgical Ventures, Inc. Xxxx & Associates
P.O. Box 9330 13025 Xxxxxxxxx St., Suite 000
Xxxxxx Xxxxx Xx, Xxxxxxxxxx 00000 Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, M.D. Attention: Xxxxxxx X. X. Xxxx
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or sent by
telecopy or, if mailed, when actually received.
7.3 Attorneys' Fees and Costs. If attorneys' fees or other costs are
incurred to secure performance of any obligations hereunder, or to establish
damages for the breach thereof or to obtain any other appropriate relief, or to
defend against any of the foregoing actions, the prevailing party will be
entitled to recover reasonable attorneys' fees and costs incurred in connection
therewith.
7.4 Brokers. Each party to this Agreement represents to the other party
that it has not incurred and will not incur any liability for brokers' or
finders' fees or agents' commissions in
37
connection with this Agreement or the transactions contemplated hereby, except
as expressly provided herein.
7.5 Severability. The invalidity or unenforceability of any provision of
this Agreement will not affect the validity or enforceability of any other
provision of this Agreement, each of which will remain in full force and effect,
so long as the economic or legal substance of the transactions contemplated by
this Agreement is not affected in a manner materially adverse to any party.
7.6 Counterparts. This Agreement may be executed in one or more
counterparts (including by facsimile or portable document format (.pdf)) for the
convenience of the parties hereto, each of which will be deemed an original, but
all of which together will constitute one and the same instrument.
7.7 Interpretation. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and will not in any way affect the meaning or interpretation of
this Agreement.
7.8 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned or delegated by the Seller, Xxxxxx or the
Buyers without the prior written consent of the other parties and any purported
assignment or delegation in violation thereof will be null and void; except that
(i) Newco may assign its rights and obligations under this Agreement to any of
the direct or indirect subsidiaries of VSCE, or any successor to its business;
and (ii) GenPar may assign its rights and obligations under this Agreement to
any of the direct or indirect subsidiaries of VSCE, or any successor to its
business. This Agreement is not intended to confer any rights or benefits on any
Person other than the parties hereto, except to the extent specifically provided
in Article VI.
7.9 Entire Agreement, Amendment. This Agreement and the related documents
contained as Exhibits and Schedules hereto or expressly contemplated hereby
contain the entire understanding of the parties relating to the subject matter
hereof and supersede all prior written or oral and all contemporaneous oral
agreements and understandings relating to the subject matter hereof. All
statements of the Seller or Xxxxxx contained in any Schedule, certificate or
other Seller Document required under this Agreement to be delivered in
connection with the transactions contemplated hereby will constitute
representations and warranties of the Seller and Xxxxxx under this Agreement.
The Exhibits, Schedules and recitals to this Agreement are hereby incorporated
by reference into and made a part of this Agreement for all purposes. This
Agreement may be amended, supplemented or modified, and any provision hereof may
be waived, only by written instrument making specific reference to this
Agreement signed by the party against whom enforcement is sought.
7.10 Specific Performance, Remedies Not Exclusive. The parties hereby
acknowledge and agree that the failure of any party to perform its agreements
and covenants hereunder, including its failure to take all required actions on
its part necessary to consummate the transactions contemplated hereby, will
cause irreparable injury to the other parties for which damages, even if
available, will not be an adequate remedy. Accordingly, each party hereby
consents to the issuance of injunctive relief by any court of competent
jurisdiction to compel performance of such party's obligations and to the
granting by any court of the remedy of
38
specific performance of its obligations hereunder. Unless otherwise expressly
stated in this Agreement, no right or remedy described or provided in this
Agreement or otherwise conferred upon or reserved to any party is intended to be
exclusive or to preclude a party from pursuing other rights and remedies to the
extent available under this Agreement, at law or in equity, and the same will be
distinct, separate and cumulative and may be exercised from time to time as
often as occasion may arise or as such party may deem expedient.
7.11 GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE,
WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT
RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
7.12 Drafting. The language in all parts of this Agreement will be
interpreted, in all cases, according to its fair meaning and not for or against
any party hereto. Each party acknowledges that it and its legal counsel have
reviewed and revised this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
will not be employed in the interpretation of this Agreement.
7.13 Usage. Whenever the plural form of a word is used in this Agreement,
it will include the singular form of that word. Whenever the singular form of a
word is used in this Agreement, it will include the plural form of that word.
The term "or" will not be interpreted as excluding any of the items described.
The term "include" or any derivative of such term does not mean that the items
following such term are the only types of such items.
7.14 Certain Definitions. For purposes of this Agreement:
(a) the term "Affiliate" means, with respect to a specified Person,
any other Person or member of a group of Persons acting together that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with, the specified Person.
(b) the term "control" (including the terms "controlling,"
"controlled by" and "under common control with") means the possession,
direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
(c) the terms "Knowledge" and "known" and words of similar import
mean:
(i) the Seller will be deemed to have "Knowledge" of a
particular matter, and the particular matter will be deemed to be
"known" by the Seller, if Xxxxxx, Xxxxxx Xxxxxxxx or Xxxxxx Xxxxxxx
has actual knowledge of such matter or would reasonably be expected
to have knowledge of such matter following reasonable inquiry of the
appropriate employees and agents of the Seller and the Partnership;
and Xxxxxx will be deemed to have "Knowledge" of a particular
matter, and the particular matter will be deemed to be "known" by
Xxxxxx, if the Seller has such "Knowledge" or is so deemed to
"know."
39
(ii) each of the Buyers will be deemed to have "Knowledge" of
a particular matter, and the particular matter will be deemed to be
"known" by such Buyer, if any director, officer or any supervisory
level employee of such Buyer has actual knowledge of such matter or
would reasonably be expected to have knowledge of such matter
following reasonable inquiry of the appropriate employees and agents
of such Buyer; and all Buyers will be deemed to have "Knowledge" of
a particular matter, and the particular matter will be deemed to be
"known" by all the Buyers, if any Buyer has such "Knowledge" or is
so deemed to "know."
(d) the term "Material Adverse Effect" means any adverse change or
effect that, individually or when taken together with all other such
changes or effects, would be materially adverse to the business,
operations or results thereof, condition (financial or otherwise), assets
or Liabilities (contingent or otherwise) of the referenced Person.
(e) the term "Permitted Liens" means (i) statutory liens for current
Taxes or other current governmental changes not yet due and payable or the
amount or validity of which is being contested in good faith by
appropriate proceedings and for which appropriate reserves (reflected in
the Latest Balance Sheet) have been established in accordance with GAAP;
(ii) mechanics', carriers' and similar statutory liens arising or incurred
in the ordinary course of business and relating to current amounts that
are not due and payable, that are not, individually and in the aggregate,
significant in amount or effect or that are being contested in good faith
by appropriate proceedings and for which appropriate reserves (reflected
in the Latest Balance Sheet) have been established in accordance with
GAAP; (iii) zoning, entitlement, building and other land use regulations
imposed by Governmental Bodies having jurisdiction over the Real Property
that are not violated by the current use and operation of the Real
Property by the Partnership; (iv) covenants, conditions, restrictions,
easements and other similar matters that appear in the applicable real
estate records affecting title to the Real Property or that do not,
individually or in the aggregate, impair in any material respect the
ownership, occupancy, use, or insurability of the Real Property as
currently owned, used and operated by the Partnership; (v) matters which
are disclosed in an accurate, professionally prepared survey of each
parcel of Real Property that has been delivered to the Buyers prior to the
Effective Date; and (vi) purchase money liens and liens securing rental
payments under capital lease arrangements, each of which is disclosed in
Schedule 2.7(b).
(f) In addition, the following terms are defined in the indicated
section of this Agreement:
DEFINED TERM SECTION
------------ --------
1933 Act 2.4(b)
Accounts Receivable 2.9
Affiliate 7.14(a)
Agreement Preamble
Assignment of GP Interest 5.1(m)
40
DEFINED TERM SECTION
------------ --------
Assignment of LP Interest 5.1(n)
Xxxx of Sale 1.4(g)
Business Recitals
Buyer(s) Preamble
Buyer Documents 3.2
Buyer Parties 6.1
Claim 6.4
Closing 1.2
Closing Date 1.2
Code 2.7(c)
Competing Transaction 4.13
Confidential Information 4.14
Consent(s) 2.10
Control 7.14(b)
Effective Date Preamble
Elite Recitals
Elite Assets 1.4(g)
Employee Benefit Plans 2.24(a)
Environmental Law 2.22(b)
ERISA 2.24(a)
ERISA Affiliate 2.24(a)
Financial Statements 2.12
GAAP 2.12
GenPar Preamble
Governmental Authorization 2.11
Governmental Entity 2.11
GP Interest Recitals
GP Purchase Price 1.3(a)
Hazardous Material 2.22(c)
Health Care Laws 2.21(a)
Indemnified Party 6.4
Indemnifying Parties 6.4
Knowledge 7.14(c)
Xxxxxx Preamble
Latest Balance Sheet 2.12
Latest Balance Sheet Date 2.12
Laws 2.17
Liabilities 2.13(a)
License(s) 2.18
Lien 2.5
Litigation 2.16
Losses 6.1
LP Interest Recitals
LP Purchase Price 1.3(b)
Management Services Agreement 5.1(o)
41
DEFINED TERM SECTION
------------ -------
Material Adverse Effect 7.14(d)
Newco Preamble
Newco Shares 2.31
Non-Selling Limited Partners Recitals
Parent Common Stock 4.20
Partnership Recitals
Partnership Agreement 5.1(j)
Partnership Contracts 2.25(a)
Payor Source Programs 2.21(a)
Payors 2.19
Permitted Lien 7.14(e)
Person 2.16
Purchased Interests Recitals
Real Property 2.7(c)
Registration Rights Agreement 5.1(l)
Required Capital 4.1(e)
Retained Expenses 4.1(e)
SCMI Recitals
Seller Documents 2.2
Seller Parties 6.2
Seller Preamble
Series A GP Shares 1.3(d)
Series A LP Shares 1.3(e)
Series A Preferred Stock 1.3(c)
Series B Certificate of Designation 1.3(f)
Series B Preferred Stock 1.3(f)
Series B Shares 1.3(g)
Tax Benefit 6.6
Tax(es) 2.15(h)
Termination Agreement 5.1(p)
VSCE 1.2
42
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.
THE BUYERS:
DEL MAR GENPAR, INC.
By: _________________________________
Name: Xxxxx Xxxxxxxxxx
Title: President and CEO
DEL MAR ACQUISITION, INC.
By: _________________________________
Name: Xxxxx Xxxxxxxxxx
Title: President and CEO
THE SELLER:
SURGICAL VENTURES, INC.
By: _________________________________
Name: Xxxxx X. Xxxxxx, M.D.
Title: President
XXXXXX:
____________________________________
Xxxxx X. Xxxxxx, M.D.
[Signature Page to Partnership Interest Purchase Agreement]
Exhibits
--------
A Form of Certificate of Designation of Series A Preferred Stock
B Form of Certificate of Designation of Series B Preferred Stock
C Form of Xxxx of Sale
D Form of Registration Rights Agreement
E Form of Assignment of GP Interest
F Form of Assignment of LP Interest
G Form of Management Services Agreement
H Form of Termination Agreement
I Form of Release
J Form of Closing Certificate of the Seller and Xxxxxx
K Form of Secretary's Certificate of the Seller
L Form of Opinion of Counsel to the Seller and Xxxxxx
M Form of Estoppel Certificate
N Form of Closing Certificate of the Buyers
O Form of Secretary's Certificate of the Buyers
Schedules
---------
2.1 Fictitious Business Names
2.4 Capitalization
2.7(a) Assets
2.7(b) Liens on Assets
2.9 Accounts Receivable
2.10 Breach, Default, Conflicts; Consents; Notices
2.11 Governmental Authorizations
2.12 Financial Statements
2.13(b) Liabilities
2.14 Absence of Certain Changes
2.16 Litigation
2.18 Licenses
2.19 Payors
2.20 Providers in Good Standing on the Medical Staff
2.21(d) Payor Source Programs
2.22 Environmental Matters
2.23 Employee Matters
2.25(a) Partnership Contracts
2.25(b) Status of Partnership Contracts
2.25(c) Required Consents
2.27 Competing Interests
2.30 Insurance
4.5 Leases with Personal Guarantees
6.1(c) Indemnification
EXHIBIT A
FORM OF CERTIFICATE OF DESIGNATION
OF
SERIES A EXCHANGEABLE PREFERRED STOCK
OF
DEL MAR ACQUISITION, INC.
__________ ___, 2006
The undersigned officer of Del Mar Acquisition, Inc. (the "Company"), a
corporation organized and existing under the General Corporation Law of the
State of Nevada (the "NGCL"),
DOES HEREBY CERTIFY
that, pursuant to authority conferred upon the Board of Directors of the Company
(the "Board") by the Articles of Incorporation of the Company, and pursuant to
the provisions of Section 78.1955 of the NGCL, the Board, by unanimous written
consent filed in the Company's minute book, has adopted the following resolution
providing for the issuance of a new series of shares of Series A Exchangeable
Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board in accordance
with the provisions of the Articles of Incorporation of the Company, a series of
Preferred Stock of the Company is hereby created, such series of Preferred Stock
to be designated Series A Exchangeable Preferred Stock, par value $0.01 per
share, and to possess the following rights, preferences, privileges, powers and
restrictions:
Section 1. Designation and Number. The shares of such series will be
designated as Series A Exchangeable Preferred Stock, par value $0.01 per share
(the "Series A Preferred Stock"), and the number of shares constituting the
Series A Preferred Stock will be 31,875, with an issue price per share of $10.00
(the "Issue Price Per Share"), for an aggregate original issue price of
$318,750.00 (collectively, the "Original Issue Price").
Section 2. Rank. The Series A Preferred Stock will rank: (a) prior to all
of the Company's common stock, $0.01 par value per share (the "Company Common
Stock"); (b) prior to any class or series of capital stock of the Company
hereafter created not specifically ranking by its terms on parity with any
Preferred Stock of whatever subdivision (together with the Common Stock, "Junior
Securities"); and (c) on parity with the Company's Series B Exchangeable
Redeemable Preferred Stock, par value $0.01 per share (the "Series B Preferred
Stock"), and any class or series of capital stock of the Company hereafter
created specifically ranking by its terms on parity with the Series A Preferred
Stock and the Series B Preferred Stock (collectively with the Series B Preferred
Stock, "Parity Securities"), in each case as to distributions of assets upon any
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary (each, a "Liquidation Event").
CERTIFICATE OF DESIGNATION OF SERIES A EXCHANGEABLE
PREFERRED STOCK OF DEL MAR ACQUISITION, INC. Page 1
Section 3. Dividends. The Series A Preferred Stock will not bear any
dividends.
Section 4. Redemption Provisions.
(a) Optional Redemption By the Company. Subject to the provisions of
this Section 4, the Company may, at its sole option and in its sole and absolute
discretion, by resolution of the Board at any time after the date of issuance,
and at a redemption price per share equal to 115% of the Issue Price Per Share,
redeem the Series A Preferred Stock, in whole or in part, upon providing to the
holders of Series A Preferred Stock (the "Holders") a Notice of Redemption (as
defined in Section 4(c)).
(b) Mandatory Redemption. The Series A Preferred Stock is not
subject to any mandatory redemption provisions.
(c) Notice of Redemption. Not less than 30 nor more than 60 days
prior to the date fixed by the Board for any redemption of Series A Preferred
Stock, the Company will deliver to the Holders a written notice of redemption
(each, a "Notice of Redemption") stating (i) the date(s) on which such
redemption will occur (each, a "Redemption Date"); (ii) the number of shares of
Series A Preferred Stock to be redeemed on each Redemption Date; (iii) the
aggregate redemption price to be paid on each Redemption Date; (iv) the address
to which certificates for such shares are to be surrendered for payment of the
applicable redemption price; (v) the exchange rights associated with such
shares; and (vi) the period within which such exchange rights may be exercised.
(d) Effect of Redemption on Exchange Rights. The giving of any
Notice of Redemption by the Company will not affect any Holder's rights to
exchange shares of Series A Preferred Stock pursuant to Section 5 up to and
including the business day immediately preceding the Redemption Date for such
shares. Upon each Redemption Date, unless (i) such Holder has properly exercised
its exchange rights as provided in Section 5; or (ii) the Company defaults on
its obligation to pay the redemption price as provided in the Notice of
Redemption, the Holder of the shares of Series A Preferred Stock to be redeemed
on such Redemption Date will no longer have any exchange or other rights with
respect to such shares, except the right to receive the redemption price payable
therefor, without interest thereon, upon surrender (and endorsement, if required
by the Company in its sole and absolute discretion) of the certificates for such
shares, and the shares represented thereby will cease to be deemed outstanding
as of such Redemption Date. In the event that, on or after the date of its
receipt of a Notice of Redemption, a Holder properly exercises its exchange
rights as provided in Section 5 with respect to the shares of Series A Preferred
Stock to be redeemed as provided in such Notice of Redemption, the Exchange Date
(as contemplated by Section 5(b)(v)) for such shares will be deemed to be the
Redemption Date provided in such Notice of Redemption; provided, however, that
in the event that the Company defaults on its obligation to pay the redemption
price as provided in such Notice of Redemption, such exchange will not be
effective unless such Holder provides written notice to the Company within 20
days of the purported Redemption Date indicating its desire to effect such
exchange notwithstanding such default by the Company.
CERTIFICATE OF DESIGNATION OF SERIES A EXCHANGEABLE
PREFERRED STOCK OF DEL MAR ACQUISITION, INC. Page 2
Section 5. Exchange Rights. The Holders will have exchange rights as
follows:
(a) Right to Exchange. Each record Holder of Series A Preferred
Stock will be entitled to exchange its Series A Preferred Stock into shares of
common stock, par value $0.01 per share ("Parent Common Stock"), of Vsource,
Inc., a Delaware corporation and indirect parent of the Company (the "Parent"),
issuable upon exchange of the Series A Preferred Stock, as follows: each
outstanding share of Series A Preferred Stock is exchangeable at any time into
22.4 fully-paid and non-assessable shares of Parent Common Stock, subject to
adjustment as provided in Section 5(c); provided, however, that in no event will
any Holder be entitled to exchange, pursuant to a single exchange transaction,
less than the lesser of 6,375 shares of Series A Preferred Stock or all shares
owned beneficially or of record by such Holder. The number of shares of Parent
Common Stock issuable upon the exchange of one share of Series A Preferred Stock
is hereinafter referred to as the "Exchange Rate."
(b) Mechanics of Exchange.
(i) Notice of Exchange; Surrender of Certificates. In order to
exchange shares of Series A Preferred Stock into Parent Common Stock, a
Holder must (A) fax, on or prior to 4:00 p.m., La Jolla, California time
on the Exchange Date (as defined in Section 5(b)(v)), a copy of a fully
executed written notice of exchange (each, a "Notice of Exchange") to the
Company or to the Company's designated transfer agent (the "Transfer
Agent") for the Series A Preferred Stock, stating that such Holder elects
so to exchange, which notice will specify the Exchange Date, the number of
shares of Series A Preferred Stock to be exchanged (which must be at least
the lesser of 6,375 shares or all shares owned beneficially or of record
by such Holder) and the number of shares of Parent Common Stock to be
issued to such Holder in exchange therefor; and (B) surrender to a common
courier for either overnight or two-day delivery to the office of the
Company or the Transfer Agent the original certificates representing the
Series A Preferred Stock being exchanged (the "Series A Stock
Certificates"), duly endorsed for transfer; provided, however, that the
Parent will not be obligated to issue certificates evidencing the Parent
Common Stock issuable upon such exchange unless the Series A Stock
Certificates are delivered to the Company or the Transfer Agent as
provided above, or the Holder notifies the Company or the Transfer Agent
that such certificates have been lost, stolen or destroyed (subject to the
requirements of Section 5(b)(ii)).
(ii) Lost or Stolen Certificates. Upon receipt by the Company
of evidence of the loss, theft, destruction or mutilation of any Series A
Stock Certificates, and (in the case of loss, theft or destruction) of
indemnity or security satisfactory to the Company in its sole and absolute
discretion, and upon surrender and cancellation of such Series A Stock
Certificates, if mutilated, the Company will execute and deliver to the
applicable Holder new Series A Stock Certificates of like tenor and date;
provided, however, that the Company will not be obligated to re-issue such
lost or stolen Series A Stock Certificates if the Holder contemporaneously
requests the Company to exchange such Series A Preferred Stock into Parent
Common Stock.
(iii) Delivery of Parent Common Stock Upon Exchange. No later
than 4:00 p.m., La Jolla, California time, on the fifth business day after
receipt by the
CERTIFICATE OF DESIGNATION OF SERIES A EXCHANGEABLE
PREFERRED STOCK OF DEL MAR ACQUISITION, INC. Page 3
Company or the Transfer Agent of all necessary documentation required for
exchange, including the original Series A Stock Certificates to be
exchanged (or after provision for security or indemnification in the case
of lost, stolen or destroyed certificates, if required), duly executed and
in proper form, and subject to approval thereof by the Board, the Parent
will issue and deliver to the Holder as shown on the stock records of the
Company a certificate for the number of shares of Parent Common Stock to
which such Holder is entitled as aforesaid.
(iv) No Fractional Shares. If any exchange of Series A
Preferred Stock would create a fractional share of Parent Common Stock or
a right to acquire a fractional share of Parent Common Stock, such
fractional share will be disregarded and the number of shares of Parent
Common Stock issuable upon such exchange, in the aggregate, will be the
next lower number of shares.
(v) Exchange Date. The date on which exchange occurs (the
"Exchange Date") will be deemed to be the date on which the Parent issues
and delivers to the Holder the certificate for the number of shares of
Parent Common Stock to which such Holder is entitled as contemplated by
Section 5(b)(iii). The person or persons entitled to receive the shares of
Parent Common Stock issuable upon such exchange will be treated for all
purposes as the record holder or holders of such Parent Common Stock as of
the Exchange Date.
(c) Adjustment to Exchange Rate.
(i) Adjustment Due to Stock Split, Stock Dividend, Etc. If,
prior to the exchange of all the Series A Preferred Stock, the number of
outstanding shares of Parent Common Stock is increased by a stock split,
stock dividend or other similar event, the Exchange Rate will be
proportionately increased, or if the number of outstanding shares of
Parent Common Stock is decreased by a combination or reclassification of
shares, or other similar event, the Exchange Rate will be proportionately
decreased.
(ii) Adjustment Due to Merger, Consolidation, Etc. If, prior
to the exchange of all the Series A Preferred Stock, there will be any
merger, consolidation, exchange of shares, recapitalization,
reorganization or other similar event as a result of which Parent Common
Stock will be converted or exchanged into the same or a different number
of shares of the same or another class or classes of stock or securities
of the Parent or another entity, or there is a sale of all or
substantially all the Parent's assets that is not deemed to be a
Liquidation Event pursuant to Section 7(c), then each Holder will
thereafter have the right to receive upon any exchange of Series A
Preferred Stock, upon the basis and upon the terms and conditions
specified herein, and in lieu of Parent Common Stock, that number of
shares of such stock, securities or other assets, as the case may be,
which such Holder would have been entitled to receive in such transaction
had all of such Holder's Series A Preferred Stock been exchanged
immediately prior to such transaction, and in any such case appropriate
provisions will be made with respect to the rights and interests of the
Holders such that the provisions hereof (including, without limitation,
provisions for the adjustment of the Exchange Rate and of the number of
shares issuable upon any exchange of Series A Preferred Stock) will
thereafter be
CERTIFICATE OF DESIGNATION OF SERIES A EXCHANGEABLE
PREFERRED STOCK OF DEL MAR ACQUISITION, INC. Page 4
applicable, as nearly as may be practicable in relation to any securities
thereafter deliverable upon the exchange thereof. The Company will not
effect any transaction described in this Section 5(c)(ii) unless (A) it
first gives 15 calendar days prior notice of such merger, consolidation,
exchange of shares, recapitalization, reorganization or other similar
event (during which time the Holders will be entitled to exchange their
Series A Preferred Stock into Parent Common Stock to the extent permitted
hereby); and (B) the resulting successor or acquiring entity (if not the
Company) assumes by written instrument all of the obligations of the
Company under this Certificate of Designation, including the obligation of
this Section 5(c)(ii).
