1
Exhibit 10.30
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STOCK PURCHASE AGREEMENT
BY AND AMONG
AMERIPATH, INC.,
DRS. XXXXXXXXXXX, XXXXXX AND ASSOCIATES, INC.,
XXXXXXXXXXX, XXXXXX REAL ESTATE PARTNERSHIP
XXXXXXXX XXXXXXXXXXX, M.D.,
XXXXXX X. XXXXXX, M.D.,
AND
XXXXX X. XXXXXXX, M.D.
DATED AS OF OCTOBER 10, 1996
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TABLE OF CONTENTS
PAGE NO.
ARTICLE I
PURCHASE OF CAPITAL STOCK
1.1 Purchase and Sale of Capital Stock............................................................ 1
1.2 The Contingent Notes.......................................................................... 3
1.3 Contingent Issuance of AmeriPath Stock........................................................ 12
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND SLA
2.1 Corporate Organization, Qualification, etc.................................................... 18
2.2 Subsidiaries.................................................................................. 18
2.3 Capital Stock................................................................................. 18
2.4 Corporate Record Books........................................................................ 18
2.5 Title to Stock................................................................................ 18
2.6 Options and Rights............................................................................ 19
2.7 Authorization, Etc............................................................................ 19
2.8 No Violation.................................................................................. 19
2.9 Financial Statements.......................................................................... 19
2.10 Employees..................................................................................... 20
2.11 Absence of Certain Changes.................................................................... 20
2.12 Contracts..................................................................................... 21
2.13 True and Complete Copies...................................................................... 23
2.14 Title and Related Matters..................................................................... 23
2.15 Litigation.................................................................................... 24
2.16 Tax Matters................................................................................... 24
2.17 Compliance with Law and Applicable Government Regulations..................................... 25
2.18 ERISA and Related Matters..................................................................... 26
2.19 Intellectual Property......................................................................... 27
2.20 Environmental Matters......................................................................... 28
2.21 Dealings with Affiliates...................................................................... 29
2.22 Banking Arrangements.......................................................................... 29
2.23 Insurance..................................................................................... 29
2.24 Consents...................................................................................... 29
2.25 Investment Representations.................................................................... 30
2.26 Accounts Receivable; Inventories.............................................................. 31
2.27 Brokerage..................................................................................... 32
2.28 Improper and Other Payments................................................................... 32
2.29 Participation in Audits....................................................................... 32
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2.30 Health Care Laws.............................................................................. 32
2.31 Financial Condition at Closing................................................................ 34
2.32 Disclosure.................................................................................... 34
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
3.1 Corporate Organization, etc................................................................... 35
3.2 Subsidiaries.................................................................................. 35
3.3 Authorization, Etc............................................................................ 35
3.4 No Violation.................................................................................. 35
3.5 Governmental Authorities; Consents............................................................ 36
3.6 Issuance of AmeriPath Stock................................................................... 36
3.7 Additional Purchaser Representations: Books and Records; Financial
Statements.................................................................................... 36
3.8 Compliance.................................................................................... 36
3.9 Capitalization................................................................................ 36
3.10 Litigation.................................................................................... 36
3.11 No Additional Seller Representations.......................................................... 37
3.12 Tax Matters................................................................................... 37
3.13 Dealing with Affiliates....................................................................... 37
3.14 Disclosure.................................................................................... 38
ARTICLE IV
COVENANTS OF THE SELLERS
4.1 Regular Course of Business.................................................................... 38
4.2 Amendments.................................................................................... 38
4.3 Capital Changes; Pledges...................................................................... 38
4.4 Dividends..................................................................................... 38
4.5 Capital and Other Expenditures................................................................ 39
4.6 Cash and Cash Equivalents..................................................................... 39
4.7 Borrowing..................................................................................... 39
4.8 Other Commitments............................................................................. 39
4.9 Amendments to Charter......................................................................... 39
4.10 Full Access and Disclosure.................................................................... 39
4.11 Confidentiality............................................................................... 40
4.12 Breach of Agreement........................................................................... 40
4.13 Fulfillment of Conditions Precedent........................................................... 40
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ARTICLE V
COVENANTS OF THE PURCHASER
5.1 Confidentiality............................................................................... 40
5.2 Full Access and Disclosure.................................................................... 40
5.3 Breach of Agreement........................................................................... 41
5.4 Fulfillment of Conditions Precedent........................................................... 41
ARTICLE VI
OTHER AGREEMENTS
6.1 Further Assurances............................................................................ 41
6.2 Agreement to Defend........................................................................... 42
6.3 Consents...................................................................................... 42
6.4 No Solicitation or Negotiation................................................................ 42
6.5 No Termination of Sellers' Obligations by Subsequent Incapacity, Etc.......................... 42
6.6 Employment Agreements......................................................................... 42
6.7 Public Announcements.......................................................................... 42
6.8 Deliveries After Closing...................................................................... 43
6.9 Non-Competition Covenant...................................................................... 43
6.10 Non-disclosure; Confidentiality............................................................... 44
6.11 Rule 144 Best Efforts......................................................................... 46
6.12 Real Estate................................................................................... 46
6.13 Delivery of Purchaser Statements.............................................................. 46
6.14 Stock Options................................................................................. 47
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
7.1 Representations and Warranties; Covenants and Agreements...................................... 47
7.2 No Injunction................................................................................. 48
7.3 Third Party Consents.......................................................................... 48
7.4 No Material Adverse Change.................................................................... 48
7.5 Employment Agreement.......................................................................... 48
7.7 Delivery of SLA Share Certificates............................................................ 48
