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EXHIBIT 10.20
INDEMNIFICATION AGREEMENT
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This INDEMNIFICATION AGREEMENT (the "Agreement") is entered
into this ___ day of ___________, 1997, by and between AMERICAN PHYSICIAN
PARTNERS, INC., a Delaware corporation ("APP"), and the individuals identified
on Exhibit A attached hereto (the "Stockholders"). Unless otherwise defined
herein, all capitalized terms shall have the meaning contained in that certain
Agreement and Plan of Reorganization and Merger dated ______________, 1997 (the
"Merger Agreement") by and among APP, APP Sub and _________________________, a
_____________ corporation (the "Company").
RECITALS
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A. Concurrent with this Agreement, the Company shall enter
into the Merger Agreement and the Service Agreement whereby APP shall acquire
the assets, and manage the non-medical aspects of, the Company's radiology
practice.
B. Pursuant to Section ____ of the Merger Agreement, the
Stockholders have, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, agreed to execute and deliver this
Agreement to APP and APP Sub.
NOW, THEREFORE, in consideration of the preceding recitals and
the covenants and agreements set forth herein, the parties agree as follows:
1. Indemnification by the Stockholders. Subject to the terms,
limitations and conditions of this Agreement, the Stockholders (each an
"Indemnifying Party" and collectively, the "Indemnifying Parties"), severally,
and not jointly, agree to indemnify, defend and hold APP and its directors,
officers, stockholders, employees, agents, attorneys, consultants and Affiliates
(each an "Indemnified Party" and collectively, the "Indemnified Parties"),
harmless from and against all losses, claims, obligations, demands, assessments,
penalties, liabilities, costs, damages, reasonable attorneys' fees and expenses
(including, without limitation, all costs of experts and all costs incidental to
or in connection with any appellate process) (collectively, "Damages") asserted
against or incurred by an Indemnified Party arising out of or resulting from:
a. a breach of any representation, warranty or covenant of the
Company contained in the Merger Agreement (without giving effect to any Material
Adverse Effect qualifier contained as part of any such representation or
warranty or covenant of the Company contained in the Merger Agreement or in any
Disclosure Schedule or certificate delivered thereunder);
b. any violation (or alleged violation) by the Company and/or
any of its past or present directors, officers, partners, stockholders,
employees (including, without limitation, any Physician Employee), agents,
attorneys, consultants and Affiliates of any state or federal law governing
health care fraud and abuse or prohibition on referral of patients to Persons in
which a licensed professional has a financial or other form of interest
(including, but not limited to, fraud and abuse in the Medicare and Medicaid
Programs) occurring on or before the Closing Date, or any overpayment or
obligation (or alleged
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overpayment or obligation) arising out of or resulting from claims submitted to
any Payor on or before the Closing Date; and
c. any liability under the Securities Act, the Exchange Act or
any other federal or state "blue sky" or securities law or regulation, at common
law or otherwise, arising out of or based upon any (i) untrue statement of a
material fact in any Registration Statement or any prospectus forming a part
thereof, or any amendment thereof or supplement thereto relating to the Company
(including any Company Subsidiary) or NewCo, or (ii) failure to state
information necessary to make the statements required to be stated therein not
misleading, which untrue statement or failure to state information arises or
results solely from information provided in writing to APP or its counsel by the
Company or such Stockholder or their agents specifically for inclusion in any
such Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto (including, without limitation,
schedules, exhibits and certifications delivered by the Company or any of its
agents in connection with the Merger Agreement).
The provisions contained in Paragraph 2(g) shall not apply to
indemnification of claims listed in Exhibit B attached hereto. In addition,
notwithstanding anything herein to the contrary, nothing contained in this
Agreement shall relieve any of the Stockholders of any liability or limit any
liability that he or she may have in the case of fraud in connection with the
transactions contemplated by the Merger Agreement.