(iii) No Fractional Shares. If any adjustment under this
Section 5(c) would create a fractional share of Parent Common Stock or a
right to acquire a fractional share of Parent Common Stock, such
fractional share will be disregarded and the number of shares of Parent
Common Stock issuable upon any future exchange, in the aggregate, will be
the next lower number of shares.
(d) Reservation of Parent Common Stock. The Parent will at all times
reserve and keep available out of the authorized but unissued shares of Parent
Common Stock, solely for the purpose of effecting the exchange of shares of
Series A Preferred Stock, such number of shares of Parent Common Stock as will
from time to time be sufficient to effect the exchange of all outstanding shares
of Series A Preferred Stock. If at any time the number of authorized but
unissued shares of Parent Common Stock will not be sufficient to effect the
exchange of all then-outstanding shares of Series A Preferred Stock, the Parent
will take such corporate action as may, in the opinion of its legal counsel, be
necessary or appropriate to increase the number of authorized but unissued
shares of Parent Common Stock to such number of shares as will be sufficient for
such purpose.
(e) Payment of Taxes. Each Holder will pay all taxes and other
governmental charges that may be imposed with respect to the issuance or
delivery of shares of Parent Common Stock upon exchange of such Holder's shares
of Series A Preferred Stock, including, without limitation, any income taxes
associated therewith and any tax or other charge imposed in connection with any
transfer involved in the issuance and delivery of shares of Parent Common Stock
in a name other than that of such Holder.
Section 6. Voting Rights. The Holders will have no voting power
whatsoever, except as otherwise provided by the NGCL, and no Holder will vote or
otherwise participate in any proceeding in which actions will be taken by the
Company or the Parent or their respective stockholders or be entitled to
notification as to any meeting of the stockholders of the Company or the Parent.
Notwithstanding the above, the Company will provide each Holder with
notification of any meeting of the Company's stockholders regarding any major
corporate events affecting the Company. In the event of any taking by the
Company of a record of its stockholders for the purpose of determining
stockholders who are entitled to receive payment of any dividend or other
distribution, any right to subscribe for, purchase or otherwise acquire any
share of any class or any other securities or property (including by way of
merger, consolidation or reorganization), or to receive any other right, or for
the purpose of determining stockholders who are entitled to
CERTIFICATE OF DESIGNATION OF SERIES A EXCHANGEABLE
PREFERRED STOCK OF DEL MAR ACQUISITION, INC. Page 5
vote in connection with any proposed sale, lease or conveyance of all or
substantially all the assets of the Company, or any proposed Liquidation Event,
the Company will deliver a notice to each Holder at least five business days
prior to the record date specified therein, of the date on which any such record
is to be taken for the purpose of such dividend, distribution, right or other
event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
To the extent that under the NGCL the vote of the Holders, voting
separately as a class, is required to authorize a given action of the Company,
the affirmative vote or consent of the Holders of at least a majority of the
shares of the Series A Preferred Stock then outstanding, represented at a duly
held meeting at which a quorum is present or by written consent of such a
majority (except as otherwise may be required under the NGCL) will constitute
the approval of such action by such class.
Section 7. Liquidation Preference.
(a) In the event of any Liquidation Event, the Holders will be
entitled to receive, prior in preference to any distribution to Junior
Securities, but in parity with any distribution to Parity Securities, an amount
per share equal to the Issue Price Per Share. If, upon the occurrence of a
Liquidation Event, the assets and funds available to be distributed among the
Holders and any holders of Parity Securities (collectively, the "Parity
Holders") are insufficient to permit the payment to the Holders and such Parity
Holders of the full preferential amounts due to the Holders and such Parity
Holders, respectively, then the entire assets and funds of the Company legally
available for distribution will be distributed among the Holders and such Parity
Holders, pro rata, based on the respective liquidation amounts to which the
Series A Preferred Stock and any such series of Parity Securities is entitled
pursuant to the Company's Articles of Incorporation and any duly adopted
certificate(s) of designation relating thereto.
(b) Upon the completion of the distribution required by Section
7(a), if any assets remain in the Company, such assets will be distributed to
holders of Junior Securities in accordance with the Company's Articles of
Incorporation and any duly adopted certificate(s) of designation relating
thereto.
(c) At each Holder's option, a sale, conveyance or disposition of
all or substantially all the assets of the Company to a private entity, the
common stock of which is not publicly traded, will be deemed to be a Liquidation
Event within the meaning of this Section 7 (a Holder who elects to have a
transaction so deemed is referred to herein as a "Liquidating Holder");
provided, however, that with respect to each Holder, any event described in the
preceding clause that such Holder does not elect to treat as a Liquidation
Event, or any merger, consolidation, acquisition or other business combination
of the Company with or into any other company or companies will not be treated
as a Liquidation Event within the meaning of this Section 7, but instead will be
treated pursuant to Section 5(c)(ii).
(d) Prior to the closing of any transaction described in Section
7(c) that could, at each Holder's option, be deemed a Liquidation Event, the
Company will either (i) make all cash distributions it is required to make to
the Liquidating Holders pursuant to the first sentence of Section 7(a); (ii) set
aside sufficient funds from which any cash distributions required to be
CERTIFICATE OF DESIGNATION OF SERIES A EXCHANGEABLE
PREFERRED STOCK OF DEL MAR ACQUISITION, INC. Page 6
made to the Liquidating Holders may be made; or (iii) establish an escrow or
other similar arrangement with a third party pursuant to which the proceeds
payable to the Company from a sale of all or substantially all the assets of the
Company will be used to make any required liquidating payments to the
Liquidating Holders immediately after the consummation of such sale. In the
event that the Company has not fully complied with either of the foregoing
alternatives, the Company will either: (x) cause such closing to be postponed
until the Company has so complied; or (y) cancel such transaction, in which
event the rights of the Holders will be the same as existing immediately prior
to such proposed transaction.
Section 8. Status of Redeemed or Exchanged Stock. In the event any Series
A Preferred Stock is redeemed pursuant to Section 4 or exchanged pursuant to
Section 5, the shares so exchanged will be canceled, will return to the status
of authorized but unissued Preferred Stock of no designated series, and will not
be issuable by the Company as Series A Preferred Stock.
Section 9. Preference Rights. Nothing contained herein will be construed
to prevent the Board from issuing one or more series of Preferred Stock with
dividend and liquidation preferences junior to or in parity with the dividend
and liquidation preferences of the Series A Preferred Stock.
Section 10. No Preemptive Rights. No Holder will, in its capacity as a
Holder, have any preemptive rights to subscribe to or purchase any shares of any
class of capital stock of the Company or the Parent now or hereafter authorized
or issued, whether or not exchangeable for any capital stock of the Company or
the Parent of any class or classes now or hereafter authorized or issued; nor
will any Holder, in its capacity as a Holder, have any right to purchase,
acquire or subscribe to any securities that the Company or the Parent may issue
or sell, whether or not convertible into or exchangeable for shares of capital
stock of the Company or the Parent of any class or classes now or hereafter
authorized or issued, and whether or not any such securities have attached or
appurtenant thereto any warrants, options or other instruments that entitle the
holders thereof to purchase, acquire or subscribe to shares of capital stock of
the Company or the Parent of any class or classes now or hereafter authorized or
issued.
Section 11. Notices. All notices and other communications required hereby
must be in writing and will be deemed given (a) when delivered personally; (b)
on the fifth business day after being mailed by certified mail, return receipt
requested; (c) the next business day after delivery to a recognized overnight
courier; or (d) upon transmission and confirmation of receipt by a facsimile
operator if sent by facsimile, as follows:
with copies (which will not
if to the Company: constitute notice) to:
c/o Vsource, Inc. Xxxxxx & Xxxx, L.L.P.
0000 Xxxxxxx Xxxxxx, Xxxxx 000 0000 Xxxx Xxxxxx, Xxxxx 0000
Xx Xxxxx, Xxxxxxxxxx 00000 Xxxxxx, Xxxxx 00000
Attention: General Counsel Attention: I. Xxxxx Xxxxxxxx
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
CERTIFICATE OF DESIGNATION OF SERIES A EXCHANGEABLE
PREFERRED STOCK OF DEL MAR ACQUISITION, INC. Page 7
if to any Holder:
To the address of such Holder as listed in the stock record books of the
Company (which may include the records of the Transfer Agent)
or to such other address or facsimile number as the Company or such Holder, as
the case may be, may have specified by notice properly given pursuant to this
provision. Any such notice or other communication will be deemed to have been
given and received (whether actually received or not) on the day it is
personally delivered or delivered by courier or overnight delivery service or
sent by telecopy or, if mailed, when actually received.
Section 12. Interpretation. The section headings contained herein are
solely for the purpose of reference will not in any way affect the meaning or
interpretation hereof.
Section 13. Usage. Whenever the plural form of a word is used herein, it
will include the singular form of that word. Whenever the singular form of a
word is used herein, it will include the plural form of that word. The term "or"
will not be interpreted as excluding any of the items described. The term
"include" or any derivative of such term does not mean that the items following
such term are the only types of such items.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
CERTIFICATE OF DESIGNATION OF SERIES A EXCHANGEABLE
PREFERRED STOCK OF DEL MAR ACQUISITION, INC. Page 8
IN WITNESS WHEREOF, the undersigned officer of the Company has executed
this Certificate of Designation as of the date first written above.
DEL MAR ACQUISITION, INC.
By: ___________________________________
Name: Xxxxx Xxxxxxxxxx
Title: President and CEO
Attest:
By: ____________________________
Name: Xxxx Xxxxxx
Title: Secretary
THE STATE OF CALIFORNIA Section
Section
COUNTY OF ___________________ Section
The foregoing instrument was acknowledged before me this ____ day of
____________, 2006, by Xxxxx Xxxxxxxxxx, the President and Chief Executive
Officer of Del Mar Acquisition, Inc., a Nevada corporation, on behalf of said
corporation, and was attested to by Xxxx Xxxxxx, the Secretary of said
corporation.
____________________________ [SEAL]
Notary Public in and for
the State of California
My Commission Expires:
______________________
[Signature Page to Certificate of Designation]
EXHIBIT B
FORM OF CERTIFICATE OF DESIGNATION
OF
SERIES B EXCHANGEABLE REDEEMABLE PREFERRED STOCK
OF
DEL MAR ACQUISITION, INC.
__________ ___, 2006
The undersigned officer of Del Mar Acquisition, Inc. (the "Company"), a
corporation organized and existing under the General Corporation Law of the
State of Nevada (the "NGCL"),
DOES HEREBY CERTIFY
that, pursuant to authority conferred upon the Board of Directors of the Company
(the "Board") by the Articles of Incorporation of the Company, and pursuant to
the provisions of Section 78.1955 of the NGCL, the Board, by unanimous written
consent filed in the Company's minute book, has adopted the following resolution
providing for the issuance of a new series of shares of Series B Exchangeable
Redeemable Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board in accordance
with the provisions of the Articles of Incorporation of the Company, a series of
Preferred Stock of the Company is hereby created, such series of Preferred Stock
to be designated Series B Exchangeable Redeemable Preferred Stock, par value
$0.01 per share, and to possess the following rights, preferences, privileges,
powers and restrictions:
Section 1. Designation and Number. The shares of such series will be
designated as Series B Exchangeable Redeemable Preferred Stock, par value $0.01
per share (the "Series B Preferred Stock"), and the number of shares
constituting the Series B Preferred Stock will be 19,125, with an issue price
per share of $50.00 (the "Issue Price Per Share"), for an aggregate original
issue price of $956,250.00 (collectively, the "Original Issue Price").
Section 2. Rank. The Series B Preferred Stock will rank: (a) prior to all
of the Company's common stock, $0.01 par value per share (the "Company Common
Stock"); (b) prior to any class or series of capital stock of the Company
hereafter created not specifically ranking by its terms on parity with any
Preferred Stock of whatever subdivision (together with the Common Stock, "Junior
Securities"); and (c) on parity with the Company's Series A Exchangeable
Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock"), and
any class or series of capital stock of the Company hereafter created
specifically ranking by its terms on parity with the Series A Preferred Stock
and the Series B Preferred Stock (collectively with the Series A Preferred
Stock, "Parity Securities"), in each case as to distributions of assets upon any
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary (each, a "Liquidation Event").
CERTIFICATE OF DESIGNATION OF SERIES B EXCHANGEABLE REDEEMABLE
PREFERRED STOCK OF DEL MAR ACQUISITION, INC. Page 1
Section 3. Dividends. The Series B Preferred Stock will bear a cash
dividend of 4% of the Issue Price Per Share per annum on each outstanding share
of Series B Preferred Stock (in each case, as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such shares
after the filing date hereof), payable annually on December 31 of each year;
provided, however, that each annual dividend will only be payable to the extent
that the Company has received Partnership Distributable Cash Flow (as defined
below) for such year in an amount sufficient, after taking into consideration
any taxes due and payable on such Partnership Distributable Cash Flow, to pay
such annual dividend. "Partnership Distributable Cash Flow" means the Company's
50% pro rata portion of all cash available for distribution by Elite Surgical
Centers, Del Mar L.P., a California limited partnership (the "Partnership"), to
its partners after taking into consideration: (a) a minimum reserve of $200,000
for operations for the month in which Partnership Distributable Cash Flow is
being calculated; (b) any required capital expenditures or additional reserves
as required by the Board of Governors of the Partnership in its sole and
absolute discretion; (c) any necessary tax distributions and management fees due
to Del Mar GenPar, Inc., a Nevada corporation and a subsidiary of the Company
("GenPar"), in connection with GenPar's performance as the general partner of
the Partnership; and (d) any management fees due to Surgical Center Management,
Inc., a Nevada corporation and an affiliate of the Company ("SCMI"), in
connection with SCMI's performance of its obligations under that certain
Management Services Agreement dated as of __________ ___, 2006, by and between
the Partnership and SCMI.
Section 4. Redemption Provisions.
(a) Optional Redemption By the Company. Subject to the provisions of
this Section 4, the Company may, at its sole option and in its sole and absolute
discretion, by resolution of the Board at any time after the date of issuance,
and at a redemption price per share equal to the Issue Price Per Share, redeem
the Series B Preferred Stock, in whole or in part, upon providing to the holders
of Series B Preferred Stock (the "Holders") a Notice of Redemption (as defined
in Section 4(c)).
(b) Mandatory Redemption.
(i) So long as any Series B Preferred Stock is outstanding,
the Company will, on the first business day of [AUGUST (ASSUMING CLOSING
OCCURS ON OR NEAR FEBRUARY 1)] in each of 2008, 2009, 2010, 2011 and 2012
(each, a "Mandatory Redemption Date"), redeem 3,825 shares of Series B
Preferred Stock (or, if the number of outstanding shares of Series B
Preferred Stock as of any Mandatory Redemption Date is less than 3,825,
such lower number of shares) at a redemption price per share equal to the
Issue Price Per Share; provided, however, that if any provision of the
NGCL or any other applicable law prohibits such redemption or otherwise
would cause such redemption to be illegal on the scheduled Mandatory
Redemption Date with respect to any Holder, then such Holder's shares will
not be redeemed until the first date on which such shares may be redeemed
in compliance with the NGCL and all other applicable laws; further
provided, that the Company will not be liable to any Holder in any respect
whatsoever if the Company redeems such Holder's shares and such Holder was
aware of
CERTIFICATE OF DESIGNATION OF SERIES B EXCHANGEABLE REDEEMABLE
PREFERRED STOCK OF DEL MAR ACQUISITION, INC. Page 2
a legal prohibition against such redemption and did not advise the Company
of such prohibition prior to such redemption.
(ii) At least 10 days prior to each Mandatory Redemption Date,
the Company will set aside for the applicable redemption, out of any funds
legally available therefor, cash in the amount of $191,250 (which amount
represents the product of the Issue Price Per Share multiplied by 3,825
shares of Series B Preferred Stock) (or, if the number of outstanding
shares of Series B Preferred Stock as of the applicable Mandatory
Redemption Date is less than 3,825, the amount equal to the product of the
Issue Price Per Share multiplied by such lower number of shares) (each, a
"Mandatory Redemption Payment"); provided, however, that each Mandatory
Redemption Payment (or partial portion thereof) will be payable on the
applicable Mandatory Redemption Date only to the extent that the Company
has received Partnership Distributable Cash Flow for the 12 months
immediately preceding such Mandatory Redemption Date in an amount
sufficient, after taking into consideration any taxes due and payable on
such Partnership Distributable Cash Flow and any dividends payable
pursuant to Section 3, to fund such Mandatory Redemption Payment (or
partial portion thereof); further provided, that to the extent any
Mandatory Redemption Payment (or partial portion thereof) is not funded on
the applicable Mandatory Redemption Date pursuant to the preceding clause,
the unpaid portion will be payable in full on the first business day of
the first month in which the Company has received Partnership
Distributable Cash Flow in an amount sufficient, after taking into
consideration any taxes due and payable on such Partnership Distributable
Cash Flow and any dividends payable pursuant to Section 3, to fund such
unpaid portion.
(iii) Notwithstanding the provisions of Sections 4(b)(i) and
(ii), the Company may, at its sole option and in its sole and absolute
discretion, elect to make any Mandatory Redemption Payment in monthly or
quarterly installments during the 12-month period immediately preceding
the applicable Mandatory Redemption Date, by giving the Notice of
Redemption for such Mandatory Redemption Date not less than 30 nor more
than 60 days prior to the date of the first such monthly or quarterly
installment; provided, that if the Company so elects, such Notice of
Redemption will provide that the shares of Series B Preferred Stock
otherwise to be redeemed on the applicable Mandatory Redemption Date will
instead be redeemed in one-twelfth or one-fourth increments, as
applicable, on the dates of such monthly or quarterly installments, and
will provide the complete schedule for such monthly or quarterly
installments and the associated redemptions of Series B Preferred Stock.
(c) Notice of Redemption. Not less than 30 nor more than 60 days
prior to the date fixed for any redemption of Series B Preferred Stock, the
Company will deliver to the Holders a written notice of redemption (each, a
"Notice of Redemption") stating (i) the date(s) on which such redemption will
occur (each, a "Redemption Date"); (ii) the number of shares of Series B
Preferred Stock to be redeemed on each Redemption Date; (iii) the aggregate
redemption price to be paid on each Redemption Date; (iv) the amount, if any, of
the annual dividend for the applicable year that will be accrued but unpaid as
of each Redemption Date; (v) that the annual dividend with respect to the shares
redeemed on each Redemption Date will cease to accrue on such Redemption Date;
(vi) the address to which certificates for such shares are to
CERTIFICATE OF DESIGNATION OF SERIES B EXCHANGEABLE REDEEMABLE
PREFERRED STOCK OF DEL MAR ACQUISITION, INC. Page 3
be surrendered for payment of the applicable redemption price; (vii) the
exchange rights associated with such shares; and (viii) the period within which
such exchange rights may be exercised.
(d) Effect of Redemption on Exchange Rights. The giving of any
Notice of Redemption by the Company will not affect any Holder's rights to
exchange shares of Series B Preferred Stock pursuant to Section 5 up to and
including the business day immediately preceding the Redemption Date for such
shares. Upon each Redemption Date, unless (i) such Holder has properly exercised
its exchange rights as provided in Section 5; or (ii) the Company defaults on
its obligation to pay the redemption price as provided in the Notice of
Redemption, the Holder of the shares of Series B Preferred Stock to be redeemed
on such Redemption Date will no longer have any exchange or other rights with
respect to such shares, except the right to receive the redemption price payable
therefor, without interest thereon, upon surrender (and endorsement, if required
by the Company in its sole and absolute discretion) of the certificates for such
shares, and the shares represented thereby will cease to be deemed outstanding
as of such Redemption Date. In the event that, on or after the date of its
receipt of a Notice of Redemption, a Holder properly exercises its exchange
rights as provided in Section 5 with respect to the shares of Series B Preferred
Stock to be redeemed as provided in such Notice of Redemption, the Exchange Date
(as contemplated by Section 5(b)(v)) for such shares will be deemed to be the
Redemption Date provided in such Notice of Redemption; provided, however, that
in the event that the Company defaults on its obligation to pay the redemption
price as provided in such Notice of Redemption, such exchange will not be
effective unless such Holder provides written notice to the Company within 20
days of the purported Redemption Date indicating its desire to effect such
exchange notwithstanding such default by the Company.
Section 5. Exchange Rights. The Holders will have exchange rights as
follows:
(a) Right to Exchange. Each record Holder of Series B Preferred
Stock will be entitled to exchange its Series B Preferred Stock into shares of
common stock, par value $0.01 per share ("Parent Common Stock"), of Vsource,
Inc., a Delaware corporation and indirect parent of the Company (the "Parent"),
issuable upon exchange of the Series B Preferred Stock, as follows: each
outstanding share of Series B Preferred Stock is exchangeable at any time into
25 fully-paid and non-assessable shares of Parent Common Stock, subject to
adjustment as provided in Section 5(c); provided, however, that in no event will
any Holder be entitled to exchange, pursuant to a single exchange transaction,
less than the lesser of 3,825 shares of Series B Preferred Stock or all shares
owned beneficially or of record by such Holder. The number of shares of Parent
Common Stock issuable upon the exchange of one share of Series B Preferred Stock
is hereinafter referred to as the "Exchange Rate."
(b) Mechanics of Exchange.
(i) Notice of Exchange; Surrender of Certificates. In order to
exchange shares of Series B Preferred Stock into Parent Common Stock, a
Holder must (A) fax, on or prior to 4:00 p.m., La Jolla, California time
on the Exchange Date (as defined in Section 5(b)(v)), a copy of a fully
executed written notice of exchange (each, a "Notice of Exchange") to the
Company or to the Company's designated transfer agent (the "Transfer
Agent") for the Series B Preferred Stock, stating that such Holder elects
so
CERTIFICATE OF DESIGNATION OF SERIES B EXCHANGEABLE REDEEMABLE
PREFERRED STOCK OF DEL MAR ACQUISITION, INC. Page 4
to exchange, which notice will specify the Exchange Date, the number of
shares of Series B Preferred Stock to be exchanged (which must be at least
the lesser of 3,825 shares or all shares owned beneficially or of record
by such Holder) and the number of shares of Parent Common Stock to be
issued to such Holder in exchange therefor; and (B) surrender to a common
courier for either overnight or two-day delivery to the office of the
Company or the Transfer Agent the original certificates representing the
Series B Preferred Stock being exchanged (the "Series B Stock
Certificates"), duly endorsed for transfer; provided, however, that the
Parent will not be obligated to issue certificates evidencing the Parent
Common Stock issuable upon such exchange unless the Series B Stock
Certificates are delivered to the Company or the Transfer Agent as
provided above, or the Holder notifies the Company or the Transfer Agent
that such certificates have been lost, stolen or destroyed (subject to the
requirements of Section 5(b)(ii)).
(ii) Lost or Stolen Certificates. Upon receipt by the Company
of evidence of the loss, theft, destruction or mutilation of any Series B
Stock Certificates, and (in the case of loss, theft or destruction) of
indemnity or security satisfactory to the Company in its sole and absolute
discretion, and upon surrender and cancellation of such Series B Stock
Certificates, if mutilated, the Company will execute and deliver to the
applicable Holder new Series B Stock Certificates of like tenor and date;
provided, however, that the Company will not be obligated to re-issue such
lost or stolen Series B Stock Certificates if the Holder contemporaneously
requests the Company to exchange such Series B Preferred Stock into Parent
Common Stock.
(iii) Delivery of Parent Common Stock Upon Exchange. No later
than 4:00 p.m., La Jolla, California time, on the fifth business day after
receipt by the Company or the Transfer Agent of all necessary
documentation required for exchange, including the original Series B Stock
Certificates to be exchanged (or after provision for security or
indemnification in the case of lost, stolen or destroyed certificates, if
required), duly executed and in proper form, and subject to approval
thereof by the Board, the Parent will issue and deliver to the Holder as
shown on the stock records of the Company a certificate for the number of
shares of Parent Common Stock to which such Holder is entitled as
aforesaid.
(iv) No Fractional Shares. If any exchange of Series B
Preferred Stock would create a fractional share of Parent Common Stock or
a right to acquire a fractional share of Parent Common Stock, such
fractional share will be disregarded and the number of shares of Parent
Common Stock issuable upon such exchange, in the aggregate, will be the
next lower number of shares.
(v) Exchange Date. The date on which exchange occurs (the
"Exchange Date") will be deemed to be the date on which the Parent issues
and delivers to the Holder the certificate for the number of shares of
Parent Common Stock to which such Holder is entitled as contemplated by
Section 5(b)(iii). The person or persons entitled to receive the shares of
Parent Common Stock issuable upon such exchange will be treated for all
purposes as the record holder or holders of such Parent Common Stock as of
the Exchange Date.