7.8 Shareholders' Agreement....................................................................... 48
7.9 Subordination Agreement....................................................................... 48
7.10 SLA Charter Amendments........................................................................ 49
7.11 Creditors..................................................................................... 49
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ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
8.1 Representations and Warranties; Performance................................................... 49
8.2 No Injunction................................................................................. 49
8.3 Material Adverse Change....................................................................... 49
8.4 Third Party Consents.......................................................................... 49
8.5 Purchase Consideration........................................................................ 50
8.6 Employment Agreements......................................................................... 50
ARTICLE IX
CLOSING
9.1 Closing....................................................................................... 50
9.2 Closing Deliveries............................................................................ 50
ARTICLE X
TERMINATION AND ABANDONMENT
10.1 Methods of Termination........................................................................ 52
10.2 Procedure Upon Termination.................................................................... 53
ARTICLE XI
SURVIVAL OF TERMS; INDEMNIFICATION
11.1 Survival...................................................................................... 53
11.2 Indemnification by the Sellers................................................................ 54
11.3 Indemnification by the Purchaser.............................................................. 55
11.4 Third-Party Claims............................................................................ 55
11.5 Indemnification Basket; Maximum Liability..................................................... 56
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Amendment and Modification.................................................................... 57
12.2 Entire Agreement.............................................................................. 57
12.3 Certain Definitions........................................................................... 57
12.4 Notices....................................................................................... 59
12.5 Assignment.................................................................................... 61
12.6 Governing Law................................................................................. 61
12.7 Consent to Jurisdiction; Service of Process................................................... 61
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12.8 Injunctive Relief............................................................................. 61
12.9 Counterparts.................................................................................. 61
12.10 Headings...................................................................................... 61
12.11 Binding Effect................................................................................ 61
12.12 Delays or Omissions........................................................................... 61
12.13 Severability.................................................................................. 62
12.14 Expenses...................................................................................... 62
12.15 Arbitration................................................................................... 62
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SCHEDULES
1.1 Sellers
1.2(b)(i) Accounts Existing at Closing
1.3 Conditions & Restrictions on Shares
2.1 Jurisdictions of Qualification
2.2 SLA's Subsidiaries
2.6 Agreements Regarding SLA's Shares
2.9(a) Additional Liabilities
2.9(b) Liabilities covered by Insurance
2.9(c) Accounts Payable
2.12 Contracts
2.14 Real and Personal Property
2.15 Claims
2.17(a) Permits and Licenses
2.17(b) Jurisdictions Licensed to Provide Health Care
2.18 ERISA, Benefit Plans and Other Matters
2.19 Intellectual Property
2.20 Environmental Matters
2.21 Affiliated Transactions
2.22 Banking Arrangements
2.23 Insurance
2.24 Consents
2.26 Accounts Receivable
2.28 Improper Payments
2.29 Participation in Audits
2.30(a) Fraud and Abuse
2.30(b) Third-Party Payors
2.30(c) Medicare and Medicaid Compliance
2.30(d) Rate Limitations and Rates
3.2 Subsidiaries of AmeriPath
3.7 Books and Records
3.9 Capitalization
3.10 Litigation
3.13 Agreements and Arrangements with Affiliates
7.3 Third Party Consents
7.11 Creditor Consents
EXHIBITS
1.2 Form of 7% Non-Negotiable Subordinated Contingent Promissory Note
2.1 SLA's Articles of Incorporation, as amended, and By-laws
2.9 Financial Statements
3.1 AmeriPath Florida's Charters and Bylaws
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6.6 Form of Employment Agreement
6.12 Lease
7.6 Opinion of Seller's Counsel
7.8 Subordination Agreement
8.7 Opinion of Purchaser's Counsel
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is dated as of October
10, 1996, by and among AMERIPATH, INC., a Delaware corporation, ("AmeriPath" or
the "Purchaser"), DRS. XXXXXXXXXXX, XXXXXX AND ASSOCIATES, INC., a Florida
professional service corporation ("SLA"), all of the shareholders of SLA (set
forth on Schedule 1.1 hereto) who collectively hold One Hundred (100) shares,
par value $1.00 per share, of SLA (each shareholder shall be referred to herein
as the "Seller" and collectively, the "Sellers") and XXXXXXXXXXX, XXXXXX REAL
ESTATE PARTNERSHIP, a Florida general partnership.
.
WHEREAS, the Sellers own all of the issued and outstanding shares of
capital stock of SLA; SLA, although initially organized as a professional
service corporation under Chapter 621 of the Florida Statutes, has, prior to the
closing of the transactions contemplated by this Agreement, upon the terms and
subject to the conditions set forth herein, converted itself to and is presently
organized as, a regular business corporation organized under Chapter 607 of the
Florida Statutes;
WHEREAS, AmeriPath desires to purchase and acquire from the Sellers,
and the Sellers desire to sell, transfer and deliver to AmeriPath, all of the
issued and outstanding shares of capital stock of SLA, upon the terms and
subject to the conditions set forth herein;
WHEREAS, although the parties hereto have agreed as to the minimum
value of SLA, they are not able to agree as to the total value of SLA, and thus
the parties hereto have agreed to certain additional contingent purchase price
consideration based upon the results of operations of SLA, as more fully set
forth herein; and
WHEREAS, upon the closing of the transactions contemplated by this
Agreement, (i) SLA shall be and become a wholly-owned subsidiary of AmeriPath,
and (ii) such wholly-owned subsidiary may be merged with and into another
wholly-owned subsidiary of AmeriPath, AmeriPath Florida, Inc. ("AmeriPath
Florida"), with AmeriPath Florida surviving such merger.
NOW, THEREFORE, for and in consideration of the mutual benefits to be
derived hereby and the premises, representations, warranties, covenants and
agreements herein contained, AmeriPath, the Sellers and SLA hereby agree,
intending to be legally bound, as follows:
ARTICLE I
PURCHASE OF CAPITAL STOCK
1.1 Purchase and Sale of Capital Stock and Certain Assets.
(a) Subject to the terms and conditions of this Agreement, the
Sellers agree to sell, transfer and deliver to the Purchaser, and the
Purchaser agrees to purchase, acquire
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and accept delivery from the Sellers, all of the issued and outstanding
capital stock of SLA (the "SLA Shares") owned or held by such Sellers,
which number of SLA Shares to be sold and purchased hereunder is set
forth opposite each such Seller's respective name on Schedule 1.1
attached hereto.
(b) Upon the sale, transfer and delivery to the Purchaser by
the Sellers of the SLA Shares at the Closing (as such term is defined
in Section 9.1 hereof), and in consideration therefor, AmeriPath shall
deliver to the Sellers the following consideration in the aggregate
(which aggregate consideration shall be divided between the Sellers in
the amounts and as indicated on Schedule 1.1 attached hereto) (the
"Purchase Price"):
(i) TEN MILLION TWO HUNDRED THIRTY SEVEN THOUSAND
FIVE HUNDRED DOLLARS ($10,237,500.00), by cashier's check or
by wire transfer;
(ii) Certificates evidencing 75,834 shares of Common
Stock, par value $.01 per share, of AmeriPath (the "AmeriPath
Stock");
(iii) Three (3) 7% Non-Negotiable Subordinated
Contingent Promissory Notes, in the form attached hereto as
Exhibit 1.1(C) (the "Contingent Notes"), in the aggregate
maximum principal amount of FIVE MILLION SIX HUNDRED
EIGHTY-SEVEN THOUSAND FIVE HUNDRED DOLLARS
($5,687,500.00)($1,895,833.33 for each Seller), the issuance
and certain terms and conditions of which Contingent Notes are
set forth in Section 1.2 below;
(iv) Up to 379,166 shares of AmeriPath Stock,
issuable over five years subject to the satisfaction of
certain contingencies set forth in Section 1.3 hereof; and
(v) In accordance with the terms of this Section
1.1(b)(vi), the net proceeds (1/3 of such net amount to each
Seller delivered by cashier's check or by wire transfer) of
the sale of 5,500 shares of Florida Physicians Insurance
Company ("the FPIC Shares") stock currently owned by SLA.