2. Conditions of Indemnification. All claims for indemnification under
this Agreement shall be asserted and resolved as follows:
a. The Indemnified Party shall promptly (and, in any event, at
least ten (10) days prior to the due date for any responsive pleadings, filings
or other documents) (i) notify each Indemnifying Party of any third-party claim
or claims asserted against the Indemnified Party ("Third Party Claim") that
could give rise to a right of indemnification under this Agreement and (ii)
transmit to the Indemnifying Parties a written notice ("Claim Notice")
describing in reasonable detail the nature of the Third Party Claim, a copy of
all papers served with respect to such claim (if any), an estimate of the amount
of Damages attributable to the Third Party Claim and the basis of the
Indemnified Party's request for indemnification under this Agreement. The
failure to promptly deliver a Claim Notice shall not relieve any Indemnifying
Party of its obligations to any Indemnified Party with respect to the related
Third Party Claim except to the extent that the resulting delay is materially
prejudicial to the defense of such claim. Within thirty (30) days after receipt
of any Claim Notice (the "Election Period"), the Indemnifying Parties shall
notify the Indemnified Party (x) whether the Indemnifying Parties dispute their
potential liability to the Indemnified Party under this Agreement with respect
to such Third Party Claim and (y) whether the Indemnifying Parties desire, at
the sole cost and expense of each Indemnifying Party, to defend the Indemnified
Party against such Third Party Claim.
b. If the Indemnifying Parties notify the Indemnified Party
within the Election Period that the Indemnifying Parties elect to assume the
defense of the Third Party Claim, then the Indemnifying Parties shall have the
right to defend, at their sole cost and expense, with counsel reasonably
acceptable to such Indemnified Party or Indemnified Parties, such Third Party
Claim by all appropriate proceedings, which proceedings shall be prosecuted
diligently by the Indemnifying Parties to a final conclusion or settled at the
discretion of the Indemnifying Parties in accordance with this Paragraph 2(b).
Except as set forth in Paragraph 2(f) below, the Indemnifying Parties shall have
full control of such defense and proceedings, including any compromise or
settlement thereof. The Indemnified Party is hereby authorized, at the sole
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cost and expense of the Indemnifying Parties (but only if the Indemnified Party
is entitled to indemnification hereunder), to file, during the Election Period,
any motion, answer or other pleadings that the Indemnified Party shall deem
necessary or appropriate to protect its interests or those of the Indemnifying
Parties and not prejudicial to the Indemnifying Parties. If requested by the
Indemnifying Parties, the Indemnified Party agrees, at the sole cost and expense
of the Indemnifying Parties, to cooperate with the Indemnifying Parties and
their counsel in contesting any Third Party Claim that the Indemnifying Parties
elect to contest, including, without limitation, the making of any related
counterclaim against the person asserting the Third Party Claim or any
cross-complaint against any person. The Indemnified Party may participate in,
but not control, any defense or settlement of any Third Party Claim controlled
by the Indemnifying Parties pursuant to this Paragraph 2(b) and shall bear its
own costs and expenses with respect to such participation; provided, however,
that if the named parties to any such action (including any impleaded parties)
include both the Indemnifying Parties and the Indemnified Party, and the
Indemnified Party has been advised by counsel that there may be one or more
legal defenses available to it that are different from or additional to those
available to the Indemnifying Parties, then the Indemnified Party may employ
separate counsel at the expense of the Indemnifying Parties, and upon written
notification thereof, the Indemnifying Parties shall not have the right to
assume the defense of such action on behalf of the Indemnified Party; provided
further that the Indemnifying Parties shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys at any time for the Indemnified Party, which firm shall be designated
in writing by the Indemnified Party. Notwithstanding the foregoing, the
Indemnifying Parties shall be prohibited from confessing or settling any
criminal allegations brought against the Indemnified Party without the express
written consent of the Indemnified Party.
c. If the Indemnifying Parties fail to notify the Indemnified
Party within the Election Period that the Indemnifying Parties elect to defend
the Indemnified Party pursuant to Paragraph 2(b), or if the Indemnifying Parties
elect to defend the Indemnified Party pursuant to Paragraph 2(b) but fail
diligently and promptly to prosecute or settle the Third Party Claim, then the
Indemnified Party shall have the right to defend, at the sole cost and expense
of the Indemnifying Parties (if the Indemnified Party is entitled to
indemnification hereunder), the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted by
the Indemnified Parties to a final conclusion or settled. The Indemnified
Parties shall have full control of such defense and proceedings, provided,
however, that the Indemnified Parties may not enter into, without the
Indemnifying Parties' consent, which shall not be unreasonably withheld, any
compromise or settlement of such Third Party Claim. Notwithstanding the
foregoing, if the Indemnifying Parties have delivered a written notice to the
Indemnified Party to the effect that the Indemnifying Parties dispute their
potential liability to the Indemnified Party under this Agreement and if such
dispute is resolved in favor of the Indemnifying Parties, the Indemnifying
Parties shall not be required to bear the costs and expenses of the Indemnified
Parties' defense pursuant to this Paragraph or of the Indemnifying Party's
participation therein at the Indemnified Party's request, and the Indemnified
Party shall reimburse the Indemnifying Parties in full for all costs and
expenses of such litigation. The Indemnifying Parties may participate in, but
not control, any defense or settlement controlled by the Indemnified Party
pursuant to this Paragraph 2(c), and the Indemnifying Parties shall bear their
own costs and expenses with respect to such participation; provided, however,
that if the named parties to any such action (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party, and the
Indemnifying Parties have been advised by counsel that there may be one or more
legal defenses available to it that are different from or additional to those
available to the Indemnified Party, then the Indemnifying Parties may employ
separate counsel and upon
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written notification thereof, the Indemnified Party shall not have the right to
assume the defense of such action on behalf of the Indemnifying Parties.