CERTIFICATE OF DESIGNATION OF SERIES B EXCHANGEABLE REDEEMABLE
PREFERRED STOCK OF DEL MAR ACQUISITION, INC. Page 5
(c) Adjustment to Exchange Rate.
(i) Adjustment Due to Stock Split, Stock Dividend, Etc. If,
prior to the exchange of all the Series B Preferred Stock, the number of
outstanding shares of Parent Common Stock is increased by a stock split,
stock dividend or other similar event, the Exchange Rate will be
proportionately increased, or if the number of outstanding shares of
Parent Common Stock is decreased by a combination or reclassification of
shares, or other similar event, the Exchange Rate will be proportionately
decreased.
(ii) Adjustment Due to Merger, Consolidation, Etc. If, prior
to the exchange of all the Series B Preferred Stock, there will be any
merger, consolidation, exchange of shares, recapitalization,
reorganization or other similar event as a result of which Parent Common
Stock will be converted or exchanged into the same or a different number
of shares of the same or another class or classes of stock or securities
of the Parent or another entity, or there is a sale of all or
substantially all the Parent's assets that is not deemed to be a
Liquidation Event pursuant to Section 7(c), then each Holder will
thereafter have the right to receive upon any exchange of Series B
Preferred Stock, upon the basis and upon the terms and conditions
specified herein, and in lieu of Parent Common Stock, that number of
shares of such stock, securities or other assets, as the case may be,
which such Holder would have been entitled to receive in such transaction
had all of such Holder's Series B Preferred Stock been exchanged
immediately prior to such transaction, and in any such case appropriate
provisions will be made with respect to the rights and interests of the
Holders such that the provisions hereof (including, without limitation,
provisions for the adjustment of the Exchange Rate and of the number of
shares issuable upon any exchange of Series B Preferred Stock) will
thereafter be applicable, as nearly as may be practicable in relation to
any securities thereafter deliverable upon the exchange thereof. The
Company will not effect any transaction described in this Section 5(c)(ii)
unless (A) it first gives 15 calendar days prior notice of such merger,
consolidation, exchange of shares, recapitalization, reorganization or
other similar event (during which time the Holders will be entitled to
exchange their Series B Preferred Stock into Parent Common Stock to the
extent permitted hereby); and (B) the resulting successor or acquiring
entity (if not the Company) assumes by written instrument all of the
obligations of the Company under this Certificate of Designation,
including the obligation of this Section 5(c)(ii).
(iii) No Fractional Shares. If any adjustment under this
Section 5(c) would create a fractional share of Parent Common Stock or a
right to acquire a fractional share of Parent Common Stock, such
fractional share will be disregarded and the number of shares of Parent
Common Stock issuable upon any future exchange, in the aggregate, will be
the next lower number of shares.
(d) Reservation of Parent Common Stock. The Parent will at all times
reserve and keep available out of the authorized but unissued shares of Parent
Common Stock, solely for the purpose of effecting the exchange of shares of
Series B Preferred Stock, such number of shares of Parent Common Stock as will
from time to time be sufficient to effect the exchange of all outstanding shares
of Series B Preferred Stock. If at any time the number of authorized but
CERTIFICATE OF DESIGNATION OF SERIES B EXCHANGEABLE REDEEMABLE
PREFERRED STOCK OF DEL MAR ACQUISITION, INC. Page 6
unissued shares of Parent Common Stock will not be sufficient to effect the
exchange of all then-outstanding shares of Series B Preferred Stock, the Parent
will take such corporate action as may, in the opinion of its legal counsel, be
necessary or appropriate to increase the number of authorized but unissued
shares of Parent Common Stock to such number of shares as will be sufficient for
such purpose.
(e) Payment of Taxes. Each Holder will pay all taxes and other
governmental charges that may be imposed with respect to the issuance or
delivery of shares of Parent Common Stock upon exchange of such Holder's shares
of Series B Preferred Stock, including, without limitation, any income taxes
associated therewith and any tax or other charge imposed in connection with any
transfer involved in the issuance and delivery of shares of Parent Common Stock
in a name other than that of such Holder.
Section 6. Voting Rights. The Holders will have no voting power
whatsoever, except as otherwise provided by the NGCL, and no Holder will vote or
otherwise participate in any proceeding in which actions will be taken by the
Company or the Parent or their respective stockholders or be entitled to
notification as to any meeting of the stockholders of the Company or the Parent.
Notwithstanding the above, the Company will provide each Holder with
notification of any meeting of the Company's stockholders regarding any major
corporate events affecting the Company. In the event of any taking by the
Company of a record of its stockholders for the purpose of determining
stockholders who are entitled to receive payment of any dividend or other
distribution, any right to subscribe for, purchase or otherwise acquire any
share of any class or any other securities or property (including by way of
merger, consolidation or reorganization), or to receive any other right, or for
the purpose of determining stockholders who are entitled to vote in connection
with any proposed sale, lease or conveyance of all or substantially all the
assets of the Company, or any proposed Liquidation Event, the Company will
deliver a notice to each Holder at least five business days prior to the record
date specified therein, of the date on which any such record is to be taken for
the purpose of such dividend, distribution, right or other event, and a brief
statement regarding the amount and character of such dividend, distribution,
right or other event to the extent known at such time.
To the extent that under the NGCL the vote of the Holders, voting
separately as a class, is required to authorize a given action of the Company,
the affirmative vote or consent of the Holders of at least a majority of the
shares of the Series B Preferred Stock then outstanding, represented at a duly
held meeting at which a quorum is present or by written consent of such a
majority (except as otherwise may be required under the NGCL) will constitute
the approval of such action by such class.
Section 7. Liquidation Preference.
(a) In the event of any Liquidation Event, the Holders will be
entitled to receive, prior in preference to any distribution to Junior
Securities, but in parity with any distribution to Parity Securities, an amount
per share equal to the Issue Price Per Share. If, upon the occurrence of a
Liquidation Event, the assets and funds available to be distributed among the
Holders and any holders of Parity Securities (collectively, the "Parity
Holders") are insufficient
CERTIFICATE OF DESIGNATION OF SERIES B EXCHANGEABLE REDEEMABLE
PREFERRED STOCK OF DEL MAR ACQUISITION, INC. Page 7
to permit the payment to the Holders and such Parity Holders of the full
preferential amounts due to the Holders and such Parity Holders, respectively,
then the entire assets and funds of the Company legally available for
distribution will be distributed among the Holders and such Parity Holders, pro
rata, based on the respective liquidation amounts to which the Series B
Preferred Stock and any such series of Parity Securities is entitled pursuant to
the Company's Articles of Incorporation and any duly adopted certificate(s) of
designation relating thereto.
(b) Upon the completion of the distribution required by Section
7(a), if any assets remain in the Company, such assets will be distributed to
holders of Junior Securities in accordance with the Company's Articles of
Incorporation and any duly adopted certificate(s) of designation relating
thereto.
(c) At each Holder's option, a sale, conveyance or disposition of
all or substantially all the assets of the Company to a private entity, the
common stock of which is not publicly traded, will be deemed to be a Liquidation
Event within the meaning of this Section 7 (a Holder who elects to have a
transaction so deemed is referred to herein as a "Liquidating Holder");
provided, however, that with respect to each Holder, any event described in the
preceding clause that such Holder does not elect to treat as a Liquidation
Event, or any merger, consolidation, acquisition or other business combination
of the Company with or into any other company or companies will not be treated
as a Liquidation Event within the meaning of this Section 7, but instead will be
treated pursuant to Section 5(c)(ii).
(d) Prior to the closing of any transaction described in Section
7(c) that could, at each Holder's option, be deemed a Liquidation Event, the
Company will either (i) make all cash distributions it is required to make to
the Liquidating Holders pursuant to the first sentence of Section 7(a); (ii) set
aside sufficient funds from which any cash distributions required to be made to
the Liquidating Holders may be made; or (iii) establish an escrow or other
similar arrangement with a third party pursuant to which the proceeds payable to
the Company from a sale of all or substantially all the assets of the Company
will be used to make any required liquidating payments to the Liquidating
Holders immediately after the consummation of such sale. In the event that the
Company has not fully complied with either of the foregoing alternatives, the
Company will either: (x) cause such closing to be postponed until the Company
has so complied; or (y) cancel such transaction, in which event the rights of
the Holders will be the same as existing immediately prior to such proposed
transaction.
Section 8. Status of Redeemed or Exchanged Stock. In the event any Series
B Preferred Stock is redeemed pursuant to Section 4 or exchanged pursuant to
Section 5, the shares so exchanged will be canceled, will return to the status
of authorized but unissued Preferred Stock of no designated series, and will not
be issuable by the Company as Series B Preferred Stock.
Section 9. Preference Rights. Nothing contained herein will be construed
to prevent the Board from issuing one or more series of Preferred Stock with
dividend and liquidation preferences junior to or in parity with the dividend
and liquidation preferences of the Series B Preferred Stock.
CERTIFICATE OF DESIGNATION OF SERIES B EXCHANGEABLE REDEEMABLE
PREFERRED STOCK OF DEL MAR ACQUISITION, INC. Page 8
Section 10. No Preemptive Rights. No Holder will, in its capacity as a
Holder, have any preemptive rights to subscribe to or purchase any shares of any
class of capital stock of the Company or the Parent now or hereafter authorized
or issued, whether or not exchangeable for any capital stock of the Company or
the Parent of any class or classes now or hereafter authorized or issued; nor
will any Holder, in its capacity as a Holder, have any right to purchase,
acquire or subscribe to any securities that the Company or the Parent may issue
or sell, whether or not convertible into or exchangeable for shares of capital
stock of the Company or the Parent of any class or classes now or hereafter
authorized or issued, and whether or not any such securities have attached or
appurtenant thereto any warrants, options or other instruments that entitle the
holders thereof to purchase, acquire or subscribe to shares of capital stock of
the Company or the Parent of any class or classes now or hereafter authorized or
issued.
Section 11. Notices. All notices and other communications required hereby
must be in writing and will be deemed given (a) when delivered personally; (b)
on the fifth business day after being mailed by certified mail, return receipt
requested; (c) the next business day after delivery to a recognized overnight
courier; or (d) upon transmission and confirmation of receipt by a facsimile
operator if sent by facsimile, as follows:
with copies (which will not
if to the Company: constitute notice) to:
c/o Vsource, Inc. Xxxxxx & Xxxx, L.L.P.
0000 Xxxxxxx Xxxxxx, Xxxxx 000 0000 Xxxx Xxxxxx, Xxxxx 0000
Xx Xxxxx, Xxxxxxxxxx 00000 Xxxxxx, Xxxxx 00000
Attention: General Counsel Attention: I. Xxxxx Xxxxxxxx
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
if to any Holder:
To the address of such Holder as listed in the stock record books of the
Company (which may include the records of the Transfer Agent)
or to such other address or facsimile number as the Company or such Holder, as
the case may be, may have specified by notice properly given pursuant to this
provision. Any such notice or other communication will be deemed to have been
given and received (whether actually received or not) on the day it is
personally delivered or delivered by courier or overnight delivery service or
sent by telecopy or, if mailed, when actually received.
Section 12. Interpretation. The section headings contained herein are
solely for the purpose of reference will not in any way affect the meaning or
interpretation hereof.
Section 13. Usage. Whenever the plural form of a word is used herein, it
will include the singular form of that word. Whenever the singular form of a
word is used herein, it will include the plural form of that word. The term "or"
will not be interpreted as excluding any of the items described. The term
"include" or any derivative of such term does not mean that the items following
such term are the only types of such items.
CERTIFICATE OF DESIGNATION OF SERIES B EXCHANGEABLE REDEEMABLE
PREFERRED STOCK OF DEL MAR ACQUISITION, INC. Page 9
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CERTIFICATE OF DESIGNATION OF SERIES B EXCHANGEABLE REDEEMABLE
PREFERRED STOCK OF DEL MAR ACQUISITION, INC. Page 10
IN WITNESS WHEREOF, the undersigned officer of the Company has executed
this Certificate of Designation as of the date first written above.
DEL MAR ACQUISITION, INC.
By: __________________________________
Name: Xxxxx Xxxxxxxxxx
Title: President and CEO
Attest:
By: __________________________________
Name: Xxxx Xxxxxx
Title: Secretary
THE STATE OF CALIFORNIA Section
Section
COUNTY OF _____________________ Section
The foregoing instrument was acknowledged before me this ____ day of
____________, 2006, by Xxxxx Xxxxxxxxxx, the President and Chief Executive
Officer of Del Mar Acquisition, Inc., a Nevada corporation, on behalf of said
corporation, and was attested to by Xxxx Xxxxxx, the Secretary of said
corporation.
______________________________ [SEAL]
Notary Public in and for
the State of California
My Commission Expires:
______________________________
[Signature Page to Certificate of Designation]
EXHIBIT C
FORM OF XXXX OF SALE
This Xxxx of Sale (this "Xxxx of Sale") is made and entered into as
of__________ ___, 2006 (the "Effective Date"), by Elite Surgical Management,
Inc., a California corporation ("Elite"), for the benefit of Surgical Center
Management, Inc., a Nevada corporation ("SCMI"). This Xxxx of Sale is the Xxxx
of Sale required by (a) Section 1.4(g) of that certain Partnership Interest
Purchase Agreement dated as of December ___, 2005 (the "Point Loma Purchase
Agreement"), by and among Point Loma GenPar, Inc., a Nevada corporation and an
Affiliate of SCMI ("Point Loma GenPar"); Point Loma Acquisition, Inc., a Nevada
corporation and an Affiliate of SCMI ("Point Loma Acquisition"); Surgical
Ventures, Inc., a California corporation and an Affiliate of Elite ("SVI"); and
Xxxxx X. Xxxxxx, M.D., an individual residing in the State of California and the
sole stockholder of Elite and SVI ("Xxxxxx"); and (b) Section 1.4(g) of that
certain Partnership Interest Purchase Agreement dated as of December ___, 2005
(the "Del Mar Purchase Agreement" and, together with the Point Loma Purchase
Agreement, the "Purchase Agreements"), by and among Del Mar GenPar, Inc., a
Nevada corporation and an Affiliate of SCMI ("Del Mar GenPar"); Del Mar
Acquisition, Inc., a Nevada corporation and an Affiliate of SCMI ("Del Mar
Acquisition" and, collectively with Del Mar GenPar, Point Loma GenPar and Point
Loma Acquisition, the "Buyers"); SVI and Xxxxxx. Capitalized terms used herein
that are not otherwise defined have the meanings ascribed to such terms in each
of the Purchase Agreements.
W I T N E S S E T H:
WHEREAS, Point Loma Surgical Center, L.P., a California limited
partnership (the "Point Loma Partnership"), and SCMI have entered into a
Management Services Agreement dated as of the Effective Date (the "Point Loma
MSA"), pursuant to which the Point Loma Partnership has engaged SCMI to furnish,
and SCMI has agreed to furnish to the Point Loma Partnership, the management and
support services described therein;
WHEREAS, Elite Surgical Centers, Del Mar L.P., a California limited
partnership (the "Del Mar Partnership"), and SCMI have entered into a Management
Services Agreement dated as of the Effective Date (the "Del Mar MSA" and,
together with the Point Loma MSA, the "Management Services Agreements"),
pursuant to which the Del Mar Partnership has engaged SCMI to furnish, and SCMI
has agreed to furnish to the Del Mar Partnership, the management and support
services described therein;
WHEREAS, Elite formerly provided management and support services to (a)
the Point Loma Partnership pursuant to a Management Agreement dated as of
February 1, 2002, which has been terminated by the Point Loma Partnership; and
(b) the Del Mar Partnership pursuant to a Management Agreement dated as of April
1, 2002, which has been terminated by the Del Mar Partnership, and as a result
of such terminations Elite no longer needs or has any use for the Elite Assets;
1
WHEREAS, the Buyers, SVI and Xxxxxx have entered into the Purchase
Agreements, pursuant to which, among other things, Xxxxxx has agreed to cause
Elite, effective as of the date hereof, to sell the Elite Assets to SCMI;
WHEREAS, in order for SCMI to continue performing its obligations under
the Management Services Agreements, SCMI desires to purchase from Elite, and
Elite desires to sell to SCMI, the Elite Assets, on the terms and subject to the
conditions set forth in this Xxxx of Sale; and
WHEREAS, the sale, transfer, assignment and delivery of the Elite Assets
pursuant to this Xxxx of Sale is part of the consideration for the transactions
contemplated by the Purchase Agreements, and the Buyers have required that
Xxxxxx cause Elite to deliver this Xxxx of Sale to SCMI as a condition to the
consummation of the transactions contemplated by the Purchase Agreement.
KNOW BY THESE PRESENTS, that, in consideration of the foregoing premises,
one dollar in cash and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Elite does hereby sell, transfer,
assign and deliver to SCMI, and its successors and assigns, all right, title and
interest in and to the Elite Assets, a complete and accurate listing of which is
provided in Schedule 1 to this Xxxx of Sale.
Elite represents and warrants to SCMI as follows:
(a) Organization. Elite is a corporation duly organized, validly
existing and in good standing under the laws of the State of California
and has full power to own its properties and to conduct its business as
presently conducted. Elite is not qualified to do business in any foreign
jurisdiction, and no such qualification is required as of the date hereof.
(b) Authority. Elite has all requisite power, authority and
capacity, corporate or otherwise, to execute, deliver and perform under
this Xxxx of Sale. The execution, delivery and performance by Elite of
this Xxxx of Sale has been duly authorized by all necessary action,
corporate or otherwise, on the part of Elite. This Xxxx of Sale has been
duly executed and delivered by Elite and is a legal, valid and binding
agreement of Elite, enforceable against Elite in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance or similar laws affecting
the enforcement of creditors' rights generally and subject to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(c) Title to the Elite Assets.
(i) Set forth in Schedule 1 is a complete and accurate list of
the Elite Assets, including without limitation: (A) all real
property owned or leased by Elite; (B) each vehicle owned or leased
by Elite; and (C) each other tangible asset owned or leased by Elite
and having a book value in excess of $500.
(ii) Elite has good and marketable title to all of the Elite
Assets it owns or purports to own, and owns all of such assets free
and clear of any Liens, other
2
than Permitted Liens. Elite holds a valid leasehold interest in or
otherwise has a valid and enforceable right to use all of the Elite
Assets that it does not own. This Xxxx of Sale conveys to and vests
in SCMI good and marketable title to the Elite Assets, free and
clear of any Liens other than Permitted Liens.
(d) Condition and Sufficiency of the Elite Assets. The Elite Assets
constitute all of the assets of Elite that are used in, generated by or
associated with the business of operating the Point Loma Surgical Center
located at 0000 Xxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx 00000 (the
"Point Loma Business") or the business of operating the Del Mar Surgical
Center located at 00000 Xx Xxxxxx Xxxx, Xxxxx 00, Xxx Xxxxx, Xxxxxxxxxx
00000 (the "Del Mar Business" and, together with the Point Loma Business,
the "Business"). The Elite Assets: (A) are in good condition and repair,
ordinary wear and tear excepted; (B) are in good working order and have
been properly and regularly maintained in all material respects; (C)
conform in all material respects to all applicable Laws relating to their
construction, use, operation and maintenance; (D) constitute all assets
used by Elite in the conduct of the Business; (E) constitute all assets,
tangible and intangible, of any nature whatsoever, necessary to carry on
the Business as currently conducted; and (F) are fit for the particular
purpose for which they are used in connection with the Business.
(e) No Violation. Neither the execution or delivery of this Xxxx of
Sale nor the consummation of the transactions contemplated hereby,
including without limitation the sale, transfer, assignment and delivery
of the Elite Assets to SCMI, will, to the Knowledge of Elite or Xxxxxx,
conflict with or result in the breach of any term or provision of, require
any Consent or violate or constitute a default under (or an event that
with notice or the lapse of time or both would constitute a breach or
default), or result in the creation of any Lien on any of the Elite Assets
pursuant to, or relieve any third party of any obligation to Elite or give
any third party the right to terminate or accelerate any obligation under,
any charter provision, bylaw, contract included in the Elite Assets,
License or Law to which Elite is a party or by which any of the Elite
Assets is in any way bound or obligated.
(f) Governmental Authorizations. To the Knowledge of Elite or
Xxxxxx, no Governmental Authorization is required on the part of Elite in
connection with the sale, transfer, assignment and delivery of the Elite
Assets to SCMI or any of the other transactions contemplated by this Xxxx
of Sale.
(g) Litigation. There are currently no pending or, to the Knowledge
of Elite or Xxxxxx, threatened Litigation, in each case by any Person
against or relating to Elite or any stockholder, officer, employee or
agent (in their capacities as such) of Elite or to which any of the Elite
Assets is subject. Elite is not subject to or bound by any currently
existing judgment, order, writ, injunction, decree, ruling or charge.
Neither Elite nor Xxxxxx has any reason to believe that any such
Litigation may be brought or threatened against Elite. Elite is not a
party to or subject to the provisions of any judgment, order, writ,
injunction, decree, ruling or charge of any court or Governmental Entity
prohibiting the execution, delivery or performance of this Xxxx of Sale or
the consummation of the transactions contemplated hereby.
3
(h) Licenses. Elite owns, possesses or holds from each appropriate
Governmental Entity all Licenses issued by any Governmental Entity
necessary to use any of the Elite Assets or conduct the Business, and each
such License is included in the Elite Assets. No loss or expiration of any
such License is pending or, to the Knowledge of Elite or Xxxxxx,
threatened or reasonably foreseeable, other than expiration in accordance
with the terms thereof of Licenses that may be renewed in the ordinary
course of business without lapsing. Each such License is in good standing
and not subject to meritorious challenge.
(i) Employee Matters. Set forth in Schedule 2 is a complete and
accurate list of all current employees of Elite, including date of
employment, current title and compensation, and date and amount of last
increase in compensation. There are no written or oral employment
agreements between Elite and any of its employees. All of Elite's
employees are employees at will and may be terminated by Elite, without
prior notice, for any reason or for no reason. In relation to its
employees, both present and former, Elite has: (i) complied with all
obligations imposed on it by all Laws relevant to the relations between it
and its employees or any disclosed trade union; (ii) maintained adequate
and suitable records regarding the service of each of its employees; and
(iii) withheld all income tax required by the Code or by applicable state
and local Laws, and payments due for social security contributions
(including the employer's contributions) and any other amount required to
be withheld under any federal, state or local Laws, from salaries, wages
and bonuses paid by the Partnership, complied with all withholding
requirements and maintained proper records in respect of the foregoing.
Elite has no collective bargaining, union or labor agreements, contracts
or other arrangements with any group of employees, labor union or employee
representative and there is no organization effort currently being made
or, to the Knowledge of Elite or Xxxxxx, threatened by or on behalf of any
labor union with respect to employees of the Partnership. Elite has not
experienced, and, to the Knowledge of Elite or Xxxxxx, there is no basis
for, any strike, labor trouble, work stoppage, slow down or other
interference with or impairment of the Business. Elite does not object to
any offer of employment from SCMI to any employee of Elite, but
acknowledges and confirms that SCMI will have no obligation to offer
employment to any employee of Elite or any other person.
(j) Contracts. With respect to each agreement (whether written or
oral and including all amendments thereto) included in the Elite Assets
(each, a "Contract"), Elite has delivered to SCMI a copy of each written
Contract and a detailed written summary of each oral Contract. Except as
described in Schedule 1, (A) each Contract is valid, binding and in full
force and effect and enforceable in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent conveyance or similar laws affecting the enforcement of
creditors' rights generally and subject to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity); (B) Elite has performed all of its obligations that have become
due under any Contract to which it is a party, and there exists no breach
or default (or event that with notice or lapse of time would constitute a
breach or default) on the part of Elite or any other Person under any
Contract; (C) there has been no termination or notice of default or, to
the Knowledge of Elite or Xxxxxx, any threatened termination under any
Contract; and (iv) to the Knowledge of Elite or Xxxxxx, no party to any
Contract intends to alter its relationship with Elite as a result of or in
connection with the acquisitions contemplated by the Purchase
4
Agreement or the sale, transfer, assignment and delivery of the Elite
Assets to SCMI pursuant to this Xxxx of Sale. Except as set forth in
Schedule 1, none of the Contracts will require Consent from Elite's
counterparty or will result in a breach, termination, termination right or
change in any right or obligation thereunder as a result of the
consummation of the transactions contemplated by this Xxxx of Sale. With
respect to any Contracts that will require Consent, SCMI will have the
right to participate in any communication with such counterparties in
connection with obtaining such Consent.