Purchaser shall cause SLA to execute an order to sell the FPIC
Shares within three (3) trading days of the date on which all
restrictions on the transferability of such FPIC Shares are
terminated, provided that such shares are listed for trading
on a national exchange or quotation system at such time. In
the event that the FPIC shares are freely tradeable by SLA and
are listed for trading on a national exchange or quotation
system but are not sold by December 20, 1996, then Purchaser
shall pay to Sellers an amount equal to the Closing price per
share of the FPIC Shares on the first trading day on which the
FPIC Shares become freely tradeable by SLA, multiplied by
5,500, less applicable sales commissions, such amount to be
paid one-third to each Seller.
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(c) Upon the sale, transfer and delivery to the Purchaser by
the Xxxxxxxxxxx, Xxxxxx Real Estate Partnership (the "Partnership") of
all of the assets of the Partnership, other than the condominium unit
with a common address 0000 Xxxxx Xxxxxx, Xxxx 000, Xx. Xxxxx, Xxxxxxx,
relating to or utilized in the operation of (i) the hospital billing
company and (ii) SLA (the "Assets"), Purchaser shall purchase and
acquire the Assets from the Partnership at the Closing (as such term is
defined in Section 9.1 hereof), and in consideration therefor,
AmeriPath shall deliver to the Partnership cash equal to FOUR HUNDRED
FIFTEEN DOLLARS ($415,000.00). The Partnership, by executing and
delivering this Agreement, agrees to sell, transfer and convey the
Assets to the Purchaser on the terms and conditions set forth in this
Section 1.1(c), in Section 6.12 or elsewhere in this Agreement.
Further, the Partnership agrees that promptly following the Closing it
will deliver to Purchaser a complete schedule of the Assets.
(d) Documentary Stamp Taxes. The Purchaser hereby acknowledges
that it is its belief that Florida law does not require the payment of
documentary stamp taxes in connection with the execution and delivery
of the Contingent Notes due to the contingent nature of the obligation.
Notwithstanding the foregoing, the Purchaser agrees to pay any and all
such documentary stamp taxes, or other similar taxes, if any, that may
become due or payable in connection with the execution and delivery of
the Contingent Notes or this Agreement, and the Purchaser agrees to
indemnify and hold harmless the Sellers and SLA from and against any
and all such taxes. The Purchaser shall also be responsible for and
shall pay all Florida documentary stamp taxes due and payable and
required to be affixed with respect to the contingent issuance of
AmeriPath Stock. Notwithstanding anything else to the contrary in this
Agreement, these obligations of the Purchaser shall survive for so long
as there are any remaining obligations under the Contingent Notes and
the contingent rights to receive AmeriPath Stock.
1.2 The Contingent Notes.
(a) Principal Amounts; Issuance. The aggregate maximum
principal amount of the Contingent Notes to be issued and delivered by
the Purchaser to the Sellers pursuant to Section 1.1(b)(iii) hereof at
the Closing shall be FIVE MILLION SIX HUNDRED EIGHTY-SEVEN THOUSAND
FIVE HUNDRED DOLLARS ($5,687,500.00) ($1,895,833.33 for each Seller).
At the Closing, the Purchaser shall deliver to each Seller a Contingent
Note, with the final payment thereon, if applicable, due on December
31, 2001, which Contingent Note shall be in the form of Exhibit 1.2
hereto. The Contingent Notes shall be due and payable in the applicable
principal amount (with applicable interest) specified in or calculated
pursuant to this Agreement, the Contingent Notes and the Annexes to
such Contingent Notes (the "Appropriate Principal Amount")
corresponding to a target range of Operating Earnings (as defined
below) or Cumulative Operating Earnings (as defined below), as the case
may be, specified in the Contingent Notes and the Annexes thereto, with
respect to each of the five 12-calendar month periods ending September
30, from 1997 through 2001, if, and only if, (i) with respect to the
twelve months ending September 30, 1997, Operating Earnings for such
year equal or exceed the specified minimum target amount of
$1,820,001.00 (the "Year-1
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Minimum Target") subject to Section 1.2(b)(iv) and (d) hereof, or, (ii)
with respect to the 24 month period ending September 30, 1998, the 36
month period ending September 30, 1999, the 48 month period ending
September 30, 2000 and the 60 month period ending September 30, 2001,
Cumulative Operating Earnings for such periods equal or exceed
$3,640,002.00, $5,460,003.00, $7,280,004.00 and $9,100,005.00,
respectively (together with the Year-1 Minimum Target, as relevant to
the applicable period, the "Minimum Targets") subject to Section
1.2(b)(iv) and (d) hereof. For each of the five 12-calendar month
periods ending September 30, from 1997 through 2001 for which Operating
Earnings or Cumulative Operating Earnings, as the case may be, are less
than the applicable Minimum Target (subject to Section 1.2(b)(iv) and
(d) hereof, no principal payment(s) shall be required, due or made
under the Contingent Notes, with respect to that period, and any and
all interest with respect thereto or accrued thereon, which otherwise
would have become due or payable had the applicable Minimum Target been
achieved for such period, shall be canceled and voided. Notwithstanding
anything to the contrary herein or in the Contingent Notes, the
aggregate maximum principal amount due or payable under the Contingent
Notes shall not exceed $5,687,500.00.
(b) "Operating Earnings"; "Cumulative Operating
Earnings".
(i) Definition of "Operating Earnings". For purposes
hereof (and Section 1.3 and the Contingent Notes), the term
"Operating Earnings", with respect to any period, shall mean
the income of or attributable to SLA, which following the
Closing shall become a division of AmeriPath, or AmeriPath
Florida, named the Southwest Florida Division (as defined
below), for such full twelve month period (i.e., October 1
through September 30), before deduction for (in each case,
with respect to SLA or the Southwest Florida Division (as
defined below)) (i) interest paid in such year, (ii) income
tax payable for such year, (iii) charges for amortization of
goodwill, including without limitation any amortization of
goodwill recorded in connection with this transaction or
amortization of any payments made under the Contingent Notes,
(iv) severance pay, if any, that is payable to a Seller as a
result of a termination of such Seller pursuant to his
Employment Agreement with AmeriPath Florida or its permitted
assign, and (v) any fees or expenses incurred by SLA in
connection with the transactions contemplated by this
Agreement. With respect to the first twelve month period, such
period shall be deemed to have started on October 1, 1996
(despite the date of this Agreement or the Closing Date).