d. In the event any Indemnified Party should have a claim
against any Indemnifying Parties hereunder that does not involve a Third Party
Claim, the Indemnified Party shall transmit to the Indemnifying Parties a
written notice (the "Indemnity Notice") describing in reasonable detail the
nature of the claim, an estimate of the amount of damages attributable to such
claim and the basis of the Indemnified Party's request for indemnification under
this Agreement. If the Indemnifying Parties do not notify the Indemnified Party
within sixty (60) days from its receipt of the Indemnity Notice that the
Indemnifying Parties dispute such claim, the claim specified by the Indemnified
Party in the Indemnity Notice shall be deemed a liability of the Indemnifying
Parties hereunder. If the Indemnifying Parties have timely disputed such claim,
as provided above, such dispute shall be resolved by the procedures set forth in
Paragraph 7.
e. Payments of all amounts owing by any Indemnifying Party
pursuant to this Agreement relating to a Third Party Claim shall be made within
thirty (30) days after the latest of (i) the settlement of such Third Party
Claim, (ii) the expiration of the period for appeal of a final adjudication of
such Third Party Claim, or (iii) the expiration of the period for appeal of a
final adjudication of the Indemnifying Parties liability to the Indemnified
Party under this Agreement. Payments of all amounts owing by the Indemnifying
Parties pursuant to Paragraph 2(d) shall be made within thirty (30) days after
the later of (i) the expiration of the 60-day Indemnity Notice period or (ii)
the expiration of the period for appeal of a final adjudication of the
Indemnifying Parties liability to the Indemnified Party under this Agreement.
During the two-year period following the Effective Date, each Stockholder shall
be entitled to satisfy payments owed to APP by transfer of APP Common Stock from
such Stockholder to APP. For all purposes of this Agreement, the value of each
share of APP Common Stock transferred to APP pursuant to this Agreement shall be
calculated by averaging the daily closing prices for a share of APP Common Stock
for the twenty (20) consecutive trading days on which such shares are actually
traded on the Nasdaq National Market preceding the date of the Claim Notice or
Indemnity Notice, as the case may be. The number of shares of APP Common Stock
permitted to be transferred under this Paragraph 2(e) shall be diminished
proportionately in accordance with the percentage of APP Common Stock released
under the Lock-Up Provisions set forth in Paragraph 1 of the Stockholder
Representation Letter. The rights of any Stockholder to transfer shares of APP
Common Stock in satisfaction of payments owed to APP pursuant to this Agreement
shall terminate upon the earlier of (x) the termination of the Lock-Up
Provisions set forth in the Stockholder Representation Letter or (y) at the end
of the two-year period following the Effective Date.
f. The Indemnifying Parties shall provide the Indemnified
Party with written notice of any firm offer that is made to settle or compromise
a Third Party Claim against an Indemnified Party. If a firm offer is made to
settle such a claim solely by the payment of money damages and the Indemnifying
Parties notify the Indemnified Party in writing that the Indemnifying Parties
agree to such settlement, but the Indemnified Party elects not to accept and
agree to it, the Indemnified Party may continue to contest or defend such Third
Party Claim and, in such event, the total maximum liability of the Indemnifying
Parties to indemnify or otherwise reimburse the Indemnified Party hereunder with
respect to such a claim shall be limited to and shall not exceed the amount of
such settlement offer, plus reasonable out-of-pocket costs and reasonable
expenses (including reasonable attorneys' fees and disbursements) to the date of
notice that the Indemnifying Parties desired to accept such settlement.