(k) Full Disclosure. No representation or warranty of Elite
contained in this Xxxx of Sale, and nothing set forth herein or in the
schedules attached hereto, or in any document furnished to SCMI in
connection herewith, or in any other information or materials delivered by
Elite or Xxxxxx to SCMI or the Buyers (when read together), contains any
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made. Elite
has disclosed to SCMI all facts and information material to the purchase
of the Elite Assets or the Business that are known to Elite.
Elite agrees to warrant and defend title to the Elite Assets unto SCMI,
and its successors and assigns, forever against every Person claiming the same
or any part thereof.
Elite agrees, without further consideration, to execute and deliver to
SCMI such further instruments of conveyance and transfer as SCMI may reasonably
request in order more effectively to convey and transfer to SCMI any of the
Elite Assets, or for aiding, assisting, collecting and reducing to possession
any of the Elite Assets and exercising rights with respect thereto.
Elite hereby irrevocably constitutes and appoints SCMI as its true and
lawful attorney-in-fact, with full power of substitution, to endorse, assign,
demand, xxx for, recover, receive, release and discharge, in the name of Elite,
any and all rights, demands, moneys, claims and causes of action of every kind
and description whatsoever arising out of, incident to or in connection with the
Elite Assets.
This Xxxx of Sale will be binding on Elite and its successors and assigns
and will inure to the benefit of SCMI and its successors and assigns. Nothing
contained in this Xxxx of Sale will be deemed to supersede, modify, limit or
amend any of the rights or obligations of the Buyers, SVI or Xxxxxx under either
of the Purchase Agreements.
This Xxxx of Sale will be governed by and construed and interpreted in
accordance with the substantive laws of the State of Delaware, without giving
effect to any conflicts of law rule or principle that might result in the
application of the laws of another jurisdiction.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5
IN WITNESS WHEREOF, Elite has executed this Xxxx of Sale as of the date
first written above.
ELITE SURGICAL MANAGEMENT, INC.
By: ___________________________________
Name: Xxxxx X. Xxxxxx, M.D.
Title: President
THE STATE OF CALIFORNIA Section
Section
COUNTY OF _____________________ Section
The foregoing instrument was acknowledged before me this ____ day
of ____________, 2006, by Xxxxx X. Xxxxxx, M.D., the President of Elite Surgical
Management Inc., a California corporation, on behalf of said corporation.
_______________________________ [SEAL]
Notary Public in and for
the State of California
My Commission Expires:
_______________________________
[Signature Page to Xxxx of Sale]
SCHEDULE 1
ELITE ASSETS
All tangible and intangible assets used in, generated by or associated
with the Business, including without limitation all cash and cash equivalents,
accounts receivable and other receivables, prepaid expenses, deposits, medical
equipment, other equipment, office furnishings, vehicles, prepaid assets,
contract rights, licenses, permits, customer, prospect and marketing lists,
sales data, records, computer software and software licenses, proprietary
information, intellectual property, trade secrets, trademarks and trade names,
logos, copyrights, goodwill associated with such intellectual property and the
Business, production specifications, drawings and designs owned, leased or
otherwise used by Elite in connection with the Business as of the date hereof,
and specifically including:
[SVI/XXXXXX TO PROVIDE COMPLETE LIST.]
The Elite Assets exclude the following assets, which will remain the
property of Elite following the date hereof (collectively, the "Excluded
Assets"):
[SVI/XXXXXX TO PROVIDE COMPLETE LIST.]
Elite acknowledges and confirms that SCMI will assume only the ordinary
course obligations of Elite to be performed after the date hereof under any
contract that is included in the Elite Assets (collectively, the "Assumed
Liabilities"); and that SCMI will not assume, and Elite will retain and
discharge when due or otherwise satisfy following the date hereof any
Liabilities of Elite set forth below (collectively, the "Excluded Liabilities"):
(a) Liabilities in respect of any of the Excluded Assets;
(b) Liabilities relating to Litigation;
(c) Liabilities relating to indebtedness for borrowed money;
(d) Liabilities relating to loans or other payables owed by Elite
to its stockholders;
(e) Liabilities relating to Taxes on the earnings of Elite or
related to any of the Elite Assets for periods prior to the
Closing Date;
(f) Liabilities relating to the Plan or any other Employee Benefit
Plans;
(g) any undisclosed Liability;
(h) Liabilities incurred other than in the ordinary course of
business; and
(i) any other Liability that is not an Assumed Liability.
[Schedule 1 to Xxxx of Sale]
EXHIBIT D
FORM OF REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and entered
into as of __________ ___, 2005, by and between Vsource, Inc., a Delaware
corporation (the "Company"), and Surgical Ventures, Inc., a California
corporation (the "Stockholder"), in connection with that certain Partnership
Interest Purchase Agreement dated as of December ___, 2005 (the "Purchase
Agreement"), by and among Del Mar GenPar, Inc., a Nevada corporation and an
indirect subsidiary of the Company; Del Mar Acquisition, Inc., a Nevada
corporation and an indirect subsidiary of the Company ("Newco"); the
Stockholder; and Xxxxx X. Xxxxxx, M.D., an individual residing in the State of
California. Capitalized terms used herein that are not otherwise defined have
the meanings ascribed to such terms in the Purchase Agreement.
W I T N E S S E T H:
WHEREAS, pursuant to the Purchase Agreement, the Stockholder is acquiring
31,875 shares (the "Series A Shares") of Newco's Series A Convertible Preferred
Stock, par value $0.01 per share, and 19,125 shares (the "Series B Shares" and,
together with the Series A Shares, the "Shares") of Newco's Series B Convertible
Redeemable Preferred Stock, par value $0.01 per share;
WHEREAS, the Shares are convertible into common stock, par value $0.01 per
share ("Common Stock"), of the Company;
WHEREAS, the Company desires to grant to the Stockholder certain
registration rights relating to any Common Stock acquired by the Stockholder
upon conversion of any of the Shares, and the Stockholder desires to obtain such
registration rights, on the terms and subject to the conditions set forth in
this Agreement;
WHEREAS, this Agreement is part of the consideration for the transactions
contemplated by the Purchase Agreement, and the Stockholder has required that
the Company enter into this Agreement as a condition to the consummation of the
transactions contemplated by the Purchase Agreement; and
WHEREAS, the Company is receiving, and will receive, substantial direct
and indirect benefits from the consummation of the transactions contemplated by
the Purchase Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
1
1. Certain Definitions. As used in this Agreement, the following terms
mean:
(a) "Affiliate" means, with respect to a specified Holder, (i) the
meaning ascribed to such term in the Purchase Agreement; (ii) the spouse
or children (or a trust exclusively for the benefit of the spouse or
children) of the specified Holder; or (iii) in the case of a Holder that
is a partnership, its partners.
(b) "Commission" means the Securities and Exchange Commission, or
any successor agency; references in this Agreement to any rules,
regulations or forms promulgated by the Commission shall include rules,
regulations and forms succeeding to the functions thereof, whether or not
bearing the same designation.
(c) "Holder" means the Stockholder or any transferee or assignee
thereof to whom the rights under this Agreement are assigned in accordance
with Section 9, provided that the Stockholder or such transferee or
assignee then owns the Registrable Stock.
(d) "Register," "registered" and "registration" mean a registration
effected by preparing and filing a registration statement or similar
document in compliance with the 1933 Act and the declaration or ordering
of effectiveness of such registration statement or similar document.
(e) "Registrable Stock" means any shares of Common Stock acquired by
any Holder upon conversion of any of the Shares; provided, however, that
any Registrable Stock shall cease to be Registrable Stock when (i) a
registration statement covering such Registrable Stock has been declared
effective and such Registrable Stock has been disposed of pursuant to such
effective registration statement; (ii) such Registrable Stock is sold
pursuant to Rule 144 (or any similar provision then in force) under the
1933 Act; (iii) such Registrable Stock is eligible to be sold pursuant to
Rule 144(k) under the 1933 Act; (iv) such Registrable Stock has been
otherwise transferred, no stop transfer order affecting such stock is in
effect and the Company has delivered new certificates or other evidences
of ownership for such Registrable Stock not bearing any legend indicating
that such shares have not been registered under the 1933 Act; or (v) such
Registrable Stock is sold by a Person in a transaction in which the rights
under the provisions of this Agreement are not assigned.
(f) "Requesting Holder" means a Holder or Holders of at least a
majority of the Registrable Stock, in the aggregate.
2. Piggy-Back Registration. Commencing immediately after the Closing Date,
if the Company determines that it will file a registration statement under the
1933 Act (other than a registration statement on a Form S-4 or S-8 or filed in
connection with an exchange offer or an offering of securities solely to the
Company's existing stockholders) on any form that would also permit the
registration of the resale of the Registrable Stock and such filing is to be on
the Company's behalf or on behalf of selling holders of the Company's securities
for the general registration of Common Stock to be sold for cash, at each such
time the Company shall promptly give each Holder written notice of such
determination setting forth the date on which the
2
Company proposes to file such registration statement, which date shall be no
earlier than 30 days from the date of such notice, and advising each Holder of
its right to have Registrable Stock included in such registration. Upon the
written request of any Holder received by the Company no later than 20 days
after the date of the Company's notice, the Company shall use its commercially
reasonable efforts to cause to be registered under the 1933 Act all of the
Registrable Stock that each such Holder has so requested to be registered. If,
in the written opinion of the managing underwriter or underwriters (or, in the
case of a non-underwritten offering, in the written opinion of the placement
agent, or if there is none, the Company), the total amount of such securities to
be so registered, including such Registrable Stock, will exceed the maximum
amount of the Company's securities which can be marketed (a) at a price
reasonably related to the then-current market value of such securities, or (b)
without otherwise materially and adversely affecting the entire offering, then
the amount of Registrable Stock to be offered for the accounts of Holders shall
be reduced pro rata to the extent necessary to reduce the total amount of
securities to be included in such offering to the recommended amount; provided,
however, that if securities are being offered for the account of other Persons
as well as the Company, such reduction shall not represent a greater fraction of
the number of securities intended to be offered by Holders than the fraction of
similar reductions imposed on such other Persons other than the Company over the
amount of securities such other Persons intended to offer.
3. Expenses of Registration. The Company shall bear all expenses incurred
in connection with each registration pursuant to Section 2, excluding
underwriters' discounts and selling commissions, but including, without
limitation, all registration, filing and qualification fees, word processing,
duplicating, printers' and accounting fees (including the expenses of any
special audits or "cold comfort" letters required by or incident to such
performance and compliance), exchange listing fees or National Association of
Securities Dealers fees, messenger and delivery expenses, all fees and expenses
of complying with securities or blue sky Laws and fees and disbursements of the
Company's legal counsel. The selling Holders shall bear and pay the underwriting
commissions and discounts applicable to the Registrable Stock offered for their
account in connection with any registrations, filings and qualifications made
pursuant to this Agreement.
4. Holdback Agreement.
(a) Restrictions on Public Sale by Holder. To the extent not
inconsistent with applicable law, each Holder whose Registrable Stock is
included in a registration statement agrees not to effect any public sale
or distribution of the issue being registered or any similar security of
the Company, or any securities convertible into or exchangeable or
exercisable for such securities, including a sale pursuant to Rule 144
under the 1933 Act, during the 14 days prior to, and during the 180-day
period beginning on, the effective date of such registration statement
(except as part of the registration), if and to the extent requested by
the managing underwriter or underwriters in the case of an underwritten
public offering or if and to the extent requested by the Company in the
case of a nonunderwritten public offering.
(b) Restrictions on Public Sale by the Company and Others. The
Company agrees (i) not to effect any public sale or distribution of any
securities similar to those
3
being registered, or any securities convertible into or exchangeable or
exercisable for such securities, during the 14 days prior to, and during
the 90-day period beginning on, the effective date of any registration
statement in which Holders are participating (except as part of such
registration), if and to the extent requested by the managing underwriter
or underwriters in the case of an underwritten public offering or if and
to the extent requested by the Holders in the case of a non-underwritten
public offering; and (ii) that any agreement entered into after the date
of this Agreement pursuant to which the Company issues or agrees to issue
any securities convertible into or exchangeable or exercisable for such
securities (other than pursuant to an effective registration statement)
shall contain a provision under which holders of such securities agree not
to effect any public sale or distribution of any such securities during
the periods described in Section 4(b)(i), in each case including a sale
pursuant to Rule 144 under the 1933 Act.
5. Lock-Up/Leak-Out Provisions.
(a) Lock-Up. In the event of a firmly-underwritten public offering
of Common Stock or other securities of the Company registered under the
1933 Act by a nationally-recognized investment bank resulting in at least
$20,000,000 in net proceeds (before underwriters' discounts and selling
commissions) to the Company (the "Public Offering"), each Holder agrees
that for a period of six months commencing on the effective date of the
registration statement filed under the 1933 Act relating to the Public
Offering (the "Lock-Up Period"), such Holder will not offer, sell,
contract to sell, grant any option for the sale of or otherwise dispose
of, directly or indirectly, any of the Registrable Stock, any securities
into which the Registrable Stock is convertible, exercisable or
exchangeable, or any other securities of the Company. In order to enable
the Company to enforce the restriction on resale during the Lock-Up
Period, each Holder agrees that the Company may impose stop-transfer
instructions with respect to any Registrable Stock or any other securities
of the Company owned beneficially or of record by such Holder until the
expiration of the Lock-Up Period.
(b) Extension of Lock-Up Period. In the event that the National
Association of Securities Dealers, any other state or federal regulatory
authority or any of their respective Affiliates requires that the Lock-Up
Period be extended in connection with the Public Offering, each Holder
agrees that any executive officer of the Company may execute any
agreements and other documents, in such officer's sole and absolute
discretion, for and on behalf of, and in the name of, such Holder, to
extend the Lock-Up Period to the extent required by the National
Association of Securities Dealers, such regulatory authority or such
Affiliate without prior notice to, or further consent by, any Holder. Each
Holder further agrees that any executive officer of the Company may, in
such officer's sole and absolute discretion, extend the Lock-Up Period to
the extent such officer deems necessary or to the extent requested in
writing by the managing underwriter or underwriters. Each Holder
irrevocably constitutes and appoints the Chief Executive Officer of the
Company, with full power of substitution, as such Holder's true and lawful
agent and attorney-in-fact, with full power and authority in such Holder's
name and stead to extend the Lock-Up Period as provided in this Section
5(b).
4
(c) Leak-Out. No Registrable Stock may be sold, publicly or
otherwise, for a period of three months from the date of effectiveness of
the registration statement in which such Registrable Stock is included,
and commencing on the business day immediately following the expiration of
such three-month period, no more than five percent (5%) of such
Registrable Stock may be sold publicly in any monthly period for the next
20 consecutive months (as applicable to such Registrable Stock, the
"Leak-Out Period"). Each Holder agrees that any Registrable Stock sold
during the Leak-Out Period applicable to such Registrable Stock will only
be sold in "broker's transactions" as such term is defined in Rule 144
under the 1933 Act. Each Holder agrees that it will not engage in any
short selling of any Registrable Stock during the Leak-Out Period
applicable to such Registrable Stock.
(d) Waiver of Lock-Up/Leak-Out Provisions. Any one or more of the
restrictions set forth in this Section 5: (i) may be waived by the board
of directors of the Company if it determines in good faith and in the
exercise of its fiduciary duties that such waiver would be in the best
interests of the Company and its stockholders for any valid business
purpose, including, without limitation, to increase the liquidity of the
Common Stock; and (ii) will be null and void upon the consummation of any
tender offer to purchase all or substantially all of the Company's issued
and outstanding securities or any merger, consolidation or other
reorganization of the Company with or into an unaffiliated Person if such
transaction is approved by the affirmative vote of the requisite number of
record and beneficial owners of the Company's then outstanding and
entitled to vote on such transaction.
6. Indemnification and Contribution.
(a) Indemnification by the Company. The Company agrees to indemnify,
to the full extent permitted by law, each Holder, its directors, officers
and agents and each Person who controls such Holder (within the meaning of
the 0000 Xxx) against all Losses caused by any untrue or alleged untrue
statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or any omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statement therein (in case of a prospectus or
preliminary prospectus, in the light of the circumstances under which they
were made) not misleading. The Company will also indemnify any
underwriters of the Registrable Stock, their officers and directors and
each Person who controls such underwriters (within the meaning of the 0000
Xxx) to the same extent as provided above with respect to the
indemnification of the selling Holders.
(b) Indemnification by Holders. In connection with any registration
statement in which a Holder is participating, each such Holder will
furnish to the Company in writing such information with respect to such
Holder as the Company reasonably requests for use in connection with any
such registration statement or prospectus and agrees to indemnify, to the
full extent permitted by law, the Company, its directors, officers and
agents and each Person who controls the Company (within the meaning of the
0000 Xxx) against any Losses resulting from any untrue or alleged untrue
statement of material fact or any omission or alleged omission of a
material fact required to be stated in the registration statement,
prospectus or preliminary prospectus or any amendment thereof or
5
supplement thereto or necessary to make the statements therein (in the
case of a prospectus or preliminary prospectus, in the light of the
circumstances under which they were made) not misleading, to the extent,
but only to the extent, that such untrue statement or omission is
contained in any information with respect to such Holder so furnished in
writing by such Holder. Notwithstanding the foregoing, the liability of
each such Holder under this Section 6(b) will be limited to an amount
equal to the initial public offering price of the Registrable Stock sold
by such Holder, unless such liability arises out of or is based on gross
negligence or willful misconduct of such Holder.
(c) Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder agrees to give prompt written notice to the
indemnifying party after the receipt by such Person of any written notice
of the commencement of any action, suit, proceeding or investigation or
threat thereof made in writing for which such Person will claim
indemnification or contribution pursuant to this Agreement and, unless in
the reasonable judgment of such indemnified party a conflict of interest
may exist between such indemnified party and the indemnifying party with
respect to such claim, permit the indemnifying party to assume the defense
of such claims with counsel reasonably satisfactory to such indemnified
party. Whether or not such defense is assumed by the indemnifying party,
the indemnifying party will not be subject to any liability for any
settlement made without its consent (which consent shall be in the
indemnifying party's sole discretion if the indemnifying party is solely
liable for all Losses in connection with such claim, and which consent
shall not be unreasonably withheld if both the indemnifying party and the
indemnified party are liable for Losses in connection with such claim).
Failure by such Person to provide said notice to the indemnifying party
shall itself not create liability except to the extent of any injury
caused thereby. No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim
or litigation. If the indemnifying party is not entitled to, or elects not
to, assume the defense of a claim, it will not be obligated to pay the
fees and expenses of more than one counsel with respect to such claim,
unless in the reasonable judgment of any indemnified party a conflict of
interest may exist between such indemnified party and any other such
indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels.
(d) Contribution. If for any reason the indemnity provided for in
this Section 6 is unavailable to, or is insufficient to hold harmless, an
indemnified party, then the indemnifying party shall contribute to the
amount paid or payable by the indemnified party as a result of such Losses
(i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party on the one hand and the indemnified
party on the other hand, or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party on the one hand and the indemnified
party on the other hand but also the relative fault of the indemnifying
party and the indemnified party as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference
6
to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified parties;
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable
by a party as a result of the Losses referred to above shall be deemed to
include, subject to the limitations set forth in Section 6(c), any legal
or other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 0000 Xxx) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
If indemnification is available under this Section 6, the indemnifying parties
shall indemnify each indemnified party to the full extent provided in Sections
6(a) and 6(b) without regard to the relative fault of said indemnifying party or
indemnified party or any other equitable consideration provided for in this
Section 6.
7. Participation in Underwritten Registrations. No Holder may participate
in any underwritten registration hereunder unless such Holder (a) agrees to sell
such Holder's securities on the basis provided in any underwriting arrangements
approved by the Holders entitled hereunder to approve such arrangements, and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
8. Rule 144. After a registration statement has been filed under the 1933
Act and declared effective by the Commission, the Company covenants that it will
file the reports required to be filed by it under the 1933 Act and the
Securities Exchange Act of 1934, as amended, and the rules and regulations
adopted by the Commission thereunder; and it will take such further action as
any Holder may reasonably request, all to the extent required from time to time
to enable such Holder to sell Registrable Stock without registration under the
1933 Act within the limitation of the exemptions provided by (a) Rule 144 under
the 1933 Act, as such Rule may be amended from time to time; or (b) any similar
rule or regulation hereafter adopted by the Commission. Upon the request of any
Holder, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
9. Transfer of Registration Rights. The registration rights of any Holder
under this Agreement with respect to any Registrable Stock may not be
transferred to any third Person other than to an affiliate of such Holder;
provided, however, that such transfer to an affiliate must be effected in
accordance with applicable securities laws; further provided, that the
transferring Holder shall give the Company written notice at or prior to the
time of such transfer stating the name and address of the transferee and
identifying the securities with respect to which the rights under this Agreement
are being transferred; further provided, that such transferee shall agree in
writing, in form and substance satisfactory to the Company in its sole and
absolute discretion, to
7
be bound as a Holder by all of the provisions of this Agreement; and further
provided, that such assignment shall be effective only if immediately following
such transfer the further disposition of such securities by such transferee is
restricted under the 1933 Act. Except as set forth in this Section 9, a transfer
of Registrable Stock shall cause such Registrable Stock to lose such status.
10. Mergers, Etc. The Company will not, directly or indirectly, enter into
any merger, consolidation or reorganization in which the Company will not be the
surviving corporation unless the proposed surviving corporation, prior to such
merger, consolidation or reorganization, agrees in writing to assume the
obligations of the Company under this Agreement, and for that purpose references
hereunder to "Registrable Stock" shall be deemed to be references to the
securities the Holders would be entitled to receive in exchange for Registrable
Stock under any such merger, consolidation or reorganization; provided, however,
that the provisions of this Section 10 shall not apply in the event of any
merger, consolidation or reorganization in which the Company is not the
surviving corporation if each Holder is entitled to receive in exchange for its
Registrable Stock consideration consisting solely of (a) cash; (b) securities of
the acquiring corporation which may be immediately sold to the public without
registration under the 1933 Act; or (c) securities of the acquiring corporation
which the acquiring corporation has agreed to register within 90 days of
completion of the transaction for resale to the public pursuant to the 1933 Act.
11. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to its securities which is inconsistent
with the rights granted to the Holders in this Agreement.
(b) Notices. All notices and other communications under this
Agreement must be in writing and will be deemed given (i) when delivered
personally; (ii) on the fifth business day after being mailed by certified
mail, return receipt requested; (iii) the next business day after delivery
to a recognized overnight courier; or (iv) upon transmission and
confirmation of receipt by a facsimile operator if sent by facsimile, to
the parties at the following addresses or facsimile numbers (or to such
other address or facsimile number as such party may have specified by
notice given to the other party pursuant to this provision):
with copies (which will not
if to the Company: constitute notice) to:
c/o Vsource, Inc. Xxxxxx & Xxxx, L.L.P.
0000 Xxxxxxx Xxxxxx, Xxxxx 000 0000 Xxxx Xxxxxx, Xxxxx 0000
Xx Xxxxx, Xxxxxxxxxx 00000 Xxxxxx, Xxxxx 00000
Attention: General Counsel Attention: I. Xxxxx Xxxxxxxx
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
8
with copies (which will not
if to the Stockholder: constitute notice) to:
Surgical Ventures, Inc. Xxxx & Associates
P.O. Box 9330 13025 Xxxxxxxxx St., Suite 000
Xxxxxx Xxxxx Xx, Xxxxxxxxxx 00000 Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, M.D. Attention: Xxxxxxx X. X. Xxxx
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
Any such notice or other communication will be deemed to have been given
and received (whether actually received or not) on the day it is
personally delivered or delivered by courier or overnight delivery service
or sent by telecopy or, if mailed, when actually received.
(c) Attorneys' Fees and Costs. If attorneys' fees or other costs are
incurred to secure performance of any obligations hereunder, or to
establish damages for the breach thereof or to obtain any other
appropriate relief, or to defend against any of the foregoing actions, the
prevailing party will be entitled to recover reasonable attorneys' fees
and costs incurred in connection therewith.