Purchaser agrees that certain non-recurring expenses that were
not incurred in the ordinary course of business and are listed
on Schedule 1.2(b) hereof have been incurred by SLA since
October 1, 1996 and prior to the date hereof and such expenses
will not be excluded for purposes of calculating Operating
Earnings and the Profitability Percentage (defined below) for
such initial 12-month period. All such calculations shall be
determined in accordance with GAAP (as defined in Section 12.3
hereof) applied by the Purchaser on a consistent basis. For
purposes hereof (and Section 1.3 and the Contingent Notes),
the term "SLA," with respect to Operating Earnings or
Cumulative Operating Earnings, shall mean and include the
business, operations,
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contracts, assets and liabilities of SLA (as such is
constituted immediately prior to the Closing), which following
the Closing shall consist of the business, operations,
contracts, assets and liabilities of, and the results of
operations, revenues and expenses associated with, (i) the
contracts with hospitals, medical facilities and other parties
within the SLA Territory (defined below) in effect from time
to time, to which SLA, prior to the Closing, and AmeriPath
Florida, following the Closing, is a party, and which are
serviced by the employees who from time to time are employed
by AmeriPath Florida and who work within the Southwest Florida
Division (as defined below) (collectively, such employees
being referred to herein as the "SLA-Based Employees"), or
(ii) AmeriPath Florida's (or such other applicable AmeriPath
Affiliates) employment of, and employment agreements with, any
and all SLA-Based Employees. For purposes hereof (and Section
1.3 and the Contingent Notes), the term "Southwest Florida
Division" shall mean and include that portion of the business
and operations of AmeriPath Florida (or such other applicable
AmeriPath Affiliate) which, prior to consummation of the
transactions contemplated by this Agreement, constituted the
business and operations of Drs. Xxxxxxxxxxx, Xxxxxx and
Associates, Inc. within the SLA Territory, as same may change
and increase from time to time subsequent to the Closing.
Xxxxxx X. Xxxxxx, M.D., shall be the Managing Director of the
Southwest Florida Division for the later of (i) the duration
of the Contingent Notes, or (ii) his employment term with
AmeriPath or AmeriPath Florida.
(ii) Calculation of Operating Earnings. A statement
of the Operating Earnings, Cumulative Operating Earnings, as
well as Sellers' entitlement to any payments under the
Contingent Notes or AmeriPath Stock under the Stock Rights,
prepared by AmeriPath senior management, will be delivered to
the Sellers as soon as practicable following the end of each
applicable 12-month period, but in all events within 90 days
after the end of each such period. If AmeriPath's computation
provides that Sellers are entitled to payments under the
Contingent Notes, then the Appropriate Principal Amount
(together with accrued and unpaid interest thereon) that each
Seller is entitled to under the Contingent Notes shall be paid
within five (5) days of delivery of this statement. If any
Seller wishes to challenge the calculation of Operating
Earnings as set forth in the statement, he may do so by giving
written notice of such objection (the "Objection Notice") to
AmeriPath, signed by the Seller, within 40 days after receipt
of such statement of Operating Earnings. The Objection Notice
shall set forth in reasonable detail the Seller's calculation
of Operating Earnings (or Cumulative Operating Earnings, as
the case may be). If an Objection Notice is so timely
delivered to AmeriPath, AmeriPath and the objecting Seller
shall use their best efforts to resolve as soon as practicable
any difference of opinion. If they are unable to resolve such
difference within 20 days after receipt by AmeriPath of the
Objection Notice from the Sellers, the matter shall be
referred to the independent public accounting firm who then
audits the annual financial statements of AmeriPath, whose
decision shall be rendered within 30 days and shall be binding
on all parties, unless either party decides to dispute the
computation through arbitration pursuant to Section 12.15
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of this Agreement. If none of the Sellers timely deliver an
Objection Notice to AmeriPath, then AmeriPath's statement of
Operating Earnings and Cumulative Operating Earnings shall be
binding upon the Sellers. If any Seller fails to deliver an
Objection Notice, then AmeriPath's statement of Operating
Earnings shall be binding with respect to such Seller,
regardless of the outcome of a dispute, if any, between
another Seller and the Purchaser. If the Sellers object to the
calculation of Operating Earnings or Cumulative Operating
Earnings for the purpose of determining compliance with this
Section, the difference between the Appropriate Principal
Amount of the Contingent Notes for such period and the amount,
if any, actually paid and accompanying the AmeriPath
statement, shall be paid within ten (10) days after resolution
of the dispute with respect to such calculation to the extent,
and solely to the extent, that such resolution indicates that
any such amount remains unpaid.
(iii) Cumulative Operating Earnings. For purposes
hereof, the term "Cumulative Operating Earnings" shall mean
and include, with respect to the 24 month period ending
September 30, 1998, the 36 month period ending September 30,
1999, the 48 month period ending September 30, 2000 and the 60
month period ending September 30, 2001, the Operating Earnings
of SLA, on a cumulative basis, from October 1, 1996 through
the end of such period (e.g., the Cumulative Operating
Earnings for the period ending September 30, 1998 shall equal
the Operating Earnings, on a cumulative basis, from October 1,
1996 through and including September 30, 1998 (i.e., twenty
four full months of Operating Earnings would be included)).
(iv) Minimum Target Adjustments. For purposes of
calculating Operating Earnings, or Cumulative Operating
Earnings, as the case may be, in the event that AmeriPath
intentionally (and without the consent of the Sellers)
terminates, or fails to negotiate in good faith and allows to
expire, any profitable SLA hospital or medical facility
Contract in Lee, Charlotte, Xxxxxxx or Sarasota Counties,
Florida (the "SLA Territory"), and AmeriPath does not replace
that Contract with a Contract of substantially similar or
greater value within 60 days, or if AmeriPath benefits from a
contract amendment affecting its operations outside of the
Southwest Florida Division in return for an unfavorable
amendment to a contract in the SLA Territory, the Minimum
Targets (but not the Appropriate Principal Amounts) shall be
reduced to reflect the lost earnings from such Contract; and
should AmeriPath assign a hospital Contract existing between
AmeriPath or an AmeriPath Affiliate and a facility as of the
Closing Date within the SLA Territory to the Southwest Florida
Division, the Minimum Targets shall be increased to reflect
additional earnings from the new Contract to neutralize the
effect of such termination, expiration, amendment or
assignment. The Minimum Targets may also be adjusted as set
forth in Section 1.2(d) below. Notwithstanding or in any way
limiting the definition set forth above in Section 1.2(b)(i),
the income attributable to SLA for purposes of computing
Operating Earnings and Cumulative Operating Earnings shall
include all revenues derived
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from services performed or originated within the SLA
Territory, other than revenues derived from AmeriPath accounts
(the "Existing AmeriPath Accounts") existing on the Closing
Date (which accounts are all listed on Schedule 1.2(b)(i)),
and the hospital contracts held by the Other Practice (as
defined in Section 1.2(b)(v) below) on the Closing Date,
provided that services performed on such Existing AmeriPath
Accounts or hospital contracts are not performed by the
SLA-Based Employees. If services are performed on Existing
Ameripath Accounts by SLA-Based Employees, revenue from such
service shall be attributed to the Southwest Florida Division.