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g. Notwithstanding anything contained in this Agreement or the
Merger Agreement to the contrary, the Indemnifying Parties in the aggregate (i)
shall have no obligation hereunder to provide indemnification for the first
$100,000 of Damages (without counting Immaterial Claims as defined below), and
(ii) in no event shall the Indemnifying Parties have any liability hereunder
with respect to any singular incident or a fact involving a breach or inaccuracy
of the Company if the Damages from such claim are equal to or less than $7,500
("Immaterial Claims"). Notwithstanding anything to the contrary contained herein
or in the Merger Agreement, the obligations of each Stockholder hereunder shall
not exceed fifty percent (50%) of the aggregate value of the Merger
Consideration or Exchange Consideration, as the case may be, paid to such
Stockholder pursuant to any Related Acquisition on the Closing Date.
3. Intentionally Omitted.
4. Remedies Exclusive. The remedies provided in this Agreement are the
exclusive rights or remedies available to one party against the other arising
out of or with respect to the Merger Agreement, either at law or in equity,
except in the case of fraud.
5. Costs, Expenses and Legal Fees. Whether or not the transactions
contemplated hereby are consummated, each party hereto shall bear its own costs
and expenses (including attorneys' fees), except that each party hereto agrees
to pay the costs and expenses (including reasonable attorneys' fees and
expenses) incurred by the other parties in successfully (a) enforcing any of the
terms of this Agreement or (b) proving that another party breached any of the
terms of this Agreement.
6. Tax Benefits; Insurance Proceeds. The total amount of any indemnity
payments owed by one party to another party to this Agreement shall be reduced
by any correlative tax benefit received by the party to be indemnified or the
net proceeds received by the party to be indemnified with respect to recovery
from third parties or insurance proceeds, and such correlative insurance benefit
shall be net of the insurance premium, if any, that becomes due as a result of
such claim.
7. Dispute Resolution.
a. Arbitration. The parties hereto agree that any claim,
controversy, dispute or disagreement between or among any of the parties arising
out of or relating to this Agreement shall be governed exclusively by the terms
and provisions of this Paragraph 7; provided, however, that within ten (10) days
from the date any party gives notice to the others of its desire to seek
arbitration as provided in Paragraph 7(b) and prior to commencing an arbitration
procedure pursuant to this Paragraph 7, the parties shall meet to discuss and
consider alternative dispute resolution procedures other than arbitration
including, but not limited to Judicial Arbitration & Mediation Services, Inc.,
if applicable. If at any time prior to the rendering of the decision by the
arbitrator (or pursuant to such other alternative dispute resolution procedure)
as contemplated in this Paragraph 7 to the extent a party makes a written offer
to an opposing party proposing a settlement of the matter(s) at issue and such
offer is rejected, then the party rejecting such offer shall be obligated to pay
the costs and expenses (excluding the amount of the award granted under the
decision) of the party that offered the settlement from the date such offer was
received by such other party if the decision is for a dollar amount that is less
than the amount of such offer to settle. Notwithstanding the foregoing, the
terms and provisions of this Paragraph 7 shall not preclude any party hereto
from seeking, or a court of competent jurisdiction from granting, a temporary
restraining order, temporary injunction or other equitable relief for any breach
of (i) any noncompetition or confidentiality covenant or (ii) any duty,
obligation, covenant, representation or warranty, the breach of which may cause
irreparable harm or damage.
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b. Arbitrators. In the event there is a claim, controversy,
dispute or disagreement among the parties hereto arising out of or relating to
this Agreement (including any claim based on or arising from an alleged tort)
and the parties hereto have not reached agreement regarding an alternative to
arbitration, the parties agree to select, within 30 days of notice by a party to
the other of its desire to seek arbitration under this Paragraph 7 one (1)
arbitrator mutually acceptable to the Company and the Stockholders to hear and
decide all such claims under this Paragraph 7. Each of the arbitrators proposed
shall be impartial and independent of all parties. If the parties cannot agree
on the selection of an arbitrator within said 30-day period, then any party may
in writing request the judge of the United States District Court for the
_____________ District of __________ senior in term of service to appoint the
arbitrator and, subject to this Paragraph 7, such arbitrator shall hear all
arbitration matters arising under this Paragraph 7.
c. Applicable Rules.
(1) Each arbitration hearing shall be held at a place
in _____________ acceptable to the arbitrator. The arbitration shall be
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association to the extent such rules do not conflict with the terms
hereof; provided, however, that if the parties hereto agree to an alternative to
arbitration they may agree to an alternative set of rules, including as to rules
of evidence and procedure. The decision of the arbitrator shall be reduced to
writing and shall be binding on the parties and such decision shall contain a
concise statement of the reasons in support of such decision. Judgment upon the
award(s) rendered by the arbitrator may be entered and execution had in any
court of competent jurisdiction or application may be made to such court for a
judicial acceptance of the award and an order of enforcement. The charges and
expenses of the arbitrator shall be shared equally by the parties to the
hearing.