(d) Severability. The invalidity or unenforceability of any
provision of this Agreement will not affect the validity or enforceability
of any other provision of this Agreement, each of which will remain in
full force and effect, so long as the economic or legal substance of the
transactions contemplated by this Agreement is not affected in a manner
materially adverse to any party, it being intended that all of the rights
and privileges of the Holders shall be enforceable to the fullest extent
permitted by Law.
(e) Counterparts. This Agreement may be executed in one or more
counterparts (including by facsimile or portable document format (.pdf))
for the convenience of the parties hereto, each of which will be deemed an
original, but all of which together will constitute one and the same
instrument.
(f) Interpretation. The section headings contained in this Agreement
are solely for the purpose of reference, are not part of the agreement of
the parties and will not in any way affect the meaning or interpretation
of this Agreement.
(g) Binding Effect; Assignment. Except as otherwise expressly
provided herein, this Agreement will be binding upon and inure to the
benefit of the parties and their respective successors and assigns.
(h) Enforceability. This Agreement shall remain in full force and
effect notwithstanding any breach or purported breach of or relating to
the Purchase Agreement.
(i) Entire Agreement. This Agreement, together with the Purchase
Agreement, contains the entire understanding of the parties relating to
the subject matter hereof and supersedes all prior written or oral and all
contemporaneous oral agreements and understandings relating to the subject
matter hereof. The recitals to this Agreement are hereby incorporated by
reference into and made a part of this Agreement for all purposes.
9
(j) Amendments and Waivers. The provisions of this Agreement may not
be amended, supplemented or modified, and waivers or consents to
departures from the provisions hereof may not be given, unless the Company
has obtained the written consent of the Holders of at least a majority of
the Registrable Stock then outstanding affected by such amendment,
supplement, modification, waiver or departure.
(k) Remedies. Each Holder, in addition to being entitled to exercise
all rights granted by Law, including recovery of damages, will be entitled
to specific performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by the Company of the provisions of
this Agreement, and hereby agrees to waive (to the extent permitted by
law) the defense in any action for specific performance that a remedy of
law would be adequate.
(l) GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF
DELAWARE, WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW RULE OR PRINCIPLE
THAT MIGHT RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
(m) Drafting. The language in all parts of this Agreement will be
interpreted, in all cases, according to its fair meaning and not for or
against any party hereto. Each party acknowledges that it and its legal
counsel have reviewed and revised this Agreement and that the normal rule
of construction to the effect that any ambiguities are to be resolved
against the drafting party will not be employed in the interpretation of
this Agreement.
(n) Usage. Whenever the plural form of a word is used in this
Agreement, it will include the singular form of that word. Whenever the
singular form of a word is used in this Agreement, it will include the
plural form of that word. The term "or" will not be interpreted as
excluding any of the items described. The term "include" or any derivative
of such term does not mean that the items following such term are the only
types of such items.
(o) No Third Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto, and nothing expressed or implied will give
or be construed to give any other Person any legal or equitable rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
THE COMPANY:
VSOURCE, INC.
By: __________________________________________
Name: Xxxxx Xxxxxxxxxx
Title: President and co-Chief Executive Officer
THE STOCKHOLDER:
SURGICAL VENTURES, INC.
By: __________________________________________
Name: Xxxxx X. Xxxxxx, M.D.
Title: President
[Signature Page to Registration Rights Agreement]
EXHIBIT E
FORM OF ASSIGNMENT OF GP INTEREST
This Assignment of GP Interest (this "Assignment") is made and entered
into as of __________ ___, 2006, by and between Surgical Ventures, Inc., a
California corporation ("Assignor"), and Del Mar GenPar, Inc., a Nevada
corporation ("Assignee"), in connection with that certain Partnership Interest
Purchase Agreement dated as of December ___, 2005 (the "Purchase Agreement"), by
and among Assignee; Del Mar Acquisition, Inc., a Nevada corporation; Assignor;
and Xxxxx X. Xxxxxx, M.D., an individual residing in the State of California.
Capitalized terms used herein that are not otherwise defined have the meanings
ascribed to such terms in the Purchase Agreement.
W I T N E S S E T H:
WHEREAS, Assignor is the owner of the GP Interest;
WHEREAS, pursuant to the Purchase Agreement, Assignor has agreed to sell,
transfer and convey to Assignee, and Assignee has agreed to acquire from
Assignor, the GP Interest;
WHEREAS, in connection with such sale, transfer and conveyance, Assignor
desires to assign the GP Interest to Assignee, and Assignee desires to accept
such assignment, pursuant to the terms and provisions provided herein;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. Assignor assigns, transfers and conveys to Assignee the GP Interest,
including all of Assignor's rights and interests as an equityholder of the
Partnership allocable or attributable to the GP Interest and its proportionate
right, title and interest in and to the business, properties and assets of the
Partnership and to the capital, distributions, profits and losses of the
Partnership or its successors, allocable or attributable to the GP Interest, an
equityholder of the Partnership.
2. This Assignment and the covenants, obligations, undertakings, rights
and benefits hereof shall be binding upon, and shall inure to the benefit of,
the respective parties hereto and their respective successors and assigns.
3. This Assignment may be executed in one or more counterparts (including
by facsimile or portable document format (.pdf)) for the convenience of the
parties hereto, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
4. Each party agrees to execute any and all documents and to perform such
other acts as the other party may reasonably request to further the purposes of
this Assignment and the transactions contemplated hereby.
1
5. The recitals set forth in this Assignment are hereby incorporated into
and made a part of this Assignment for all purposes.
6. THIS ASSIGNMENT WILL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT RESULT IN THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
EXECUTED AND DELIVERED to be effective as of the date first written above.
ASSIGNOR:
SURGICAL VENTURES, INC.
By: _________________________________________
Name: Xxxxx X. Xxxxxx, M.D.
Title: President
ASSIGNEE:
DEL MAR GENPAR, INC.
By: _________________________________________
Name: Xxxxx Xxxxxxxxxx
Title: President and CEO
[Signature Page to Assignment of GP Interest]
EXHIBIT F
FORM OF ASSIGNMENT OF LP INTEREST
This Assignment of LP Interest (this "Assignment") is made and entered
into as of __________ ___, 2006, by and between Surgical Ventures, Inc., a
California corporation ("Assignor"), and Del Mar Acquisition, Inc., a Nevada
corporation ("Assignee"), in connection with that certain Partnership Interest
Purchase Agreement dated as of December ___, 2005 (the "Purchase Agreement"), by
and among Del Mar GenPar, Inc., a Nevada corporation; Assignee; Assignor; and
Xxxxx X. Xxxxxx, M.D., an individual residing in the State of California.
Capitalized terms used herein that are not otherwise defined have the meanings
ascribed to such terms in the Purchase Agreement.
W I T N E S S E T H:
WHEREAS, Assignor is the owner of the LP Interest;
WHEREAS, pursuant to the Purchase Agreement, Assignor has agreed to sell,
transfer and convey to Assignee, and Assignee has agreed to acquire from
Assignor, the LP Interest;
WHEREAS, in connection with such sale, transfer and conveyance, Assignor
desires to assign the LP Interest to Assignee, and Assignee desires to accept
such assignment, pursuant to the terms and provisions provided herein;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. Assignor assigns, transfers and conveys to Assignee the LP Interest,
including all of Assignor's rights and interests as an equityholder of the
Partnership allocable or attributable to the LP Interest and its proportionate
right, title and interest in and to the business, properties and assets of the
Partnership and to the capital, distributions, profits and losses of the
Partnership or its successors, allocable or attributable to the LP Interest, an
equityholder of the Partnership.
2. This Assignment and the covenants, obligations, undertakings, rights
and benefits hereof shall be binding upon, and shall inure to the benefit of,
the respective parties hereto and their respective successors and assigns.
3. This Assignment may be executed in one or more counterparts (including
by facsimile or portable document format (.pdf)) for the convenience of the
parties hereto, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
4. Each party agrees to execute any and all documents and to perform such
other acts as the other party may reasonably request to further the purposes of
this Assignment and the transactions contemplated hereby.
1
5. The recitals set forth in this Assignment are hereby incorporated into
and made a part of this Assignment for all purposes.
6. THIS ASSIGNMENT WILL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING
EFFECT TO ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT RESULT IN THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
EXECUTED AND DELIVERED to be effective as of the date first written above.
ASSIGNOR:
SURGICAL VENTURES, INC.
By: ____________________________________
Name: Xxxxx X. Xxxxxx, M.D.
Title: President
ASSIGNEE:
DEL MAR ACQUISITION, INC.
By: ____________________________________
Name: Xxxxx Xxxxxxxxxx
Title: President and CEO
[Signature Page to Assignment of LP Interest]
EXHIBIT G
FORM OF MANAGEMENT SERVICES AGREEMENT
This Management Services Agreement (this "Agreement") is made and entered
into effective as of __________ ___, 2006 (the "Effective Date"), by and between
Elite Surgical Centers, Del Mar L.P., a California limited partnership doing
business as Elite Surgical Centers, Del Mar (the "Partnership"), and Surgical
Center Management, Inc., a Nevada corporation (the "Manager"), in connection
with that certain Partnership Interest Purchase Agreement dated as of December
___, 2005 (the "Purchase Agreement"), by and among Del Mar GenPar, Inc., a
Nevada corporation and an Affiliate of the Manager ("GenPar"); Del Mar
Acquisition, Inc., a Nevada corporation and an Affiliate of the Manager ("Newco"
and, together with GenPar, the "Buyers"); Surgical Ventures, Inc., a California
corporation and the general partner of the Partnership (the "Seller"); and Xxxxx
X. Xxxxxx, M.D., an individual residing in the State of California and the sole
stockholder of the Seller ("Xxxxxx").
RECITALS
A. The Partnership is the owner and operator of the Medicare certified
ambulatory surgical center known as "Elite Surgical Centers, Del Mar" located at
00000 Xx Xxxxxx Xxxx, Xxxxx 00, Xxx Xxxxx, XX 00000 (the "Surgery Center"); and
B. Manager is in the business of furnishing management and support
services to ambulatory surgery centers; and
C. On December ___, 2005, the Buyers entered into the Purchase Agreement
with the Seller and Xxxxxx to acquire controlling ownership of the Partnership
and the Surgery Center; and
D. The Partnership desires to engage Manager, and Manager desires to
furnish to the Partnership, the management and support services described in
this Agreement for the purpose of assisting the Partnership in providing quality
health care services to patients of the Surgery Center, upon the terms and
subject to the conditions set forth in this Agreement.
NOW, THEREFORE, for and in consideration of the mutual representations,
warranties, agreements, and covenants in this Agreement, and other good and
valuable consideration exchanged between the parties, the receipt and
sufficiency of which are hereby acknowledged, the parties intending to be
legally bound agree as follows:
AGREEMENTS
1. DEFINITIONS. As used in this Agreement, the terms defined in Section
10(o) have the meanings ascribed to them therein (unless specifically defined or
the context clearly requires otherwise). Capitalized terms used in this
Agreement that are not otherwise defined have
1
the meanings ascribed to them in the Purchase Agreement. Other terms may be
defined elsewhere in this Agreement and have the meanings so ascribed to them.
2. RELATIONSHIP OF PARTIES.
(a) APPOINTMENT AS MANAGER. Upon the terms and subject to the
conditions set forth in this Agreement, the Partnership hereby grants, and
Manager hereby accepts, the sole and exclusive right and obligation to furnish
or perform, or arrange for the furnishing or performance of, the Management
Services (as defined in Section 3(a) below) during the Term (as defined in
Section 5(a) below). Subject to the authority and responsibility reserved by the
Partnership under Section 3, the Partnership authorizes Manager to furnish or
perform, or arrange for the furnishing or performance of, the Management
Services in whatever manner Manager reasonably determines is appropriate under
the circumstances. The Partnership will not interfere with or prevent, or act in
any way that could reasonably be foreseen to interfere with or prevent, Manager
from carrying out its responsibilities under this Agreement.
(b) PARTNERSHIP APPROVAL. For purposes of this Agreement, when any
approval, consent, waiver, notice, or other action or decision is required by or
from the Partnership, the term "Partnership" means the Governing Board. If there
is no duly constituted Governing Board or the Governing Board in office fails or
refuses to act within a reasonable time period under the circumstances of the
applicable action or decision, Manager may rely upon the action or decision of
the general partner of the Partnership.
(c) INDEPENDENT CONTRACTORS. The Partnership and Manager intend to
act and perform under this Agreement as independent contractors with respect to
each other. Neither of them will have or exercise any control or direction over
the method by which the other party carries out its responsibilities under this
Agreement. This Agreement is not intended to create any partnership, joint
venture, agency, or employment relationship between the parties or any of their
respective employees, agents, independent contractors, or representatives.
(d) NO PAYMENT FOR REFERRALS. The parties agree that the benefits to
Manager under this Agreement do not require, are not payment or compensation
for, in cash or in kind, and are not in any way contingent upon, the admission,
referral, or any other arrangement for the provision of any item or service
offerred by Manager to the Partnership or any patients of the Surgery Center.
(e) USE OF NAME, LOGOS, ETC. During the Term, Manager may use all
the names, trademarks, logos, and symbols of the Partnership identifying the
Surgery Center, including without limitation, the right to represent to the
general public and the health care industry specifically that Manager manages
the Surgery Center.
(f) MANAGER'S COMPETITIVE ACTIVITIES. The Partnership acknowledges
that Manager and its Affiliates are currently in the business of developing,
acquiring, owning, and operating ambulatory surgery centers and other health
care facilities and providing ambulatory surgery center development and
management services to the general public apart from the Management Services
that Manager is furnishing the Partnership under this Agreement.
2
Nothing in this Agreement will prohibit Manager or any of its Affiliates from
developing, owning, or operating ambulatory surgery centers or other health care
facilities or from providing ambulatory surgery center development and
management services to other Persons.
3. MANAGEMENT SERVICES.
(a) GENERAL DESCRIPTION. Subject to the authority and responsibility
reserved by the Partnership under this Section 3, Manager will, for the account
of and in the name and on behalf of the Partnership, furnish or perform, or
arrange for the furnishing or performance of, the following management and
support services described in this Section 3(a) (the "Management Services"):
(i) GENERAL OPERATIONAL. Manager will furnish the basic
day-to-day management and support services relating to financial and
operating matters as reasonably necessary for the Partnership to conduct
its business of owning and operating the Surgery Center.
(ii) GOVERNMENTAL AUTHORIZATIONS. Manager will assist the
Partnership in obtaining and maintaining, in the name of and on behalf of
the Partnership, all necessary Governmental Authorizations required for
the Surgery Center to be in compliance with Applicable Laws.
(iii) CERTIFICATIONS AND ACCREDITATIONS. Manager will assist
the Partnership in obtaining and maintaining all appropriate
certifications and accreditations reasonably available to the Surgery
Center.
(iv) CONDITION OF SURGERY CENTER. Manager will maintain the
equipment and facilities of the Surgery Center in accordance with
applicable industry and accreditation standards.
(v) OPERATING PLAN. For each full or partial fiscal year of
the Partnership, Manager will prepare and deliver to the Partnership a
proposed annual operating plan for the Surgery Center reflecting in
reasonable detail the anticipated revenues and expenses, capital
expenditures, and sources and uses of capital, together with any
operational goals and objectives, for the Surgery Center (the "Operating
Plan"). Manager must prepare and deliver the Operating Plan for the fiscal
year of the Partnership ending December 31, 2006, within 30 days following
the Effective Date. The Partnership and Manager will each use commercially
reasonable efforts to finalize the Operating Plan for the 2006 fiscal year
prior to March 31, 2006. During the remainder of the Term, Manager will
prepare and deliver the proposed Operating Plan for each of the following
fiscal years of the Partnership at least 60 days prior to the expiration
of the current fiscal year. Manager and the Partnership will each use
commercially reasonable efforts to finalize the Operating Plan with the
Partnership's approval for each of the subsequent fiscal years prior to
January 1 of the applicable fiscal year. If the Partnership and Manager
are unable to agree within the time period provided on a proposed
Operating
3
Plan, then with respect to the disputed items therein only, the same items
in the last approved Operating Plan must be used until otherwise agreed.
(vi) SURGERY CENTER STAFF. Manager will furnish the following
staff to the Surgery Center (the "Surgery Center Staff"). All the Surgery
Center Staff will be employees or independent contractors of Manager or an
Affiliate, as it determines in its sole discretion. Manager will be solely
responsible for selecting, hiring or otherwise engaging, supervising,
promoting, discharging, terminating, and replacing the Surgery Center
Staff. The Surgery Center Staff may be furnished on either a full or
part-time basis as determined to be appropriate by Manager for the Surgery
Center under the circumstances. No employees or independent contractors of
the Partnership may be employed or engaged by the Partnership to furnish
any services at the Surgery Center without Manager's prior approval.
(A) EXECUTIVE DIRECTOR. An executive director who will
be Manager's representative with responsibility for overseeing the
furnishing of Management Services to the Partnership under this
Agreement and be the liaison for the relationship between Manager
and the Partnership.
(B) OTHER PERSONNEL. A duly qualified administrator,
together with a sufficient number of nurses, nurse practioners,
physician assistants, medical technicians, and clerical and
administrative personnel.
(vii) MEDICAL DIRECTOR. Manager will assist the medical
director appointed by the Partnership after consulting with Manager (1)
with respect to the hiring, disciplining, and discharging of all
physicians and other clinical personnel employed or engaged in furnishing
services at the Surgery Center, (2) with the provision of clinical staff
orientation and education, (3) to ensure that clinical staff are assigned
duties based on their education, training, competency, and job
descriptions, and (4) with the development and implementation of all
clinical policies and procedures, including patient rights and
patient/staff grievance.
(viii) SYSTEMS. Manager will assist with the selection,
installation, and implementation of billing, collection, accounting and
auditing systems and medical records maintenance.
(ix) INSURANCE. Manager will assist the Partnership in
obtaining and maintaining professional and general liability insurance
coverages with a carrier that meets all statutory requirements to do
business in the State of California with limits consistent with Applicable
Laws.
(x) LEGAL ACTIONS.
(A) Manager will, with approval from the Partnership,
institute, in its own name or in the name of the Partnership as
directed by the Partnership, any and all lawsuits and similar
proceedings necessary or desirable for and in the
4
best interests of the Surgery Center, including without limitation,
defending any claims asserted by any third parties against the
Surgery Center, Manager, the Partnership or the officers, directors,
employees, or any Affiliate of Manager and the Partnership.
(B) Manager will, with approval from the Partnership,
take reasonable and necessary steps to protect, settle, or litigate
to final judgment or other resolution in any appropriate court or
other tribunal any such lawsuit or similar proceeding affecting the
Surgery Center.
(xi) BANK ACCOUNTS; DEPOSITS AND DISBURSEMENTS. Manager will
establish and maintain one or more bank accounts in the name of the
Partnership in which all receipts from the Surgery Center's business
operations must be deposited (the "Bank Accounts"). Manager is authorized
to withdraw funds from the Bank Accounts in connection with any cash
management program followed by Manager and to pay authorized expenses of
the Partnership and the Surgery Center, including without limitation,
payment of any Management Service Fees and Reimbursable Expenses (as
defined in Section 4(b) below) due and payable to Manager under Section 4.
Manager is further authorized to withdraw funds from the Bank Accounts to
comply with contractual obligations to which the Partnership is subject
and, to the extent necessary, to maintain the licensure and accreditation
of the Surgery Center. Manager will have no liability or obligation for
performing any of its responsibilities under this Agreement which involve
making payments to third parties or incurring fees, costs, expenses, or
charges unless the Partnership has sufficient funds available in the Bank
Accounts to pay the third party or reimburse Manager. Subject to the
foregoing, at the direction of the Partnership, Manager will withdraw and
disburse to the Partners any excess funds in the Bank Accounts from time
to time.
(xii) BILLING AND COLLECTION. The Partnership hereby appoints
Manager as the Partnership's agent and attorney-in-fact, with full power
of substitution, for the purpose of billing and collecting from patients
and Third-Party Payors for the medical and related healthcare services
furnished at the Surgery Center. Manager will oversee and supervise all
billing and collection activities for the Surgery Center.
(xiii) FINANCIAL AND OTHER BOOKS AND RECORDS. Manager will
supervise the accounting and bookkeeping services for the Partnership in
the operation of the Surgery Center, including, but not limited to, all
actions necessary to (A) maintain the books of account, including all
journals and ledgers, check register, and payroll records, (B) post all
patient and other charges, including necessary analyses and corrections,
(C) establish adequate receivable, credit and collection policies and
procedures, (D) process vendors' invoices and other accounts payable, (E)
prepare payroll checks from time sheet summaries , (F) prepare monthly
bank reconciliations, and (G) establish patient direct and Third-Party
Payor billing procedures. The books of account for the Surgery Center will
be maintained on an accrual basis in accordance with GAAP consistently
applied.
5
(viv) PERIODIC FINANCIAL STATEMENTS. Manager will prepare and
make available on a regular basis to the Partnership unaudited financial
statements reflecting the operations of the Surgery Center for the
applicable period.
(xv) EQUIPMENT AND SUPPLIES. Manager will purchase or lease,
for the account and in the name and on behalf of the Partnership, the
equipment and supplies necessary for the operation of the Surgery Center
in compliance with Applicable Laws.
(xvi) SERVICE AND OTHER CONTRACTS. Manager will negotiate and
execute, for the account of and in the name and on behalf of the
Partnership, contracts in the usual course of business of the Surgery
Center, including without limitation, linen service contracts, radiology,
laboratory and anesthesia contracts, and contracts of insurance. The
Partnership's prior approval (which will not be unreasonably withheld,
conditioned or delayed) shall be obtained in the event the aggregate
contractual obligation over the term of the contract either exceeds
$50,000.00 or was not contemplated in the applicable Operating Plan.
(xvii) THIRD-PARTY PAYOR CONTRACTS. Manager will negotiate and
execute, for the account of and in the name and on behalf of the
Partnership, contracts for the provision of ambulatory surgery services at
the Surgery Center.
(xviii) COMMUNITY AWARENESS. Manager will develop and
coordinate advertising and promotional materials, internal and external
public relations programs, sales and staff development programs, community
and Third-Party Payor awareness programs, and patient and physician
satisfaction programs.
(xix) OVERSIGHT OF CLINICAL AND QUALITY MANAGEMENT AND
OPERATING STANDARDS. Manager will provide corporate management
infrastructure for clinical care quality assurance and overall operation
of the Surgery Center. Manager will develop and institute standards,
procedures, and policies for admitting, discharging, and treating
patients, for charging patients for services and for collecting the
charges from patients or Third-Party Payors.
(b) EVENTS EXCUSING PERFORMANCE. In addition to any excuse under
Applicable Laws, Manager will not be liable to the Partnership for failure to
perform its obligations under this Agreement arising from any event beyond its
control, regardless of whether foreseeable, including, but not limited to, labor
disturbance, war, fire or other casualty, accident, act of God, governmental act
or regulation, inability to obtain materials, failure of supply, failure of
subcontractors to perform, and any other cause or event reasonably beyond the
control of Manager, regardless of whether similar to the foregoing enumerated
causes and events, for so long as such events or circumstances continue and for
a reasonable period of time thereafter.
(c) USE OF MANAGER'S AFFILIATES. Manager may contract with any of
its Affiliates for the provision of goods or services under this Agreement so
long as (i) the contracted for terms are at least as favorable as those that
would be obtained through an arms'
6
length negotiation with a third-party provider, and (ii) Manager remains fully
liable and responsible for the performance thereof.
(d) COMPLIANCE WITH APPLICABLE LAWS. In furnishing or performing, or
arranging for the furnishing or performing, of the Management Services, Manager
will comply with all Applicable Laws and applicable industry and accreditation
standards.
(e) PARTNERSHIP RESERVED AUTHORITY AND RESPONSIBILITY. Manager
expressly acknowledges and agrees that the Partnership exercises, and at all
times during the Term, will exercise the ultimate control and direction of the
operations of the Surgery Center, including without limitation, all medical and
professional matters of the Surgery Center. Manager will furnish the Management
Services within any reasonable parameters, policies, and procedures adopted by
the Partnership of which Manager has been notified so long as the parameters,
policies, and procedures do not, in Manager's reasonable judgment, jeopardize
the quality of patient care furnished at the Surgery Center or require Manager
or the Partnership to engage in any illegal or unethical acts.