Costs, charges and expenses associated with revenues
attributable to the Southwest Florida Division, including
inter-company charges for the technical/processing fee, if the
originating work is not processed by the Southwest Florida
Division, at the best available price, shall also be
attributed to SLA. For purposes hereof, services shall be
deemed to have been "performed" or "originated" within the SLA
Territory if the address or zip code of the referring
physician's office, the performing or referring facility is
within the SLA Territory. Sellers shall have access to
Purchaser's information or other available systems or records
with respect to data on referring physicians. In the event
that Purchaser controls the billing and collection process for
the Southwest Florida Division, Purchaser shall use its best
efforts to maintain a collection ratio consistent with that of
SLA during the 12 months prior to the Closing Date, allowing
for future negotiated contractual adjustments and consistent
with AmeriPath's policies. AmeriPath shall make its books and
records available, upon reasonable notice, so that the Sellers
can verify the proper calculation of Operating Earnings during
any time that the Contingent Notes remain outstanding. Sellers
shall have the right to audit the records of AmeriPath. As
prepared by AmeriPath in the normal course of business, or
upon the request of the Managing Director of the Southwest
Florida Division, Sellers shall be entitled to receive any
AmeriPath reports with respect to services performed on behalf
of referring physicians and the entities that perform such
services. In addition, the Managing Physician may download
available information from AmeriPath for purpose of extracting
information and preparing reports on other systems.
(v) Anatomic Pathology Reference Lab and Office-Based
Revenues. To align the incentives of all AmeriPath
Pathologists operating within the SLA Territory, if AmeriPath
closes on its acquisition of another pathology practice in the
SLA Territory (the "Other Practice"), the Southwest Florida
Division shall be credited with 45% (the "SFD Percentage") of
the gross revenues derived by AmeriPath for all anatomic
pathology reference lab and office-based services performed
in, or originating out of, the SLA Territory (the
"Reference-Office Revenues"), and the Other Practice shall be
credited with 55% of the Reference-Office Revenues. After the
closing, AmeriPath will provide Sellers with documentation
substantiating the 45%/55% allocation described herein. If
Sellers do not agree that such 45%/55% allocation is fair and
accurate or, alternatively, agree upon another allocation of
the Reference-Office Revenues, then this provision shall be
void and each of the Southwest Florida Division and the Other
16
Practice will be credited with their own respective
Reference-Office Revenues. If, however, the percentages are
set in accordance with this Section 1.2(b)(v), and the
Southwest Florida Division is ever, during any 12-consecutive
month period commencing on October 1, and ending on the
following September 30th (a "Period"), responsible for
actually generating Reference-Office Revenues in an amount
equal to 20 percentage points less than, or 20 percentage
points more than, the SFD Percentage, then the "SFD
Percentage" shall, for such Period and all subsequent Periods
(unless another adjustment is effectuated hereunder), become
such higher or lower percentage, and the lower and upper
ranges of such new SFD Percentage for purposes of any
subsequent adjustments shall be equal to the new SFD
Percentage, less 20 percentage points, and the new SFD
Percentage plus 20 percentage points, respectively. By way of
illustration and not of limitation, if the Southwest Florida
Division actually generated 66% of the Reference-Office
Revenues for any given applicable Period, the SFD Percentage
shall, for such Period and all subsequent Periods (unless
another adjustment is effectuated hereunder) become 66%. For
subsequent adjustments thereafter, if any, the lower range
will be 46% (i.e. 66% - 20%) and the upper range will be 86%
(i.e. 66% + 20%). Notwithstanding the definition of Operating
Earnings in this Section 1.2 and elsewhere in this Agreement,
if AmeriPath acquires the Other Practice, and a percentage
allocation of Reference-Office Revenues is set pursuant to
this Section 1.2(b)(4), then the "Operating Earnings" for any
Period (or portion thereof) commencing after the allocation is
implemented shall be equal to the Adjusted Gross Revenues,
defined below, multiplied by the Profitability Percentage,
defined below. The "Adjusted Gross Revenues" shall mean the
sum of (i) the Reference-Office Revenues allocated to the
Southwest Florida Division hereunder, and (ii) all other gross
revenues of the Southwest Florida Division, excluding all
Reference-Office Revenues of the Southwest Florida Division.
The "Profitability Percentage" shall be equal to one minus a
fraction, the numerator of which is all of the expenses
attributable to the Southwest Florida Division (as described
in this Agreement), and the denominator of which will be the
actual gross revenues of the Southwest Florida Division
without any reallocation. If, during any twelve month period,
the Reference-Office Revenues allocated to the Southwest
Florida Division fall within the applicable ranges so that
there is no adjustment to the SFD Percentage, but either the
Other Practice or the Southwest Florida Division believe that
there should be a reallocation of the expenses incurred by the
Southwest Florida Division and the Other Practice in
generating the Reference-Office Revenues, because the
allocation of such revenues utilizing the SFD Percentage was
materially different from the actual performance of the two
divisions, then the Sellers, on the one hand, or the Other
Practice, on the other hand, may, by sending written notice to
AmeriPath, cause a representative of the selling shareholders
of the Other Practice a representative of the Sellers to meet
and discuss the disproportionately incurred expenses. The
parties may by mutual agreement, but are not in any way
obligated to, decide to reallocate between the Other Practice
and the Southwest Florida Division, the expenses incurred in
generating their respective Reference-Office Revenues, prior
to performing the
17
computation of Operating Earnings as described herein.
"Reference-Office Revenues" shall be defined as gross revenues
derived from all anatomic pathology professional and/or
technical services including surgical pathology, gynecologic
and non-gynecologic cytology, bone marrow biopsies, aspirates
and peripheral smear studies, special stains and procedures
including but not limited to immunoperoxidase,
immunofluorescence, and decalcification that are performed on
any patient, specimen or sample referred or originating from
any physician's office, regardless of the physician's employer
(e.g. an independently practicing physician, or a physician
employee of an insurance company, or managed care plan, or
hospital), any free-standing ambulatory surgery center, or by
way of a reference lab service contract (e.g. Xxxxx Xxxxx,
Labcorp). Reference-Office Revenues shall not include services
provided for patients, on specimens or samples referred or
originating from a hospital in-patient or out-patient facility
or ambulatory surgery facility that has a majority ownership
interest held by a hospital, or subsidiary or other affiliate
of a hospital. In addition, Reference-Office Revenues shall
not include revenues derived from clinical laboratory
services. The parties hereto agree that subsequent to the
closing of the acquisition of the Other Practice, they shall
mutually agree on adjustments to the fee schedules of the
respective practices in order to develop a substantially
similar fee schedule for purposes of the calculations set
forth in this Section 1.2(b)(v).