(2) The arbitration shall commence within ten (10)
days after the arbitrator is selected in accordance with the provisions of this
Paragraph 7. In fulfilling his duties with respect to determining the amount of
any loss, the arbitrator may consider such matters as, in the opinion of the
arbitrator, are necessary or helpful to make a proper valuation. The arbitrator
may consult with and engage disinterested third parties to advise the
arbitrator. The arbitrator shall not add any interest factor reflecting the time
value of money to the amount of any loss and shall not award any punitive
damages.
(3) If the arbitrator selected hereunder should die,
resign or be unable to perform his or her duties hereunder, the parties, or such
senior judge (or such judge's successor) in the event the parties cannot agree,
shall select a replacement arbitrator. The procedure set forth in this Paragraph
7 for selecting the arbitrator shall be followed from time to time as necessary.
(4) As to any determination of the amount of any
loss, or as to the resolution of any other claim, controversy, dispute or
disagreement, that under the terms hereof is made subject to arbitration, no
lawsuit based on such claimed loss or such resolution shall be instituted by the
parties hereto, other than to compel arbitration proceedings or enforce the
award of the arbitrator, except as otherwise provided in Paragraph 7.
(5) All privileges under [state] and federal law,
including attorney-client and work-product privileges, shall be preserved and
protected to the same extent that such privileges would be protected in a
federal court proceeding applying [state] law.
8. Miscellaneous.
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a. Amendment; Waivers. This Agreement may be amended, modified
or supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of any terms and conditions hereof must be in writing, and
signed by the party or parties making any such waiver. The waiver of any of the
terms and conditions of this Agreement shall not be construed as a waiver of any
other terms and conditions hereof.
b. Assignment. Neither this Agreement nor any right created
hereby or in any agreement entered into in connection with the transactions
contemplated hereby shall be assignable by any party hereto.
c. Parties in Interest. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective heirs, legal representatives, successors and assigns
of the parties hereto.
d. Entire Agreement. This Agreement, the Merger Agreement and
any agreements contemplated hereby constitute the entire agreement of the
parties regarding the subject matter hereof, and supersede all prior agreements
and understandings, both written and oral, among the parties, or any of them,
with respect to the subject matter hereof.
e. Severability. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
therefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
f. Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (BUT NOT THE RULES GOVERNING
CONFLICTS OF LAWS) OF THE STATE OF ______________.
g. Captions. The captions contained in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of the
terms or provisions hereof.
h. Gender and Number. When the context requires, the gender of
all words used herein shall include the masculine, feminine and neuter and the
number of all words shall include the singular and plural.
i. Reference to Agreement. Use of the words "herein,"
"hereof," "hereto" and the like in this Agreement shall be construed as
references to this Agreement as a whole and not to any particular Article,
Paragraph or provision of this Agreement, unless otherwise noted.
j. Notice. Whenever this Agreement requires or permits any
notice, request, or demand from one party to another, the notice, request or
demand must be in writing to be effective and shall be deemed to be delivered
and received (i) if personally delivered or if delivered by telex, telegram,
facsimile or courier service, when actually received by the party to whom notice
is sent or (ii) if delivered
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by mail (whether actually received or not), at the close of business on the
third business day next following the day when placed in the mail, postage
prepaid, certified or registered, addressed to the appropriate party or parties,
at the address of such party set forth below (or at such other address as such
party may designate by written notice to all other parties in accordance
herewith):
If to APP: American Physician Partners, Inc.
000 Xxxx Xxxxxx
0000 XxxxxxxXxxx Xxxxx
Xxxxxx, Xxxxx 00000
Fax No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxx, President
with a copy to: Xxxxxxx, Phleger & Xxxxxxxx LLP
0000 XxxXxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Fax No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxx
If to the Stockholders: See Exhibit A
k. Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
l. Survival. Any and all claims for indemnification asserted
in writing before the expiration of the applicable survival periods specified in
Section __ of the Merger Agreement shall survive until resolved.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
APP:
AMERICAN PHYSICIAN PARTNERS, INC.
By:
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Xxxxxxx X. Xxxxxxx, President
STOCKHOLDERS:
[Separate pages to be attached]
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Exhibit A
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List of Stockholders
A-1
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Exhibit B
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List of Exceptions
B-1