(f) NONSOLICITATION. The Partnership agrees that, during the Term
and for a period of one year after the termination of this Agreement, it will
not, directly or indirectly, employ or solicit for employment, or attempt to
employ or solicit for employment, any Surgery Center Staff or any other
employees of Manager, without receiving Manager's prior written consent. The
Partnership acknowledges that any breach of provisions of this Section 3(f)
would cause immediate and irreparable injury to Manager for which monetary
damages are inadequate, difficult to compute, or both. As such, the Partnership
agrees the provisions of this Section 3(f) may be enforced by specific
performance, in addition to any other available legal or equitable remedy.
(g) NO MANAGER LIABILITY. Notwithstanding any provision of this
Agreement to the contrary, Manager is not, and will not become, responsible for
any of the obligations, liabilities, or debts of the Partnership or the Surgery
Center by virtue of entering into this Agreement or furnishing the Management
Services.
4. MANAGER COMPENSATION AND EXPENSE REIMBURSEMENT.
(a) MANAGEMENT SERVICES FEE.
(i) CALCULATION. As compensation for furnishing or performing,
or arranging for the furnishing or performance of, the Management
Services, the Partnership will pay to Manager a management services fee
(the "Management Services Fee") equal to the greater of (A) $15,000.00 per
month, and (B) 7% of Gross Collections for the applicable month.
As used in this Agreement, the term "Gross Collections" means the total
gross receipts of the Partnership collected from the Surgery Center's
business operations from all sources without any adjustments or deductions
(but excluding capital contributions from the equity holders of the
Partnership or other items generally treated as capital in nature).
7
(ii) PAYMENT. The Management Services Fee for any particular
month is due and payable in arrears no later than the 15th day of the
following month. For example, the Management Services Fee for the month of
February 2006 would be due and payable no later than March 15, 2006. Any
Management Services Fee due for a partial month will be pro-rated based on
the number of days during the month this Agreement was in effect.
(b) REIMBURSABLE EXPENSES.
(i) CALCULATION. In addition to the Management Services Fee,
the Partnership will reimburse Manager, at cost without any markup, for:
(A) The out-of-pocket fees, expenses, costs, and charges
incurred by Manager, for the account of and in the name and on behalf of
the Partnership, in the course of furnishing or performing, or arranging
for the furnishing or performance of, the Management Services;
(B) The direct, out of pocket fees, expenses, costs, and
charges incurred by Manager in the course of furnishing or performing, or
arranging for the furnishing or performance of, the Management Services;
(C) The fairly allocated portion of the fees, expenses,
costs, and charges, including indirect and overhead expenses and
centralized resources that are utilized on a shared basis among the
Surgery Center and other ambulatory surgery centers managed by Manager,
incurred by Manager or any of its Affiliates in furnishing or performing,
or arranging for the furnishing or performance of, the Management Services
(collectively, the "Reimbursable Expenses"). But, the Partnership will not
be obligated to reimburse Manager for any portion of the fees, expenses,
costs, or charges of Manager that were not incurred specifically in
connection with and for the purpose of furnishing the Management Services,
including, but not limited to, Manager's salary and benefits expenses for
its senior executive level management.
(ii) PAYMENT. No less than once each month, Manager will
deliver an invoice to the Partnership for the Reimbursable Expenses
setting forth the amount due, together with a reasonably detailed
description of the items and services included. The Partnership's payment
to Manager of the invoiced Reimbursable Expenses is due and payable no
later than the 15th day following the date of the invoice.
5. TERM AND TERMINATION.
(a) TERM.
(i) INITIAL TERM. Unless extended under this Section 5(a) or
earlier terminated under Section 5(b) of this Agreement, the initial term
of this Agreement is for the period beginning at 12:01 a.m. (Pacific time)
on the next day following the Effective Date and ending at 11:59 p.m.
(Pacific time) on the fifth anniversary of the Effective Date.
8
(ii) RENEWAL TERMS. Beginning with the fifth anniversary of
the Effective Date and continuing with each successive anniversary of the
Effective Date, the term of this Agreement will automatically renew and
extend for additional one year terms, upon the terms and conditions then
in effect, unless either party gives written notice to the other of its
election not to renew at least 90 days prior to the applicable renewal
date. The term of this Agreement, beginning with the Effective Date and
ending with the last date of the initial or any renewal term of this
Agreement, is referred to in this Agreement as the "Term."
(iii) NO SUBSEQUENT AGREEMENTS. If this Agreement is
terminated within one year following the Effective Date, the Partnership
and Manager will not enter into an agreement involving the Management
Services within one year from the effective time of the termination,
unless the new agreement has the same terms, including the same Management
Services Fee and other compensation provisions for the Management
Services.
(b) GROUNDS FOR TERMINATION. This Agreement will terminate upon the
occurrence of any of the following conditions or events:
(i) MUTUAL AGREEMENT. The Partnership and Manager may agree in
writing to terminate this Agreement at any time;
(ii) ADVANCE NOTICE BY MANAGER. Manager may terminate this
Agreement by giving at least six months advance notice to the Partnership
stating the effective time of termination of this Agreement;
(iii) LOSS OF LICENSURE. Manager may terminate this Agreement,
at its sole election, upon the revocation, cancellation, suspension, or
other limitation of or on the Partnership's license to own and operate the
Surgery Center;
(iv) EXCLUSION FROM THIRD-PARTY PAYOR PROGRAMS. Manager may
terminate this Agreement, at its sole election, if the Partnership is
barred or excluded as a provider in Medicare or Medicaid or any other
Third-Party Payor Programs;
(v) TERMINATION FOR INSOLVENCY. By either party upon the
filing of a petition in voluntary bankruptcy or an assignment for the
benefit of creditors by the other party or upon other action taken or
suffered, voluntarily or involuntarily, under any Applicable Laws for the
benefit of debtors by the other party, except for the filing of a petition
in involuntary bankruptcy against the other party which is dismissed
within 60 days thereafter;
(vi) TERMINATION OF BUSINESS ASSOCIATE EXHIBIT. The
Partnership may terminate this Agreement in accordance with the provisions
of Article 4 of the Business Associate Exhibit attached hereto as Exhibit
A;
9
(vii) GOOD REASON BY PARTNERSHIP. The failure or refusal by
Manager to faithfully or diligently perform its responsibilities or
obligations under this Agreement, following written notice to Manager
specifying the grounds for termination and the actions by Manager that
would allow Manager to cure the grounds and avoid termination, and giving
Manager no less than 30 days to complete the actions to the reasonable
satisfaction of the Partnership; or
(viii) GOOD REASON BY MANAGER. The failure or refusal the
Partnership to faithfully or diligently perform its responsibilities or
obligations under this Agreement, following written notice to the
Partnership specifying the grounds for termination and the actions by the
Partnership that would allow the Partnership to cure the grounds and avoid
termination, and giving the Partnership no less than 30 days to complete
the actions to the reasonable satisfaction of Manager.
(c) EFFECTS OF TERMINATION. In addition to the other specified
effects of termination of this Agreement:
(i) In the event the Partnership terminates this Agreement, it
may during any notice period prior to the effective time of termination,
relieve Manager of its regular responsibilities under this Agreement if
there is a reasonably foreseeable risk of serious bodily harm to patients
from Manager continuing to furnish the Management Services during the
notice period.
(ii) After termination, neither party will have any further
rights, duties, or obligations under this Agreement, except as
specifically provided otherwise herein for obligations that survive
termination or are to be performed following termination of this
Agreement. Each party will remain liable and responsible to the other for
all obligations and duties arising or accruing under this Agreement prior
to the effective date of termination and for all acts and omissions of
such party prior to such termination.
6. BOOKS AND RECORDS.
(a) OWNERSHIP OF MANAGER'S BUSINESS RECORDS AND SYSTEMS. All
business records, information, software, and systems of Manager relating to the
furnishing or performance of the Management Services under this Agreement will
remain the property of Manager or the applicable Affiliate, as the case may be;
provided, however, that the Partnership will be entitled, until such time as
such are destroyed in accordance with Section 6(b), upon reasonable written
request, to access such of Manager's business records and systems and make
copies or extracts thereof of any such business records and information.
(b) MAINTENANCE OF RECORDS. Except as otherwise provided in this
Agreement, each party will safeguard all records maintained by it pursuant to
this Agreement for the minimum period required by Applicable Laws from the date
of the last activity recorded in such records and, prior to destruction of any
such records, will give the other party notice of the planned destruction and,
if such other party so elects and Applicable Laws so permit, will deliver the
records to such other party in lieu of destroying them.
10
(c) GOVERNMENT ACCESS TO BOOKS AND RECORDS. Insofar as 42 U.S.C.
Section 1395x(v)(1)(I) is applicable to this Agreement, Manager will comply with
the following statutory requirements governing the maintenance of documentation
to verify the cost of the Management Services furnished under this Agreement:
(i) Until the expiration of four years after the furnishing of
the Management Services under this Agreement, Manager will make available,
upon written request of the Secretary of the United States Department of
Health and Human Services, or upon request of the Comptroller General of
the United States, or any of their duly authorized representatives, this
Agreement, and books, documents, and records of Manager that are necessary
to certify the nature and extent of such costs; and
(ii) If Manager carries out any of its responsibilities under
this Agreement through a subcontract, with a value or cost of $10,000.00
or more over a 12 month period, with an organization related by common
ownership or control, such subcontract must contain a clause to the effect
that, until the expiration of four years after the furnishing of the
Management Services under the subcontract, the related organization must
make available, upon written request of the Secretary of the United States
Department of Health and Human Services, or upon request of the
Comptroller General of the United States, or any of their duly authorized
representatives, the subcontract, and books, documents, and records of
such organization that are necessary to verify the nature and extent of
such costs.
(iii) Nothing in this Section 6(c) will constitute the waiver
of the attorney-client or any similar privilege under Applicable Laws.
7. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF PARTNERSHIP. The
Partnership represents, warrants, and covenants to and with Manager that:
(a) ORGANIZATION. It is a limited partnership duly organized,
validly existing, and in good standing under the Applicable Laws of its state of
formation, with full power and authority to conduct its business as it is now
being conducted.
(b) AUTHORITY. It has the requisite right, power, authority, and
capacity to execute, deliver and perform its obligations under this Agreement.
The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of the Partnership.
(c) LICENSURE. It now possesses, and will continue to possess during
the Term, a valid and unrestricted license to own and operate the Surgery Center
under the laws of the state in which the Surgery Center is located.
(d) NO MEDICARE/MEDICAID EXCLUSION. It has not been excluded,
debarred, or suspended or deemed ineligible to participate in Medicare,
Medicaid, or any other Payor Programs, and is not the subject of any
investigation regarding its participation in Medicare,
11
Medicaid, or any other Payor Programs, and has not been convicted of any crime
relating to any Medicare, Medicaid, or any other Payor Programs.
(e) NO CONFLICT. Neither the making of this Agreement nor its
performance by the Partnership will violate any Applicable Laws to which it is
subject.
8. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF MANAGER. Manager
represents, warrants, and covenants to and with the Partnership that:
(a) ORGANIZATION. It is a corporation duly organized, validly
existing, and in good standing under the Applicable Laws of its state of
formation, with full power and authority to conduct its business as it is now
being conducted.
(b) AUTHORITY. It has the requisite right, power, authority, and
capacity to execute, deliver and perform its obligations under this Agreement.
The execution, delivery and performance of this Agreement have been duly
authorized by all necessary action on the part of Manager.
(c) NO MEDICARE/MEDICAID EXCLUSION. It has not been excluded,
debarred, or suspended or deemed ineligible to participate in Medicare,
Medicaid, or any other Payor Programs, and is not the subject of any
investigation regarding its participation in Medicare, Medicaid, or any other
Payor Programs, and has not been convicted of any crime relating to any
Medicare, Medicaid, or any other Payor Programs.
(d) NO CONFLICT. Neither the making of this Agreement nor its
performance by Manager will violate any Applicable Laws to which it is subject.
9. INDEMNIFICATION.
(a) INDEMNIFICATION BY MANAGER. Manager will indemnify and hold
harmless the Partnership, its Affiliates, and their respective directors,
officers, employees, representatives, agents, and attorneys from, against, for
and in respect of any and all damages, penalties, fines, interest and monetary
sanctions, losses, obligations, liabilities, claims, deficiencies, costs and
expenses, including, without limitation, reasonable attorneys' fees and other
costs and expenses incident to any investigation, claim or Proceeding
(collectively, the "Partnership's Losses") suffered, sustained, incurred, or
required to be paid by any of them in connection with (i) a breach or default of
this Agreement by Manager, including a breach of any representation, warranty,
or covenant made by Manager in or pursuant to this Agreement, or (ii) Manager's
willful misconduct, bad faith, or gross negligence in the performance of any of
its obligations under this Agreement.
(b) INDEMNIFICATION BY PARTNERSHIP. The Partnership will indemnify
and hold harmless Manager and its directors, officers, employees,
representatives, agents, and attorneys from, against, for and in respect of any
and all damages, penalties, fines, interest and monetary sanctions, losses,
obligations, liabilities, claims, deficiencies, costs and expenses, including,
without limitation, reasonable attorneys' fees and other costs and expenses
incident to
12
any investigation, claim or Proceeding (collectively, the "Manager's Losses")
suffered, sustained, incurred, or required to be paid by any of them in
connection with Manager's performance of its obligations under this Agreement
other than Manager's Losses resulting from Manager's willful misconduct, bad
faith or gross negligence in the performance of its obligations under this
Agreement.
(c) NOTICE OF LOSS. Except to the extent set forth in the next
sentence, neither the Partnership nor Manager will have any liability under this
Section 9 with respect to a particular matter unless a notice (the
"Indemnification Notice") setting forth in reasonable detail the breach which is
asserted has been given to the indemnifying party. Notwithstanding the preceding
sentence, failure of the indemnified party to give notice hereunder will not
release the indemnifying party from its obligations under this Section 9, except
to the extent the indemnifying party is actually prejudiced by the failure to
give notice.
(d) RIGHT TO DEFEND.
(i) Upon receipt of notice of any investigation, claim, or
proceeding for which indemnification might be claimed by an indemnified
party, the indemnifying party is entitled to defend, contest, or otherwise
protect against such investigation, claim, or proceeding at its own cost
and expense, and the indemnified party must reasonably cooperate in any
such defense or other action, including the assertion of any counterclaim
or cross claim.
(ii) The indemnified party shall have the right, but not the
obligation, to participate at its own expense in a defense thereof by
counsel of its own choosing, but the indemnifying party is entitled to
control the defense unless the indemnified party has relieved the
indemnifying party from liability with respect to the particular matter or
the indemnifying party fails to assume defense of the matter. If the
indemnifying party fails to defend, contest, or otherwise protect in a
timely manner against any such investigation, claim, or proceeding, the
indemnified party shall have the right, but not the obligation, to defend,
contest, or otherwise protect against the same and make any compromise or
settlement thereof and recover the entire cost thereof from the
indemnifying party including reasonable attorneys' fees, disbursements and
all amounts paid as a result of such investigation, claim, or proceeding
or the compromise or settlement thereof; provided, however, that the
indemnified party must send a written notice to the indemnifying party of
any such proposed settlement or compromise, which settlement or compromise
the indemnifying party may reject, in its reasonable judgment, within 30
days after its receipt of the written notice.
(iii) A failure by the indemnifying party to reject such
settlement or compromise within such 30 day period will be deemed an
acceptance of such settlement or compromise. The indemnified party shall
have the right to effect a settlement or compromise over the objection of
the indemnifying party; provided, however, that if (A) the indemnifying
party is contesting such claim in good faith, or (B) the indemnifying
party has assumed the defense from the indemnified party and the
indemnifying party has a net worth in excess of the amount being sought,
the indemnified party must first waive,
13
in a written instrument reasonably acceptable to the indemnifying party,
any right to indemnity therefore.
(iv) If the indemnifying party undertakes the defense of such
matters, the Indemnified Party will not, so long as the indemnifying party
does not abandon the defense thereof, be entitled to recover from the
indemnifying party any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
the reasonable costs of investigation undertaken by the indemnified party
with the prior written consent of the indemnifying party and other than
such amounts incurred where a conflict of interest is reasonably
determined to exist by the indemnified party such that more than one legal
counsel is reasonably needed.
10. MISCELLANEOUS.
(a) NOTICES. All notices, consents, approvals, requests and other
communications under this Agreement must be in writing and will be deemed given
(a) when delivered personally; (b) on the fifth Business Day after being mailed
by certified mail, return receipt requested; (c) the next Business Day after
delivery to a recognized overnight courier; or (d) upon transmission and
confirmation of receipt by a facsimile operator if sent by facsimile, to the
parties at the following addresses or facsimile numbers (or to such other
address or facsimile number as such party may have specified by notice given to
the other party pursuant to this provision):
with copies (which will not
if to the Partnership: constitute notice) to:
c/o Surgical Ventures, Inc. Xxxx & Associates
P.O. Box 9330 13025 Xxxxxxxxx St., Suite 000
Xxxxxx Xxxxx Xx, Xxxxxxxxxx 00000 Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, M.D. Attention: Xxxxxxx X. X. Xxxx
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
with copies (which will
if to the Manager: not constitute notice) to:
c/o Vsource, Inc. Xxxxxx & Xxxx, L.L.P.
0000 Xxxxxxx Xxxxxx, Xxxxx 000 0000 Xxxx Xxxxxx, Xxxxx 0000
Xx Xxxxx, Xxxxxxxxxx 00000 Xxxxxx, Xxxxx 00000
Attention: General Counsel Attention: I. Xxxxx Xxxxxxxx
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
Any such notice or other communication will be deemed to have been given and
received (whether actually received or not) on the day it is personally
delivered or delivered by courier or overnight delivery service or sent by
telecopy or, if mailed, when actually received.
14
(b) INTERPRETATION. The article and section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and will not in any way affect the meaning or
interpretation of this Agreement.
(c) ENTIRE AGREEMENT; MODIFICATION. This Agreement and the related
documents contained as exhibits and schedules hereto or expressly contemplated
hereby contain the entire understanding of the parties relating to the subject
matter hereof and supersede all prior written or oral and all contemporaneous
oral agreements and understandings relating to the subject matter hereof. The
exhibits, schedules and recitals to this Agreement are hereby incorporated by
reference into and made a part of this Agreement for all purposes. This
Agreement may be amended, supplemented or modified, and any provision hereof may
be waived, only by written instrument making specific reference to this
Agreement signed by the party against whom enforcement is sought.
(d) AMENDMENTS REQUIRED BY PROSPECTIVE LEGAL EVENTS. In the event
any Applicable Laws are enacted or changed in any way that could reasonably be
expected to have a material adverse effect on the practical realization of the
benefits anticipated by one or more parties to this Agreement at the time it was
entered into, the adversely affected party or parties, as the case may be, must
notify the others in writing of such change and the effect thereof. The parties
will promptly begin good faith negotiations to modify this Agreement to reflect
such change. If an agreement on a method for modifying this Agreement is not
reached within 30 days after the date the written notice was received by the
last of the other parties, the matter will be resolved pursuant to the dispute
resolution procedures set forth in Section 10(m). The resolution must be either
to (i) structure an amendment to this Agreement which will leave the parties as
nearly as possible in the same economic position in which they would have been
under the original terms of this Agreement, had the change not occurred; or (ii)
if it is determined that the change is so fundamental that amendment and
continuation of this Agreement is not feasible, structure a termination of this
Agreement that will return the parties as nearly as possible to the economic
position in which they would have been had they not entered into this Agreement,
without altering in a material way the economic obligations or benefits derived
from this Agreement by the parties during the period it was in effect.
(e) BINDING EFFECT; ASSIGNMENT. This Agreement is a contract for the
services of Manager, and Manager may not assign this Agreement without the
Partnership's approval, which may be withheld in the sole discretion of the
Partnership. Subject to the preceding sentence, this Agreement will be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns.
(f) LANGUAGE CONSTRUCTION. The language in all parts of this
Agreement will be interpreted, in all cases, according to its fair meaning and
not for or against any party hereto. Each party acknowledges that it and its
legal counsel have reviewed and revised this Agreement and that the normal rule
of construction to the effect that any ambiguities are to be resolved against
the drafting party will not be employed in the interpretation of this Agreement.
(g) WAIVER OF PROVISIONS. Any waiver of any terms and conditions
hereof must be in writing and signed by all the parties hereto. The waiver of
any of the terms and
15
conditions of this Agreement cannot be construed as a waiver of any other terms
and conditions hereof.
(h) SURVIVAL. All obligations, liabilities, limitations of
liability, disclaimers and other provisions which, by their nature, are intended
to survive the expiration or termination of this Agreement will survive and
remain in effect beyond any expiration or termination thereof, including without
limitation, the obligations, liabilities, limitations of liability, disclaimers
and other provisions set out in the various provisions of Section 6 and Section
9 of this Agreement and this Section 10.
(i) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement will not affect the validity or enforceability of
any other provision of this Agreement, each of which will remain in full force
and effect, so long as the economic or legal substance of the transactions
contemplated by this Agreement is not affected in a manner materially adverse to
any party.
(j) EXPIRATION OF TIME PERIODS. In the event that any date specified
herein is, or that any period specified herein expires on, a Saturday, a Sunday,
or a holiday, then such date or the expiration date of such period, as the case
may be, will be extended to the next succeeding Business Day.
(k) REMEDIES CUMULATIVE. No right or remedy described or provided in
this Agreement or otherwise conferred upon or reserved to any party is intended
to be exclusive or to preclude a party from pursuing other rights and remedies
to the extent available under this Agreement, at law or in equity, and the same
will be distinct, separate and cumulative and may be exercised from time to time
as often as occasion may arise or as such party may deem expedient.
(l) NO OBLIGATION TO THIRD PARTIES. Except as provided otherwise in
Section 9 with respect to indemnification obligations, this Agreement is for the
sole benefit of the parties hereto, and nothing expressed or implied will give
or be construed to give any other Person any legal or equitable rights,
remedies, obligations or liabilities under or by reason of this Agreement.
(m) MANDATORY MEDIATION; BINDING ARBITRATION; GOVERNING LAW; VENUE;
ATTORNEY'S FEES.
(i) THE PARTIES AGREE THAT, EXCEPT FOR INJUNCTIVE OR OTHER
EQUITABLE RELIEF, ANY DISPUTE BETWEEN THEM RELATING TO THIS AGREEMENT, OR
THE BREACH HEREOF, SHALL, IF NEGOTIATIONS AND OTHER DISCUSSIONS FAIL, BE
FIRST SUBMITTED TO MEDIATION IN ACCORDANCE WITH THE PROVISIONS OF THE
COMMERCIAL MEDIATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION ("AAA")
BEFORE RESORTING TO ARBITRATION. THE PARTIES AGREE TO CONDUCT THE
MEDIATION IN GOOD FAITH AND MAKE REASONABLE EFFORTS TO RESOLVE THEIR
DISPUTE BY MEDIATION. THE COMMERCIAL MEDIATION RULES OF THE AAA THEN IN
EFFECT SHALL BE APPLIED. THE PARTIES
16
AGREE TO CONDUCT THE MEDIATION IN SAN DIEGO, CALIFORNIA, OR ANOTHER
MUTUALLY AGREED UPON LOCATION.
(ii) THE PARTIES AGREE THAT, EXCEPT FOR INJUNCTIVE OR OTHER
EQUITABLE RELIEF, ANY DISPUTE BETWEEN THEM RELATING TO THIS AGREEMENT, OR
THE BREACH HEREOF, SHALL BE SUBJECT TO BINDING ARBITRATION, IF THE DISPUTE
IS NOT RESOLVED BY THE MEDIATION REQUIRED UNDER THE PRECEDING SECTION
10(m)(i), IN ACCORDANCE WITH THE PROVISIONS OF THE COMMERCIAL ARBITRATION
RULES OF THE AAA, AND THAT JUDGMENT ON THE AWARD RENDERED BY THE
ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION THEREOF. THE
ARBITRATION SHALL BE HEARD BEFORE ONE (1) ARBITRATOR SELECTED IN
ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES. THE COMMERCIAL
ARBITRATION RULES OF THE AAA THEN IN EFFECT SHALL BE APPLIED. THE PARTIES
AGREE TO CONDUCT THE ARBITRATION IN SAN DIEGO, CALIFORNIA, OR ANOTHER
MUTUALLY AGREED UPON LOCATION.
(iii) THIS AGREEMENT, AND ANY DISPUTE BETWEEN THE PARTIES
RELATING HERETO, WILL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF DELAWARE, WITHOUT
GIVING EFFECT TO ANY CONFLICTS OF LAW RULE OR PRINCIPLE THAT MIGHT RESULT
IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
(iv) If either party appeals the decision of the arbitrator,
the parties agree that the United States District Court for the Southern
District of California, San Diego Division, and the state courts within
San Diego County, California will have exclusive venue and jurisdiction of
same.