(c) Effect of Sale on Contingent Notes. Should any Person (as
such term is defined in Section 12.3 hereof) acquire AmeriPath, whether
by means of a merger with or into AmeriPath or the acquisition of all
or substantially all of the stock or assets of AmeriPath (an "AmeriPath
Acquisition"), then, with respect to the Contingent Notes, as a
condition to consummation of the AmeriPath Acquisition, the acquiring
Person shall be required to either (i) acknowledge and guarantee
AmeriPath's ongoing obligations under the Contingent Notes or (ii)
assume the obligations under the Contingent Notes, with AmeriPath
remaining liable if it survives the transaction.
(d) Effect of Acquisitions on Contingent Notes. In the event
that AmeriPath acquires one or more Persons or businesses, Operating
Earnings will be calculated without including (i) the income generated
by, or expenses incurred in connection with, the acquisition or the
acquired Person or business (except the anatomic pathology and
reference laboratory and office-based revenues pursuant to Section
1.2(b)(v)), and (ii) any selling, general administrative, or other
expenses which do not relate to SLA or its business (except to the
anatomic pathology and reference laboratory and office-based revenues
pursuant to Section 1.2(b)(v)). Notwithstanding anything to the
contrary herein, in the event AmeriPath or an AmeriPath Affiliate so
acquires one or more Persons or businesses within the SLA Territory,
the Minimum Targets shall be decreased by 12% of the net revenues of
such acquired Person or business (i) during the applicable 12-month
period utilized to compute the valuation of such acquired Person, or
(ii) if no such computation was utilized, then during the 12-calendar
months preceding the calendar month on which AmeriPath entered into a
binding agreement with such acquiree. However, in no event shall
Minimum Target be reduced pursuant to this Section 1.2(d)
18
to less than $1,365,001, $2,730,002, $4,095,003, $5,460,004, and
$6,825,005 for periods ending September 30, 1997, September 30, 1998,
September 30, 1999, September 30, 2000, and September 30, 2001,
respectively. Any such reduction shall be calculated within 30 days
after the closing date of the acquisition to which it applies. If such
an acquisition occurs during a 12-month period, then the reduction
shall be applicable to the Minimum Target for that portion of the
12-month period that remains after the acquisition and all subsequent
12-month periods. The Applicable Stock Amount for Operating Earnings or
Cumulative Operating Earnings, as applicable, that fall within such
reduced range utilizing the new Minimum Target shall be equal to the
lowest Applicable Stock Amount for such period as set forth on Schedule
1.3, less 5.55 x ([the difference between (i) the lowest stated
Operating Earnings or Cumulative Operating Earnings, as applicable, on
the appropriate Annex to the Contingent Notes, and (ii) the actual
amount of Operating Earnings or Cumulative Operating Earnings, as
applicable, for such period]/100).
(e) Interest. The Contingent Notes shall bear interest from
the date of issuance until maturity, computed on the basis of a 360-day
year and the actual number of days elapsed, on the unpaid Appropriate
Principal Amount thereof at the rate of seven percent (7.0%) per annum.
Interest shall accrue and compound annually, and shall be payable only
upon payment of principal, if any. In the event Operating Earnings or
Cumulative Operating Earnings are less than the applicable Minimum
Target for any given year, interest on the principal amount of the
Contingent Notes for such year shall be canceled and voided.
(f) Maturity, Redemption and Prepayments. For each period for
which Operating Earnings or Cumulative Operating Earnings equal or
exceed the applicable Minimum Target, the Appropriate Principal Amount
of the Contingent Notes, together with interest accrued on such
Appropriate Principal Amount, shall become due and payable and shall be
paid as provided in subparagraph (a) above. If, in the reasonable
judgment of a majority of the full Board of Directors of AmeriPath
(which judgment is made based upon the advice of counsel), it is
determined that the Contingent Notes, or the holding of the Contingent
Notes by the Sellers, may violate any Regulation or Order of any
Authority (as such terms are defined in Section 12.3), then, at
AmeriPath's sole discretion (as recommended by counsel to Ameripath),
the Contingent Notes may be immediately converted into non-contingent
promissory notes, payable in the amounts and at the time intervals that
would be applicable pursuant to the Contingent Notes if the Operating
Earnings for the then current 12-month period, and each of the
subsequent 12- month periods, of the Contingent Notes were equal to the
average of the Operating Earnings for all prior full 12-month periods
of the Contingent Notes, provided if such decision occurs during the
first two 12-month periods (i.e. prior to September 30, 1998), then the
Operating Earnings for each 12-month period for purposes of computing
future payments under this Section 1.2(f) shall be deemed to be
$2,275,000. If AmeriPath in good xxxxx xxxxx there to be a legal
problem with Sellers holding any promissory notes of AmeriPath, even
non-contingent notes, then AmeriPath will pay the Sellers in one lump
sum the total principal amounts that would be payable over time
pursuant to the preceding sentence along with interest computed through
the date of such payment. AmeriPath shall
19
indemnify the Sellers from any and all costs, damage, losses, or
expenses, that may arise as a result of the Contingent Notes violating
any Regulation or Order of any Authority. In its sole and absolute
discretion, AmeriPath may prepay the Contingent Notes by paying, in the
aggregate, $568,750.00 for each year (or portion thereof) remaining
under the Contingent Notes, along with applicable interest as of the
date of prepayment. AmeriPath shall give the Sellers irrevocable
written notice of any prepayment permitted hereunder not less than
three (3) business days prior to the prepayment date, specifying such
prepayment and the amount of the Contingent Notes proposed to be
prepaid on such date, whereupon such principal amount of the Contingent
Note specified in such notice, together with accrued interest thereon,
shall become due and payable on the prepayment date. The aggregate
amount of each partial prepayment shall be allocated among each of the
holders of the Contingent Notes at the time outstanding pro rata in
proportion to the unpaid principal amounts of the Contingent Notes held
by each of such holders.
(g) Payments. All payments of principal (including any
prepayments or redemptions), and interest under the Contingent Notes
shall be made by AmeriPath in lawful money of the United States of
America in immediately available funds (or at the written request of
the holders thereof, by cashier's or bank check) not later than twelve
o'clock noon, Miami, Florida time, on the date each such payment is
due. To the extent calculation of any payment amounts (whether
principal, interest or otherwise) results in fractions of a cent, the
amount shall be rounded down to the nearest whole cent.
(h) Subordination; Subordination Agreement. The Contingent
Notes shall be subordinate and junior in right of payment to certain
senior indebtedness pursuant to a subordination agreement (the
"Subordination Agreement"), by and among AmeriPath's senior lenders and
each of the holders of promissory notes of AmeriPath. As a condition to
AmeriPath's obligations under the Contingent Notes, the Sellers agree
to execute and deliver appropriate documents and agreements evidencing
the subordination of the Contingent Notes to such senior indebtedness
of AmeriPath.
(i) Notes Non-negotiable. The Contingent Notes shall be
non-transferable and non-negotiable other than by will or the laws of
intestate succession.
(j) Right of Set-Off on Sellers' Contingent Notes. With
respect to the Contingent Notes, AmeriPath shall have the right,
following prior written notice to any Seller, to set-off against
principal or interest payable under the Contingent Notes the amount of
any indemnification payment owed under Article XI hereof. Such notice
shall state with reasonable specificity the good faith basis for
AmeriPath's right to such indemnification payment, and a copy of such
notice shall also be sent to each director of AmeriPath. Each Seller
shall have the right to respond to such notice, and if any Seller
requests that the exercise of such right of set-off be considered and
approved by the Board of Directors, then such right shall not be
exercised unless considered and approved by a majority of the full
Board of Directors. If within 21 days after receipt of such notice of
set-off, the Seller contests in writing (sent to AmeriPath) AmeriPath's
claim of indemnification under Article XI hereof, then the amount which
AmeriPath would
20
otherwise have paid to the Seller but for the exercise of such right of
set-off shall be paid into an interest bearing escrow account
maintained by a bank selected by AmeriPath, to be held in such account
until AmeriPath and the Seller have reached agreement as to the amount,
if any, of such indemnification payment and set-off, or until there has
been a binding resolution of such matter in an arbitration held
pursuant to Section 12.16 below, at which time the amount held in such
segregated account, together with any interest accrued thereon, shall
be released to the prevailing party and possibly with a portion
distributed to the non-prevailing party, as and to the extent agreed
upon or instructed by the arbitrator. AmeriPath and the Seller agree
that they will use their best efforts to resolve any such dispute
within 30 days of receipt of notice by AmeriPath of the Seller's
objection to the set-off.
(k) Defaults. The Sellers shall be entitled to the benefit of
the Events of Default set forth in the form of Contingent Notes.
(l) Conflict. To the extent there is any conflict or
inconsistency between the terms of this Agreement and the terms
specified in the Contingent Notes, the terms specified in the
Contingent Notes shall govern and prevail, provided, however, much of
the text of this Agreement, and in particular this Section 1.2, expands
upon, but does not expressly conflict with, the terms of the Contingent
Notes, and such expansive language herein shall not be deemed a
conflict.
1.3 Contingent Issuance of AmeriPath Stock. As additional purchase
price consideration, the Purchaser shall issue to the Sellers, subject to the
conditions and restrictions set forth in this Section 1.3 (the "Stock Rights"),
up to an aggregate maximum of 379,166 shares of AmeriPath Stock (to be divided
among the Sellers as set forth on Schedule 1.1 hereof). Upon achieving the range
(the "Applicable Range") of Operating Earnings or Cumulative Operating Earnings,
as the case may be, set forth on Schedule 1.3 hereto and as addressed in this
Section 1.3, with respect to each period commencing with the twelve month period
ending September 30, 1997 through the sixty month period ending September 30,
2001, AmeriPath shall deliver, in the aggregate, certificates evidencing the
corresponding number of shares of AmeriPath Stock indicated on Schedule 1.3
hereto (the "Aggregate Stock Amount") to the Sellers (and to each Seller (the
"Applicable Stock Amount")) as so indicated, which shares shall be subject to
the terms, conditions and restrictions set forth in this Section 1.3 and on such
Schedule 1.3.
(a) Delivery; Right to Contingent Issuance Subject to
Cancellation. Certificates for shares representing the Applicable Stock
Amount shall be delivered on or before each January 15 following each
12-month period that the Applicable Range of Operating Earnings or
Cumulative Operating Earnings, as the case may be, has been achieved,
if, and only if, (i) with respect to the twelve months ending September
30, 1997, Operating Earnings equal or exceed a minimum target amount of
$1,820,001.00 (the "First Year Minimum Stock Target") or, (ii) with
respect to the 24 month period ending September 30, 1998, the 36 month
period ending September 30, 1999, the 48 month period ending September
30, 2000 and the 60 month period ending September 30, 2001, Cumulative
Operating Earnings for such periods equal or exceed $3,640,002.00,
$5,460,003.00,
21
$7,280,004.00 and $9,100,005.00, respectively (together with the First
Year Minimum Stock Target, as relevant to the applicable period, the
"Minimum Stock Targets"), subject to the same adjustments as those to
the Minimum Targets, set forth in Sections 1.2(b)(iv) and (d),
substituting "Minimum Stock Target" for "Minimum Target" therein. If
any Seller contests the amount of AmeriPath Stock paid to the Seller
pursuant to this Section 1.3, the contest and resolution of same shall
be initiated and resolved in the same manner described in Section
1.2(b)(ii) above, with payment of the AmeriPath Stock, if any after any
such dispute paid within 10 days after such resolution in the same
manner as payment under the Contingent Notes.
(b) Effect of Sale on Stock Rights. In the event of an
AmeriPath Acquisition (as such term is defined in Section 1.2(c)),
then, with respect to such Stock Rights that have not theretofore been
canceled or voided because the Minimum Stock Target was not or has not
been met for the period in question, as a condition to consummation of
the AmeriPath Acquisition, each Seller shall have the option to either
(i) require that the acquiring Person assume the obligations under the
Stock Rights by converting the rights to receive AmeriPath Stock into
rights to receive stock in the acquiring Person (of substantially
equivalent value, based upon acquisition value, as determined in good
faith by the Board of Directors of AmeriPath) or (ii) convert the Stock
Rights into a subordinated promissory note payable with interest at
prime plus two percent in a principal amount equal to the "stated
value" (as defined below) of the Stock Rights remaining outstanding at
the time of such acquisition. For purposes of this Section 1.3(b), the
"stated value" of the Stock Rights shall be $15.00 multiplied by the
number of shares that would be due and owing in the future if the
Operating Earnings for the current 12- month period and each of the
subsequent 12-month periods of the Stock Rights are equal to the
average of the Operating Earnings for all prior full 12-month periods
of the Stock Rights, provided, if such AmeriPath Acquisition occurs
during the first two 12-month periods, (i.e.occurs before September 30,
1998), then the annual Operating Earnings for purposes of computing the
payment hereunder shall be deemed to be $2,275,000.