(v) The prevailing party in any mediation, arbitration, or
litigation shall be entitled to recover from the other party reasonable
attorney's fees, court costs, and the administrative costs, fees, and
expenses of the AAA, each as applicable, incurred in the same, in addition
to any other relief that may be awarded.
(n) CONFIDENTIALITY. No party hereto will disseminate or release to
any third party any information regarding any provision of this Agreement, or
any financial or business information regarding the other (past, present, or
future) that was obtained by the other in the course of the negotiations of this
Agreement or in the course of the performance of this Agreement, including, but
not limited to, any information relating to the internal operations of the
Partnership with respect to the Surgery Center, without the other party's
written approval; provided, however, the foregoing will not apply to information
which (i) is generally available to the public other than as a result of a
breach of this confidentiality provision; (ii) becomes available on a
non-confidential basis from a source other than the other party or any Affiliate
or agent of the other party, which source was not itself in violation of a
confidentiality agreement by providing such information; (iii) which is required
to be disclosed by Applicable Laws or
17
pursuant to court order; provided, however, that Manager will provide the
Partnership with prompt written notice of the required disclosure and cooperate
with the Partnership in its reasonable efforts to resist or narrow the request
for disclosure; or (iv) except as required in connection with reports or filings
with the United States Securities and Exchange Commission or any applicable
state departments of securities.
(o) CERTAIN DEFINITIONS. As used in this Agreement, the following
terms mean:
"Applicable Laws" means all applicable provisions of constitutions,
statutes, rules, regulations, ordinances, and orders of Governmental
Entities and all orders and decrees of courts, tribunals, and arbitrators
and includes, without limitation, all Health Care Laws.
"Business Day" means any day other than a day on which banks in the
State of California are authorized or obligated to be closed.
"Governing Board" means the governing board of the Partnership duly
elected or appointed pursuant to the terms of the Partnership Agreement
and in office from time to time.
"Medicaid" means any state program pursuant to which health care
providers are paid or reimbursed for care given or goods afforded to
indigent persons and administered pursuant to a plan approved by the
Centers for Medicare and Medicaid Services, or any successor Governmental
Entity exercising similar authority ("CMS"), under Title XIX of the Social
Security Act, as amended.
"Medicare" means any medical program established under Title XVIII
of the Social Security Act, as amended, and administered by CMS.
"Third-Party Payors" means Medicare, Medicaid, CHAMPUS, Blue Cross
or Blue Shield, managed care plans, any other private healthcare insurance
programs or company and any other individual or entity responsible for
payment of ambulatory surgical and related services performed at the
Surgery Center, as well as any future payor of any Third-Party Payor
Programs.
"Third-Party Payor Programs" means Medicare, Medicaid, CHAMPUS,
insurance provided by Blue Cross or Blue Shield, managed care plans, and
any other private health care insurance programs and employee assistance
programs, as well as any future similar programs.
(p) COUNTERPARTS. This Agreement may be executed in one or more
counterparts (including by facsimile or portable document format (.pdf)) for the
convenience of the parties hereto, each of which will be deemed an original, but
all of which together will constitute one and the same instrument.
18
(q) ACKNOWLEDGMENT. The parties to this Agreement agree and
acknowledge that: (i) they have each been independently advised by counsel in
respect of the provisions of this Agreement, or have had an opportunity to be so
advised, and have voluntarily waived their right to have such independent
advice; and (ii) the parties have negotiated the provisions hereof on an equal
footing based on equal bargaining power.
11. HIPAA COMPLIANCE. The parties agree that, in order to comply with the
Health Insurance Portability and Accountability Act of 1996, Public Law 104-191
and regulations promulgated thereunder by the U.S. Department of Health and
Human Services, as may be amended and in effect from time to time ("HIPPA"),
each of them will satisfy its respective requirements and obligations contained
in the Business Associate Exhibit attached hereto as Exhibit A. This Agreement
and the Business Associate Exhibit are intended to be read and construed in
harmony with each other, but in the event any provision in the Business
Associate Exhibit conflicts with any provision in this Agreement, the provisions
in the Business Associate Exhibit will control the matter.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
19
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the Effective Date.
PARTNERSHIP:
ELITE SURGICAL CENTERS, DEL MAR L.P.
By: Surgical Ventures, Inc., a California corporation
Its: General Partner
By: __________________________________
Name: Xxxxx X. Xxxxxx, M.D.
Title: President
EIN: _______________________________________________
MANAGER:
SURGICAL CENTER MANAGEMENT, INC.
By: ________________________________________________
Name: Xxxxx Xxxxxxxxxx
Title: President and CEO
EIN: _______________________________________________
[Signature Page to Management Services Agreement]
EXHIBIT A
BUSINESS ASSOCIATE EXHIBIT
This Business Associate Exhibit (this "Exhibit") supplements and is made
part of the Management Services Agreement to which it is attached as entered
into between the Partnership and the Manager. The Partnership is a "Covered
Entity" and Manager is a "Business Associate" as those terms are defined under
HIPAA. The capitalized terms used in this Exhibit that are not otherwise
specifically defined have the meanings ascribed to them in the Agreement. Other
capitalized terms used in this Exhibit and not defined in the Agreement have the
meanings ascribed to them under HIPAA.
RECITALS
A. The Partnership has engaged Manager under the Agreement to furnish or
perform, or arrange for the furnishing or performance of, the Management
Services which involve the use or disclosure of Protected Health Information (as
defined by 45 C.F.R. Section 160.103) ("PHI"); and
B. The Partnership is required to comply with HIPAA in the conduct of its
business; and
C. The parties desire to set forth the permitted and prohibited uses of
PHI that is provided by, or created or received by, the Manager from or on
behalf of the Partnership; and
D. The parties desire to set forth their mutual responsibilities with
respect to the handling of Designated Record Sets (as defined by 45 C.F.R.
Section 164.501); and
E. The parties desire to set forth the requirements for accessing,
creating, obtaining or maintaining Electronic Protected Health Information (as
defined by 45 C.F.R. Section 160.103) ("ePHI").
NOW, THEREFORE, in consideration of the mutual promises and obligations
set forth herein, and other good and valuable consideration, the sufficiency and
receipt of which is hereby acknowledged, The Partnership and Manager agree as
follows:
ARTICLE 1
RESPONSIBILITIES OF BUSINESS ASSOCIATE
1.1 PRIVACY OF PHI. With respect to the use or disclosure of PHI, the Manager
agrees:
(a) Not to use or further disclose any PHI other than as permitted or
required by this Exhibit or as otherwise required by Applicable
Laws;
(b) Not to use or further disclose any PHI in a manner that would
violate any Applicable Laws (including, but not limited, to HIPAA)
if done by the
1
Partnership, except that Manager may use or disclose PHI if
necessary for the proper management and administration of the
Partnership or to carry out the legal responsibilities of Manager,
provided that the disclosure is required by Applicable Laws or the
Manager obtains reasonable assurances from the Person to whom the
information is disclosed that it will be held confidentially and
used or further disclosed only as required by Applicable Laws or for
the purpose for which it was disclosed to the Person;
(c) To use commercially reasonable efforts to safeguard and maintain the
security and privacy of the PHI and to prevent the use or disclosure
of PHI other than as provided for in this Exhibit;
(d) To report to the Partnership's designated Privacy Officer any use or
disclosure of the PHI that is not permitted or required by this
Exhibit of which Manager becomes aware within a commercially
reasonable time after Manager's discovery of such unauthorized use
or disclosure;
(e) To establish procedures for mitigating, to the greatest extent
possible, any negative or HARMFUL effects from any improper use or
disclosure of PHI that Manager reports to the Partnership;
(f) To ensure that all agents and subcontractors of Manager that
receive, use or have access to PHI under this Exhibit agree to
adhere to the same restrictions and conditions that apply to Manager
with respect to such PHI as set forth in this Exhibit;
(g) To make available all records, books, agreements, policies,
procedures and other relevant documents in any media relating to the
use or disclosure of PHI to the Partnership and to permit inspection
and copying of the same in accordance with Applicable Laws
(including, but not limited to, HIPAA), subject to attorney-client
and other applicable privileges;
(h) Subject to attorney-client and other applicable privileges, to make
available all records, books, agreements, policies, procedures and
other relevant documents in any media relating to the use or
disclosure of PHI available to the Secretary of the United States
Department of Health and Human Services, or designates thereof, for
purposes of determining the Partnership's compliance with Applicable
Laws (including, but not limited to, HIPAA); provided, however, that
in all events, Manager shall immediately notify the Partnership upon
receipt by Manager of any such request, and subject to
attorney-client and other applicable privileges, shall provide the
Partnership with a copy thereof and of all materials so disclosed;
(i) Subject to applicable privileges or Applicable Laws, within 20 days
after receiving a written request from the Partnership, to provide
to the Partnership such information as requested by the Partnership
to permit it to respond to a
2
request by an individual for an accounting of disclosures of the
individual's PHI in accordance with 45 C.F.R. Section 164.528;
(j) Within 30 days after termination of the Agreement and this Exhibit,
Manager shall return or destroy all PHI relating to the Partnership
that the Manager maintains in any form. If such return or
destruction is not feasible, then Manager shall extend the
protections of this Exhibit to the PHI remaining within its control
or possession, and shall, upon demand, certify in writing to the
Partnership that Manager has not used or disclosed the retained PHI
in any manner inconsistent with the protections provided by this
Exhibit;
(k) Subject to applicable privileges or Applicable Laws, to disclose to
its subcontractors, agents or other third-parties, and request from
the Partnership, only the minimum PHI necessary to perform or
fulfill a specific function required or permitted under the
Agreement or this Exhibit; and
(l) To incorporate any amendments or corrections to such PHI when
notified by Partnership.
1.2 SECURITY OF ePHI. With respect to the use or disclosure of ePHI, the
Manager agrees:
(a) To implement administrative, physical and technical safeguards that
reasonably and appropriately protect the confidentiality, integrity
and availability of ePHI that it creates, receives, maintains or
transmits on behalf of the Partnership, as required by 45 C.F.R.
Part 164, Subpart C;
(b) Promptly report to the Partnership any "Security Incident" of which
it becomes aware (as such term is defined by 45 C.F.R. Section
164.304). The Security Incident report shall include, but not be
limited to, the following information:
(i) The date of the Security Incident;
(ii) The scope of the Security Incident;
(iii) The Manager's response to the Security Incident;
(iv) The identification of the party responsible for causing the
Security Incident, if known; and
(v) Any additional information the Partnership may request in
connection with the Security Incident; and
(c) Ensure that any agent, including a subcontractor, to whom it
provides ePHI agrees to implement reasonable and appropriate
safeguards to protect ePHI.
3
1.3 STATE PRIVACY LAWS. Manager agrees to comply with all relevant state
privacy laws relating to protected health information; provided, however,
that in the event state privacy laws are contrary to HIPAA, HIPAA shall
govern Manager's responsibilities.
ARTICLE 2
RESPONSIBILITIES OF COVERED ENTITY
2.1 RESPONSIBILITIES OF THE COVERED ENTITY. With regard to the use or
disclosure of PHI by the Manager, the Partnership hereby agrees:
(a) To inform Manager of any changes in the form of Notice of Privacy
Practices (the "Privacy Notice") that the Partnership provides to
individuals pursuant to 45 C.F.R. Section 164.520, and provide the
Manager a copy of the Privacy Notice currently in use;
(b) To inform Manager of any changes in, or withdrawal of, the consent
or authorization provided by the Partnership by individuals pursuant
to 45 C.F.R. Section 164.506 or Section 164.508;
(c) To notify Manager, in writing and in a timely manner, of any
arrangements permitted or required of the Partnership under 45
C.F.R. part 160 and 164 that may impact in any manner the use and/or
disclosure of PHI by the Manager under this Exhibit, including, but
not limited to, restrictions on uses and/or disclosures of an
individual's PHI as provided for in 45 C.F.R. Section 164.522 and
agreed to by the Partnership; and
(d) To allow Manager may make any use and/or disclosure of PHI permitted
under 45 C.F.R. Section 164.512, except uses or disclosure for
research are not permitted without prior approval by the
Partnership.
ARTICLE 3
RESPONSIBILITIES OF PARTIES WITH RESPECT TO HANDLING OF THE
DESIGNATED RECORD SET
3.1 RESPONSIBILITIES OF BUSINESS ASSOCIATE WITH RESPECT TO HANDLING OF
DESIGNATED RECORD SET. In the event that the parties mutually agree in
writing that the PHI constitutes a Designated Record Set, the Manager
hereby agrees to do the following:
(a) At the request of, and in the time and manner designated by the
Partnership, provide access to the PHI to the Partnership or the
individual to whom such PHI relates or his or her authorized
representative in order to meet a request by such individual under
45 C.F.R. Section 164.524.
(b) At the request of, and in the time and manner designated by the
Partnership, make any amendment(s) to the PHI that the Partnership
directs pursuant to 45 C.F.R. Section
4
164.526; provided, however, that the Partnership makes the
determination that the amendment(s) are necessary because the PHI
that is the subject of the amendment(s) has been, or could
foreseeably be, relied upon by the Manager or others to the
detriment of the individual who is the subject of the PHI to be
amended.
3.2 RESPONSIBILITIES OF COVERED ENTITY WITH RESPECT TO THE HANDLING OF
DESIGNATED RECORD SET. In the event that the parties mutually agree in
writing that the PHI constitutes a Designated Record Set, the Partnership
agrees to do the following:
(a) Notify the Manager, in writing, of any PHI that the Partnership
seeks to make available to an individual pursuant to 45 C.F.R.
Section 164.524 and the time, manner and form in which the Manager
shall provide such access.
(b) Notify the Manager, in writing, of any amendment(s) to the PHI in
the possession of the Manager that the Manager shall make and inform
the Manager of the time, form and manner in which such amendment(s)
shall be made.
ARTICLE 4
TERMS AND TERMINATION
4.1 TERM. This Exhibit shall continue in effect for so long as Manager
provides services to the Partnership, unless terminated as provided in
this Article 4. In addition, certain provisions and requirements of this
Exhibit shall survive its expiration or other termination as set forth in
this Article 4.
4.2 TERMINATION BY COVERED ENTITY. As provided for under 45 C.F.R. Sections
164.504(e)(2)(iii) and 164.314(a)(2)(i)(D), the Partnership may
immediately terminate the Agreement and this Exhibit if the Partnership
makes the determination that the Manager has breached a material term of
this Exhibit. Alternatively, the Partnership may choose to: (i) provide
the Manager with 14 days written notice of the existence of an alleged
material breach; and (ii) afford the Manager an opportunity to cure said
alleged material breach upon mutually agreeable terms. In the event that
mutually agreeable terms cannot be achieved within said 14 days following
notice, Manager must cure said breach to the satisfaction of the
Partnership within thirty (30) days of notice. Failure of the Manager to
cure in the manner set forth in this paragraph is grounds for the
immediate termination of the Agreement and this Exhibit by the
Partnership.
4.3 TERMINATION BY BUSINESS ASSOCIATE. If the Manager, in its sole discretion,
makes the determination that the Partnership has breached a material term
of this Exhibit, Manager may provide 30 days notice of its intention to
terminate the Agreement and this Exhibit, and may thereafter terminate the
Agreement and this Exhibit 30 days after such notice. Manager agrees,
however, to attempt to cooperate with the Partnership to find a
mutually-satisfactory resolution to the matter prior to terminating.
5
4.4 EFFECT OF TERMINATION. Upon an event of termination pursuant to this
Article 4, Manager agrees to return or destroy all PHI and ePHI pursuant
to 45 C.F.R. Section 164.504(e)(2)(I), if it is feasible to do so. Prior
to doing so, the Manager further agrees to recover any PHI and ePHI in the
possession of its subcontractors or agents. If it is not feasible for the
Manager to return or destroy said PHI and ePHI, the Manager will notify
the Partnership in writing. Said notification shall include: (i) a
statement that the Manager has determined that it is infeasible to return
or destroy the PHI and ePHI in its possession, and (ii) the specific
reasons for such determination. Manager further agrees to extend any and
all protections, limitations and restrictions contained in this Exhibit to
the Manager's use and/or disclosure of any PHI and ePHI retained after the
termination of this Exhibit, and to limit any further uses or disclosures
to the purposes that make the return or destruction of the PHI and ePHI
infeasible. If it is infeasible for the Manager to obtain, from a
subcontractor or agent any PHI and ePHI in the possession of the
subcontractor or agent, the Manager must provide a written explanation to
the Partnership and require the subcontractors and agents to agree to
extend any and all protections, limitations and restrictions contained in
this Exhibit to the subcontractors' and/or agents' use and/or disclosure
of any PHI and ePHI retained after the termination of this Exhibit, and to
limit any further uses or disclosures to the purposes that make the return
or destruction of the PHI and ePHI infeasible.
ARTICLE 5
MISCELLANEOUS
5.1 SURVIVAL. The respective rights and obligations of Manager and the
Partnership, with respect to the PHI and ePHI which the Manager retains in
accordance with Section 4.4 because it is not feasible to return or
destroy such PHI, shall survive termination of this Exhibit indefinitely.
5.2 AMENDMENTS, WAIVER. Except as provided elsewhere in this Exhibit, this
Exhibit may not be modified, nor shall any provision hereof be waived or
amended, except in a writing duly signed by authorized representatives of
the parties. A waiver with respect to one event shall not be construed as
continuing, or as a bar to or waiver of any right or remedy as to
subsequent events.
5.3 PRIVACY LAW AMENDMENTS. In the event any federal or state privacy law is
amended or added during the term of this Exhibit, the parties agree to
amend this Exhibit as necessary to maintain compliance with all relevant
federal and state privacy laws, including, but not limited to, HIPAA.
5.4 NO THIRD PARTY BENEFICIARIES. Nothing express or implied in this Exhibit
is intended to confer, nor shall anything herein confer, upon any person
other than the parties and the respective successors or assigns of the
parties, any rights, remedies, obligations, or liabilities whatsoever.
6
EXHIBIT H
FORM OF TERMINATION OF MANAGEMENT AGREEMENTS
This Termination of Management Agreements (this "Termination Agreement")
is made and entered into as of __________ ___, 2006 (the "Effective Date"), by
and among Elite Surgical Centers, Del Mar L.P., a California limited partnership
(the "Partnership"); Elite Surgical Management, Inc., a California corporation
("Elite"); and Clinicis, Inc., a California corporation ("Clinicis").
W I T N E S S E T H:
WHEREAS, the Partnership and Elite are parties to that certain Management
Agreement dated as of April 1, 2002 (the "Elite Agreement");
WHEREAS, in January 2005, the Partnership and Clinicis entered into an
oral agreement pursuant to which Clinicis has been providing management services
to the Partnership (the "Clinicis Agreement" and, together with the Elite
Agreement, the "Prior Agreements");
WHEREAS, the Partnership is entering into that certain Management Services
Agreement dated as of the Effective Date (the "MSA"), by and between the
Partnership and Surgical Center Management, Inc., a Nevada corporation ("SCMI");
and
WHEREAS, in connection with its entering into the MSA, the Partnership
desires to terminate in its entirety each of the Prior Agreements, and all
rights and obligations of the parties thereunder, and Elite and Clinicis have
agreed to such termination.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. Termination of Elite Agreement. The Partnership and Elite agree that
the Elite Agreement is terminated and canceled in its entirety, and is of no
further force and effect.
2. Termination of Clinicis Agreement. The Partnership and Clinicis agree
that the Clinicis Agreement is terminated and canceled in its entirety, and is
of no further force and effect.
3. Partnership Funds or Notices. Each of Elite and Clinicis agrees that in
the event that it receives, after the Effective Date, any funds attributable to
the business or operations of the Partnership, or otherwise rightfully belonging
to the Partnership, or any notices or other communications with respect to the
Partnership, it will promptly turn over or forward, as applicable, such funds,
notice or communication to the Partnership.
4. Mutual Release. The Partnership, Elite and Clinicis, each on its own
behalf and on behalf of its respective past, present and future affiliates,
predecessors, successors and
1
assigns, and any and all employees, agents, attorneys, officers, directors and
holders of any class of security of any of the foregoing (each of the foregoing,
as applicable, a "Releasing Party") hereby knowingly, voluntarily, irrevocably
and after being counseled by its legal representatives, fully and completely
releases, waives and forever discharges the other parties and their respective
past, present and future affiliates, predecessors, successors and assigns, and
any and all employees, agents, attorneys, officers, directors and holders of any
class of security of any of the foregoing (each of the foregoing, as applicable,
a "Released Party") from, any and all direct or indirect, known or unknown and
suspected or unsuspected debts, obligations or liabilities of any nature,
whether absolute, accrued, contingent, liquidated or otherwise, and whether due
or to become due, asserted or unasserted; claims; demands; actions; causes;
contingencies; suits; damages; costs and expenses whatsoever, at law or in
equity, in tort, contract or otherwise, including all court costs, litigation
expenses and reasonable attorneys' fees (collectively, "Losses"), arising from,
relating to or in connection with any of the Prior Agreements that such
Releasing Party or any of its affiliates, predecessors, successors or assigns
ever had, now have or may have against any Released Party (collectively, the
"Released Claims"); provided, however, that each such Releasing Party expressly
reserves, and does not release, any contractual rights it may have against a
Released Party (a) under this Termination Agreement; or (b) for fees and
expenses earned or accrued under the Prior Agreements as of the Effective Date
and listed on Exhibit A or Exhibit B attached hereto, and the same shall not be
included in the Released Claims. Each Releasing Party further covenants and
agrees never to assert any Released Claim against any Released Party in any
proceeding before any tribunal, public or private. Each Releasing Party
represents that it (i) has agreed to this release knowingly and voluntarily and
in the absence of any fraud, mistake, duress, coercion or undue influence; (ii)
has been advised to obtain, and has had reasonable opportunity to obtain,
counsel from its legal representatives prior to executing and delivering this
release; and (iii) has not assigned any claims or rights in connection with the
subject matter of this release.
5. Attorneys' Fees and Costs. If attorneys' fees or other costs are
incurred to secure performance of any obligations hereunder, or to establish
damages for the breach thereof or to obtain any other appropriate relief, or to
defend against any of the foregoing actions, the prevailing party will be
entitled to recover reasonable attorneys' fees and costs incurred in connection
therewith.
6. Severability. The invalidity or unenforceability of any provision of
this Termination Agreement will not affect the validity or enforceability of any
other provision of this Termination Agreement, each of which will remain in full
force and effect, so long as the economic or legal substance of the transactions
contemplated by this Termination Agreement is not affected in a manner
materially adverse to any party.
7. Counterparts. This Termination Agreement may be executed in one or more
counterparts (including by facsimile or portable document format (.pdf)) for the
convenience of the parties hereto, each of which will be deemed an original, but
all of which together will constitute one and the same instrument.
8. Interpretation. The section headings contained in this Termination
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and will not in any way affect the meaning or interpretation of
this Termination Agreement.
2
9. Entire Agreement. This Termination Agreement contains the entire
understanding of the parties relating to the subject matter hereof and
supersedes all prior written or oral and all contemporaneous oral agreements and
understandings relating to the subject matter hereof. The recitals to this
Termination Agreement are hereby incorporated by reference into and made a part
of this Termination Agreement for all purposes.
10. GOVERNING LAW. THIS TERMINATION AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE
OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAW RULE OR PRINCIPLE
THAT MIGHT RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
11. Drafting. The language in all parts of this Agreement will be
interpreted, in all cases, according to its fair meaning and not for or against
any party hereto. Each party acknowledges that it and its legal counsel have
reviewed and revised this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
will not be employed in the interpretation of this Agreement.
12. Usage. Whenever the plural form of a word is used in this Agreement,
it will include the singular form of that word. Whenever the singular form of a
word is used in this Agreement, it will include the plural form of that word.
The term "or" will not be interpreted as excluding any of the items described.
The term "include" or any derivative of such term does not mean that the items
following such term are the only types of such items.
13. Binding Effect. This Termination Agreement will be binding on and will
inure to the benefit of the parties hereto and their respective successors and
assigns.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
3
IN WITNESS WHEREOF, the parties hereto have executed this Termination
Agreement as of the Effective Date.
THE PARTNERSHIP:
ELITE SURGICAL CENTERS, DEL MAR L.P.
By: Surgical Ventures, Inc.
Its: General Partner
By: __________________________________
Name: Xxxxx X. Xxxxxx, M.D.
Title: President
ELITE:
ELITE SURGICAL MANAGEMENT, INC.
By: _______________________________________
Name: Xxxxx X. Xxxxxx, M.D.
Title: President
CLINICIS:
CLINICIS, INC.
By: _______________________________________
Name: Xxxxxx Xxxx
Title: President
EXHIBITS
Exhibit A: Fees and Expenses (Elite Agreement)
Exhibit B: Fees and Expenses (Clinicis Agreement)
[Signature Page to Termination of Management Agreements]
EXHIBIT A
FEE AND EXPENSES (ELITE AGREEMENT)
[None.]
[Exhibit A to Termination of Management Agreements]
EXHIBIT B
FEE AND EXPENSES (CLINICIS AGREEMENT)
[None.]
[Exhibit B to Termination of Management Agreements]
EXHIBIT I
FORM OF RELEASE
Reference is made to that certain Partnership Interest Purchase Agreement
dated as of December ___, 2005 (the "Purchase Agreement"), by and among Del Mar
GenPar, Inc., a Nevada corporation ("GenPar"); Del Mar Acquisition, Inc., a
Nevada corporation ("Newco" and, together with GenPar, the "Buyers"); Surgical
Ventures, Inc., a California corporation (the "Seller"); and Xxxxx X. Xxxxxx,
M.D., an individual residing in the State of California ("Xxxxxx" and, together
with the Seller, the "Releasing Parties"). Capitalized terms used herein that
are not otherwise defined have the meanings ascribed to such terms in the
Purchase Agreement.
Each Releasing Party, on its own behalf and on behalf of its successors,
Affiliates and assigns, by the act of the undersigned authorized officer (in the
case of the Seller) or individual (in the case of Xxxxxx), and without the
necessity of any further action on the part of such Releasing Party, any Buyer
or the Partnership, hereby knowingly, voluntarily, irrevocably and after being
counseled by its legal representatives, fully and completely releases and
forever discharges the Buyers and the Partnership, and their respective past,
present and future Affiliates, predecessors, successors and assigns, and any and
all employees, agents, attorneys, officers, directors and holders of any class
of security of any of the Buyers or the Partnership, or any of their respective
Affiliates (collectively (but specifically excluding (a) Xxxxxx Xxxx, an
individual residing in the State of California; (b) Clinicis, Inc., a California
corporation; and (c) Clinicis-Phoenix Surgery Center, LLC, an Arizona limited
liability company doing business as Clinicis Pain Management & Outpatient
Surgery Center, notwithstanding any relationship any of them may have had, now
have or hereafter acquire with respect to the Buyers), the "Released Parties")
from all direct or indirect, vested or contingent, known or unknown and
suspected or unsuspected claims, demands, actions, causes, suits and damages
whatsoever, at law or in equity, in tort, contract or otherwise, that such
Releasing Party and any of its Affiliates, successors or assigns ever had or now
have, for or by reason of any Law, negotiation, contract, transaction, document,
agreement, matter, cause or thing whatsoever, including without limitation
actions for breach of contract, fraud, misrepresentation, interference, duress,
prima facie tort, breach of fiduciary duty, usury, partnership, joint venture or
the ordinary, sole, contributory, comparative or concurrent negligence of any
Released Party (collectively, the "Released Claims"); provided, however, that
nothing contained in this release shall affect any rights or obligations of the
parties under the Purchase Agreement or any of the related documents to be
executed or delivered by any party in connection with or pursuant to the
Purchase Agreement, and the same shall not be included in the Released Claims.
Each Releasing Party further covenants and agrees never to assert any
Released Claim against any Released Party in any proceeding before any tribunal,
public or private.
Each Releasing Party represents that it (a) has agreed to this release
knowingly and voluntarily and in the absence of any fraud, mistake, duress,
coercion or undue influence; (b) has been advised to obtain, and has had
reasonable opportunity to obtain, counsel from its legal
1
representatives prior to executing and delivering this release; and (c) has not
assigned any claims or rights in connection with the subject matter of this
release.
Each Releasing Party agrees to indemnify, defend and hold harmless the
Released Parties against any and all claims, demands, actions, causes of action,
losses, damages and rights to recover or to be indemnified for losses, costs,
expenses and liabilities whatsoever, known or unknown, anticipated or
unanticipated, suspected or unsuspected, fixed, contingent or conditional, at
law or in equity, whether arising out of contract, tort, violation of law or
regulations, or otherwise incurred or suffered by any Released Party arising out
of or in connection with the Released Claims.
It is the intention of the Buyers, the Partnership and the Releasing
Parties that the foregoing be construed broadly as a total and unconditional
release and covenant by each Releasing Party never to assert any Released Claim.
If any clause, sentence, section or paragraph of this release is
judicially or administratively declared invalid, unenforceable or void under
applicable Law, such decision shall not have the effect of invalidating or
voiding the remainder of this release, and each Releasing Party agrees that the
part or parts of this release so held to be invalid, unenforceable or void shall
be deemed to be replaced by a valid and enforceable clause, sentence, section or
paragraph as close as possible to the purpose and intent of the part held to be
invalid, unenforceable or void and the remainder shall have the same force and
effect as if such invalid, unenforceable or void part or parts had never been
included herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
IN WITNESS WHEREOF, each of the undersigned has executed this release as
of __________ ___, 2006.
SURGICAL VENTURES, INC.
By: ___________________________________
Name: Xxxxx X. Xxxxxx, M.D.
Title: President
_______________________________________
Xxxxx X. Xxxxxx, M.D.
[Signature Page to Release]
EXHIBIT J
FORM OF CLOSING CERTIFICATE OF THE SELLER AND XXXXXX
Reference is made to that certain Partnership Interest Purchase Agreement
dated as of December ___, 2005 (the "Purchase Agreement"), by and among Del Mar
GenPar, Inc., a Nevada corporation; Del Mar Acquisition, Inc., a Nevada
corporation; Surgical Ventures, Inc., a California corporation (the "Seller");
and Xxxxx X. Xxxxxx, M.D., an individual residing in the State of California
("Xxxxxx"). Capitalized terms used herein that are not otherwise defined have
the meanings ascribed to such terms in the Purchase Agreement.
In connection with the Closing under the Purchase Agreement, the
undersigned certify as follows:
1. All representations and warranties of the Seller and Xxxxxx contained
in the Purchase Agreement are true and correct in all respects at and as of the
date hereof, without regard to any supplemental disclosure provided pursuant to
Section 4.3 of the Purchase Agreement, with the same effect as though such
representations and warranties were made at and as of the date hereof (rather
than as of the Effective Date as provided in the first paragraph of Article II
of the Purchase Agreement).
2. Each of the undersigned has performed and complied in all respects with
all the covenants and agreements required to be performed or complied with by
such undersigned at or prior to the date hereof pursuant to the Purchase
Agreement.
3. Each of the undersigned has delivered each document required to be
delivered by such undersigned pursuant to Section 1.4 of the Purchase Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, each of the undersigned has executed this certificate
as of __________ ___, 2006.
SURGICAL VENTURES, INC.
By: ____________________________________
Name: Xxxxx X. Xxxxxx, M.D.
Title: President
________________________________________
Xxxxx X. Xxxxxx, M.D.
[Signature Page to Closing Certificate of the Seller and Xxxxxx]
EXHIBIT K
FORM OF SECRETARY'S CERTIFICATE OF THE SELLER
This certificate is provided to Del Mar GenPar, Inc., a Nevada corporation
("GenPar"); Del Mar Acquisition, Inc., a Nevada corporation ("Newco" and,
together with GenPar, each individually a "Buyer" and collectively the
"Buyers"), pursuant to Section 5.1(q) of that certain Partnership Interest
Purchase Agreement dated as of December ___, 2005 (the "Purchase Agreement"), by
and among the Buyers; Surgical Ventures, Inc., a California corporation (the
"Seller"); and Xxxxx X. Xxxxxx, M.D., an individual residing in the State of
California. Capitalized terms used herein that are not otherwise defined have
the meanings ascribed to such terms in the Purchase Agreement.
I, _______________, certify that I am the Secretary of the Seller, and
further certify, on behalf of the Seller, that:
(a) Attached hereto as Annex A is a true and complete copy of the Articles
of Incorporation of the Seller, as in full force and effect at all times since
prior to the adoption of the resolutions described in paragraphs (c) and (d), to
and including the date hereof;
(b) Attached hereto as Annex B is a true and complete copy of the bylaws
of the Seller, as in full force and effect at all times since prior to the
adoption of the resolutions described in paragraphs (c) and (d), to and
including the date hereof;
(c) Attached hereto as Annex C is a true copy of the resolutions duly
adopted by the board of directors of the Seller concerning the Purchase
Agreement and the transactions contemplated thereby; such resolutions have not
been amended, modified or rescinded and remain in full force and effect; and
such resolutions are the only resolutions adopted by the board of directors of
the Seller or any committee thereof relating to the Purchase Agreement or any of
the transactions contemplated thereby.
(d) Attached hereto as Annex D is a true copy of the resolutions duly
adopted by the sole shareholder of the Seller concerning the Purchase Agreement
and the transactions contemplated thereby; such resolutions have not been
amended, modified or rescinded and remain in full force and effect; and such
resolutions are the only resolutions adopted by the sole shareholder of the
Seller relating to the Purchase Agreement or any of the transactions
contemplated thereby.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, I have hereunto signed my name on behalf of the
Seller.
Dated: __________ ___, 2006
SURGICAL VENTURES, INC.
By: ____________________________________
Name: __________________________________
Title: Secretary
[Signature Page to Secretary's Certificate of the Seller]
ANNEX A
ARTICLES OF INCORPORATION
X-0
XXXXX X
XXXXXX
X-0
ANNEX C
BOARD OF DIRECTORS RESOLUTIONS
C-1
ANNEX D
SOLE SHAREHOLDER RESOLUTIONS
D-1
EXHIBIT L
FORM OF OPINION OF COUNSEL TO THE SELLER AND XXXXXX
Counsel to the Seller and Xxxxxx will give the following opinions (subject
to reasonable and customary qualifications and limitations):
1. The Partnership is a limited partnership and the Seller is a
corporation, each duly organized, validly existing and in good standing under
the laws of the State of California, and each has full power to own its
properties and to conduct its business as presently conducted. The Partnership
is not qualified to do business in any jurisdiction other than California, and
no such qualification is required.
2. Each of the Seller and Xxxxxx has all requisite power, authority and
capacity, corporate, individual or otherwise, to execute, deliver and perform
under the Purchase Agreement and the other Seller Documents to which it is a
party. The execution, delivery and performance by the Seller of each Seller
Document to which it is a party has been duly authorized by all necessary
action, corporate or otherwise, on the part of the Seller.
3. The Purchase Agreement and each other Seller Document has been duly
executed and delivered by the Seller and Xxxxxx (to the extent each is a party
thereto). The Purchase Agreement and each of the other Seller Documents is a
legal, valid and binding agreement of the Seller and Xxxxxx (to the extent each
is a party thereto), enforceable against the Seller and Xxxxxx in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent conveyance or similar laws affecting the
enforcement of creditors' rights generally and subject to general principles of
equity (regardless of whether enforcement is sought in a proceeding of law or in
equity).
4. To our knowledge, Schedule 2.4 to the Purchase Agreement is a complete
and accurate list of all of the ownership interests in the Partnership and the
capital account balances associated therewith. Based solely on our review of
______________, the ownership interests described in Schedule 2.4 to the
Purchase Agreement constitute all of the issued and outstanding equity interests
in the Partnership. The Purchased Interests have been duly authorized and
validly issued in compliance with all applicable Laws and the provisions of the
Partnership Agreement or any applicable predecessor operating agreement of the
Partnership, and are fully paid and nonassessable and free of preemptive rights.
The Partnership does not have any equity interests reserved for issuance. To our
knowledge, there are no outstanding options, warrants, convertible or
exchangeable securities or other rights, agreements, arrangements or commitments
obligating the Seller or the Partnership, directly or indirectly, to issue,
sell, purchase, acquire or otherwise transfer or deliver any equity interest in
the Partnership, or any agreement, document, instrument or obligation
convertible or exchangeable therefor. To our knowledge, there are no agreements,
arrangements or commitments of any character (contingent or otherwise) pursuant
to which any Person is or may be entitled to receive any payment based on the
revenues or earnings, or calculated in accordance therewith, of the Partnership.
To our knowledge, there are no voting trusts, proxies or other agreements or
understandings to which the Seller or the Partnership is a party or by which the
1
Seller or the Partnership is bound with respect to the voting of any equity
interest in the Partnership. To our knowledge, neither the GP Interest nor the
LP Interest was issued in violation of the Securities Act of 1933, as amended,
or any applicable state securities Laws.
5. The Seller owns of record and beneficially the Purchased Interests,
free and clear of any Lien other than as provided in the Partnership Agreement.
Upon sale of the Purchased Interests and delivery of certificates (or other
transfer documents included in the Seller Documents) therefor to the Buyers at
the Closing, GenPar will acquire the entire legal and beneficial interests in
the GP Interest and Newco will acquire the entire legal and beneficial interests
in the LP Interest, each free and clear of any Lien and subject to no legal or
equitable restrictions of any kind other than as provided in the Partnership
Agreement.
6. Except as disclosed in Schedule 2.10 to the Purchase Agreement, to our
knowledge, neither the execution or delivery of the Seller Documents nor the
consummation of the transactions contemplated thereby, including without
limitation the sale of the Purchased Interests to the Buyers, will conflict with
or result in the breach of any term or provision of, require Consent or violate
or constitute a default under (or an event that with notice or the lapse of time
or both would constitute a breach or default), or result in the creation of any
Lien on the Purchased Interests or the assets of the Partnership pursuant to, or
relieve any third party of any obligation to the Partnership or give any third
party the right to terminate or accelerate any obligation under, any charter
provision, bylaw, provision of the Partnership Agreement, Partnership Contract,
License or Law to which the Seller or the Partnership is a party or by which any
assets of the Partnership or otherwise used in the Business is in any way bound
or obligated.
7. Except as set forth in Schedule 2.11, to our knowledge, no Governmental
Authorization is required on the part of the Seller or the Partnership in
connection with the sale and purchase of the Purchased Interests or any of the
other transactions contemplated by the Purchase Agreement.
8. To our knowledge, except as set forth in Schedule 2.16 to the Purchase
Agreement, there is currently no pending or threatened Litigation by any Person
against or relating to the Partnership or any equityholder, officer, employee or
agent (in their capacities as such) of the Partnership or to which any of the
assets of the Partnership is subject. To our knowledge, the Partnership is not
subject to or bound by any currently existing judgment, order, writ, injunction,
decree, ruling or charge. To our knowledge, there is no reason to believe that
any such Litigation may be brought or threatened against the Partnership. To our
knowledge, the Seller is not a party to or subject to the provisions of any
judgment, order, writ, injunction, decree, ruling or charge of any court or
Governmental Body prohibiting the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby. To our
knowledge, there are no malpractice claims or Liabilities against the
Partnership or the Seller and no facts exist that might be the basis for a
malpractice claim or Liability against the Partnership or the Seller.
2
EXHIBIT M
FORM OF ESTOPPEL CERTIFICATE
PROPERTY: That certain real property located in San Diego County,
California, more particularly described in the Lease (the
"Property")
LESSOR: Champions of the West Tower LLC, a California limited
liability company ("Lessor")
LEASE DATED: June 1, 2001 (the "Lease")
LESSEE: Elite Surgical Centers, Del Mar L.P., a California limited
partnership doing business as "Elite Surgical Centers, Del
Mar" ("Lessee"), as assignee of Xxxxx X. Xxxxxx, M.D., an
individual residing in the State of California
PURCHASERS: Del Mar GenPar, Inc. and Del Mar Acquisition, Inc., each a
Nevada corporation ("Purchasers")
Lessor has executed and entered into the Lease, which Lease is attached
hereto as Exhibit A and made a part hereof for all purposes, with respect to the
Property. Lessor understands that Purchasers intend to purchase and acquire an
aggregate of 51% of the outstanding equity interests of Lessee. This will
confirm, for the benefit of Purchasers, their respective successors and assigns
and any title insurance company issuing title insurance policies relating to the
Lease, the following matters concerning the Lease:
1. Lessor is presently the lessor under the Lease.
2. A true and correct copy of the Lease (including all modifications,
supplements and amendments) is attached hereto as Exhibit A. The Lease
constitutes the only contractual agreement (written or oral) between Lessor and
Lessee with respect to the Property.
3. The Lease is in full force and effect and has not been modified,
supplemented, or amended in any respect except as shown on Exhibit A attached
hereto. Lessee has not waived or released any rights or options set forth in the
Lease to: (i) renew or extend the term of the Lease or (ii) purchase all or a
portion of the Property.
4. Lessee is current in the payment of rent under the Lease, and rentals
have been paid through __________ 2006.
5. The base rental payable by Lessee is currently $__________ per month.
6. The term of the Lease commenced on June 1, 2001, and is presently
scheduled to expire on December 31, 2008, and contains two options to renew or
extend the term of the Lease for additional periods of seven years for each
option.
7. Lessee has not made, and has not been required to make, any security
deposit or any other deposit under the Lease.
8. As of the date of this Certificate, Lessee is not in default in the
performance of the Lease, and there are no events or conditions existing that,
with or without notice or the lapse of time, or both, could constitute a
monetary or other default of Lessee under the Lease. As of the date of this
Certificate, Lessor has no setoffs, claims or defenses to the enforcement of the
Lease by Lessee against Lessor.
9. Lessor agrees to give notice to Purchasers of all matters to which the
lessee under the Lease is entitled to receive notice.
10. All notices shall be in writing and shall be deemed properly given
when received by Lessor or Lessee at their addresses as provided in the Lease
and, in the case of Purchasers, at the following address:
c/o Vsource, Inc.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Telecopy: (000) 000-0000
11. By its execution of this Certificate, Lessor indicates its agreement
with the statements set forth above and states, represents, warrants and
certifies that such statements are true and correct and may be relied upon by
Purchasers, their respective successors and assigns and any title insurance
company issuing title insurance policies relating to the Lease.
12. Contemporaneous with any sale of the Property or the assignment of
Lessor's interest in the Lease, Lessor shall notify such purchaser or assignee
of the existence of this Certificate.
13. This Certificate will be binding upon Lessor, Lessor's successors and
assigns and all other owners of the Property or assignees of Lessor's interest
in the Lease and will inure to the benefit of Purchasers and their respective
successors and assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
2
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.
LESSOR:
CHAMPIONS OF THE WEST TOWER LLC,
a California limited liability company
By: _____________________________________
Name: ___________________________________
Title: __________________________________
STATE OF CALIFORNIA Section
Section
COUNTY OF SAN DIEGO Section
This instrument was acknowledged before me on the _____ day of __________,
2006, by _________________________, _________________________ of Champions of
the West Tower LLC, a California limited liability company, on behalf of said
limited liability company.
Notary Public, State of California
My Commission Expires:
____________________________________
Printed/Typed Name of Notary
EXHIBIT:
A - Lease and all modifications
[Signature Page to Estoppel Certificate]
EXHIBIT A
[Attach copy of Lease Agreement dated June 1, 2001 and all amendments or
modifications thereto.]
A-1
EXHIBIT N
FORM OF CLOSING CERTIFICATE OF THE BUYERS
Reference is made to that certain Partnership Interest Purchase Agreement
dated as of December ___, 2005 (the "Purchase Agreement"), by and among Del Mar
GenPar, Inc., a Nevada corporation ("GenPar"); Del Mar Acquisition, Inc., a
Nevada corporation ("Newco" and, together with GenPar, the "Buyers"); Surgical
Ventures, Inc., a California corporation; and Xxxxx X. Xxxxxx, M.D., an
individual residing in the State of California. Capitalized terms used herein
that are not otherwise defined have the meanings ascribed to such terms in the
Purchase Agreement.
In connection with the Closing under the Purchase Agreement, the
undersigned certify as follows:
1. All representations and warranties of the Buyers contained in the
Purchase Agreement are true and correct in all respects at and as of the date
hereof with the same effect as though such representations and warranties were
made at and as of the date hereof (rather than as of the Effective Date as
provided in the first paragraph of Article III of the Purchase Agreement).
2. Each of the undersigned has performed and complied in all respects with
all the covenants and agreements required to be performed or complied with by
such undersigned at or prior to the date hereof pursuant to the Purchase
Agreement.
3. Each of the undersigned has delivered each document required to be
delivered by such undersigned pursuant to Section 1.4 of the Purchase Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, each of the undersigned has executed this certificate
as of __________ ___, 2006.
DEL MAR GENPAR, INC.
By: _____________________________
Name: Xxxxx Xxxxxxxxxx
Title: President and CEO
DEL MAR ACQUISITION, INC.
By: _____________________________
Name: Xxxxx Xxxxxxxxxx
Title: President and CEO
[Signature Page to Closing Certificate of the Buyers]
EXHIBIT O
FORM OF SECRETARY'S CERTIFICATE OF THE BUYERS
This certificate is provided to Surgical Ventures, Inc., a California
corporation (the "Seller"), and Xxxxx X. Xxxxxx, M.D., an individual residing in
the State of California ("Xxxxxx"), pursuant to Section 5.2(j) of that certain
Partnership Interest Purchase Agreement dated as of December ___, 2005 (the
"Purchase Agreement"), by and among Del Mar GenPar, Inc., a Nevada corporation
("GenPar"); Del Mar Acquisition, Inc., a Nevada corporation ("Newco" and,
together with GenPar, the "Buyers"); the Seller; and Xxxxxx. Capitalized terms
used herein that are not otherwise defined have the meanings ascribed to such
terms in the Purchase Agreement.
I, Xxxxx Xxxxxxxxxx, certify that I am the Secretary of each of the
Buyers, and further certify, on behalf of each of the Buyers, that:
(a) Attached hereto as Annex A is a true and complete copy of the Articles
of Incorporation of GenPar, as in full force and effect at all times since prior
to the adoption of the resolutions described in paragraph (c), to and including
the date hereof;
(b) Attached hereto as Annex B is a true and complete copy of the bylaws
of GenPar, as in full force and effect at all times since prior to the adoption
of the resolutions described in paragraph (c), to and including the date hereof;
(c) Attached hereto as Annex C is a true copy of the resolutions duly
adopted by the board of directors of GenPar concerning the Purchase Agreement
and the transactions contemplated thereby; such resolutions have not been
amended, modified or rescinded and remain in full force and effect; and such
resolutions are the only resolutions adopted by the board of directors of GenPar
or any committee thereof relating to the Purchase Agreement or any of the
transactions contemplated thereby.
(d) Attached hereto as Annex D is a true and complete copy of the Articles
of Incorporation of Newco, as in full force and effect at all times since prior
to the adoption of the resolutions described in paragraph (f), to and including
the date hereof;
(e) Attached hereto as Annex E is a true and complete copy of the bylaws
of Newco, as in full force and effect at all times since prior to the adoption
of the resolutions described in paragraph (f), to and including the date hereof;
(f) Attached hereto as Annex F is a true copy of the resolutions duly
adopted by the board of directors of Newco concerning the Purchase Agreement and
the transactions contemplated thereby; such resolutions have not been amended,
modified or rescinded and remain in full force and effect; and such resolutions
are the only resolutions adopted by the board of directors of Newco or any
committee thereof relating to the Purchase Agreement or any of the transactions
contemplated thereby.
IN WITNESS WHEREOF, I have hereunto signed my name on behalf of each of
the Buyers.
Dated: __________ ___, 2006
DEL MAR GENPAR, INC.
By: ______________________________
Name: Xxxx Xxxxxx
Title: Secretary
DEL MAR ACQUISITION, INC.
By: ______________________________
Name: Xxxx Xxxxxx
Title: Secretary
[Signature Page to Secretary's Certificate of the Buyers]
ANNEX A
ARTICLES OF INCORPORATION OF GENPAR
X-0
XXXXX X
XXXXXX XX XXXXXX
X-0
ANNEX C
BOARD OF DIRECTORS RESOLUTIONS OF GENPAR
X-0
XXXXX X
XXXXXXXX XX XXXXXXXXXXXXX XX XXXXX
X-0
ANNEX E
BYLAWS OF NEWCO
E-1
ANNEX F
BOARD OF DIRECTORS RESOLUTIONS OF NEWCO
F-1