(c) Effect of Acquisitions on Stock Rights. In the event that
AmeriPath acquires one or more Persons or businesses, Operating
Earnings will be calculated without including (i) the income generated
by, or expenses incurred in connection with, the acquisition of the
acquired Person or business (except the anatomic pathology and
reference laboratory and office-based revenues pursuant to Section
1.2(b)(v)), and (ii) any selling, general administrative or other
expenses which do not relate to SLA or its business (except the
anatomic pathology and reference laboratory and office-based revenues
pursuant to Section 1.2(b)(v)). Notwithstanding anything to the
contrary herein, in the event AmeriPath or an AmeriPath Affiliate so
acquires one or more Persons or businesses within the SLA Territory,
the Minimum Stock Target shall be decreased in the same manner as the
Minimum Targets pursuant to Section 1.2(d), substituting "Minimum Stock
Targets" for "Minimum Targets." The Applicable Stock Amount for
Operating Earnings or Cumulative Operating Earnings, as applicable,
that fall within such reduced range utilizing the new Minimum Stock
Target shall be equal to the lowest Applicable Stock Amount for such
period as set forth on Schedule 1.3, less 5.55 shares x the
22
difference between (i) the lowest stated Operating Earnings or
Cumulative Operating Earnings, as applicable, on the appropriate chart
to Schedule 1.3 and (ii) the actual amount of Operating Earnings or
Cumulative Operating Earnings, as applicable, for such period.
(d) Termination of Stock Rights; Call on AmeriPath Stock. For
each period for which SLA's Operating Earnings, or Cumulative Earnings,
as the case may be, exceed the Minimum Stock Target, the corresponding
Applicable Stock Amount shall become earned and shall be delivered as
provided in subparagraph (a) above. If, in the reasonable judgment of a
majority of the full Board of Directors of AmeriPath (which judgment is
based upon the advice of counsel), it is determined that the Stock
Rights, or the holding of the AmeriPath Stock by the Sellers, may
violate any Regulation or Order of any Authority, then, at AmeriPath's
sole discretion and option (as recommended by counsel to Ameripath),
(i) the Stock Rights may be canceled upon the issuance to Sellers of
the number of shares of AmeriPath Stock that Sellers would be entitled
to pursuant to this Section 1.3 if the Operating Earnings for the
current 12-month period and each of the subsequent 12-month periods
through September 30, 2001 were equal to the average of the Operating
Earnings for all prior full 12-month periods, provided if such a
determination is made during the first two 12-month periods (i.e.
before September 30, 1998) then the Operating Earnings for each
12-month period, for purposes of computing the amount of shares of
AmeriPath Stock payable to the Seller(s) hereunder, shall be deemed to
be $2,275,000, or (ii) if it is determined that ownership of AmeriPath
Stock by Sellers could violate a Regulation or Order, then the Stock
Rights may be canceled and all outstanding shares of AmeriPath Stock
issued to or held by the Sellers (and all AmeriPath Stock that would
have been issued to Sellers if AmeriPath had elected to proceed under
"(i)" of this Section 1.3(d)) may be redeemed or purchased by AmeriPath
(the "Call"), and the Sellers hereby irrevocably and unconditionally
agree to sell such stock to AmeriPath upon any such Call, at the
greater of (i) $15 per share of AmeriPath Stock, or (ii) if AmeriPath
Stock is publicly traded on a national exchange, the average closing
price for AmeriPath Stock on the applicable exchange for the ten
consecutive trading days immediately preceding the date of AmeriPath's
determination to call the AmeriPath Stock and Stock Rights. AmeriPath
shall give the Sellers written notice of any such election not less
than three (3) business days prior to the closing date of such event,
specifying such termination and/or Call and the amount to be paid for
the AmeriPath Stock on the closing date specified therein, whereupon
such amount specified in such notice, upon receipt by AmeriPath of the
certificates therefor at the closing thereof, shall be paid to the
Sellers.
(e) Payments; Certificates. All payments for AmeriPath Stock
or Stock Rights which is "called" by AmeriPath pursuant to Section
1.3(d) shall be made by AmeriPath in lawful money of the United States
of America in immediately available funds (or at the written request of
the Sellers, by certified or bank check) after proper tender by each
Seller of certificates representing all of the AmeriPath Stock owned by
such Seller, duly endorsed for transfer to the Purchaser, together with
stock powers duly executed in blank. Any and all liens, claims,
encumbrances or other restrictions with respect to the
23
AmeriPath Stock so called shall be satisfied and released, to the
reasonable satisfaction of AmeriPath, prior to closing on the purchase
thereof. To the extent calculation of any payment amounts results in
fractions of a cent, the amount shall be rounded down to the nearest
whole cent.
(f) Transferability; Shareholders' Agreement. The AmeriPath
Stock and the Stock Right are not transferable by the Sellers other
than by will or the laws of intestate succession, in accordance with
Purchaser's Shareholders' Agreement, or in accordance with applicable
securities laws including but not limited to Rule 144. All shares of
AmeriPath Stock issued at Closing or pursuant to the Stock Right shall
be subject to the Purchaser's Shareholders' Agreement (as defined in
Section 7.9) relating to the AmeriPath Stock and related and other
matters, including, but not limited to, any restrictions on
transferability, any rights of first refusal and any option of the
Purchaser to purchase such shares. Sellers shall have the rights and
obligations of a Common Shareholder pursuant to the Shareholders'
Agreement. As a condition to the issuance of shares of AmeriPath Stock
in connection with any Stock Rights (and at AmeriPath's option, at each
issuance), the Sellers shall execute and deliver to the Purchaser a
counterpart to the Shareholders' Agreement, in form and substance
reasonably satisfactory to AmeriPath and Sellers, and the Sellers shall
make such commercially reasonable representations and execute such
certificates as AmeriPath may reasonably require, including
representations similar to those made in Section 2.25 hereof.
(g) Legend. Each and every stock certificate representing
shares of AmeriPath Stock issued to the Sellers pursuant to the Stock
Right shall bear the following (or similar) restrictive legend,
together with such other legend(s) as the Purchaser shall in its
discretion deem appropriate, provided such additional legends may not
contain any restrictions on Sellers, unless imposed by this Agreement,
the Purchasers' Shareholders' Agreement, or applicable law:
"The shares represented by this certificate (the "Shares") are
subject to each and every one of the terms, conditions and
restrictions set forth in the Shareholders' Agreement of
AmeriPath, Inc. dated February 29, 1996 (the "Shareholders'
Agreement"), as amended, including, but not limited to, any
restrictions on transferability, any rights of first refusal
and any option of AmeriPath, Inc. to "call" or purchase such
Shares, and may not, in whole or in part, be sold,
transferred, pledged, gifted, hypothecated or otherwise
disposed of in any manner other than in accordance with the
terms of the Shareholders' Agreement, a copy of which is on
file and available for inspection at the principal offices of
AmeriPath, Inc. presently located at 000 Xxxxxxx Xxxxx Xxxx,
Xxxxx 000, Xxxx Xxxxxxxxxx, Xxxxxxx 00000."
(h) Antidilution; Adjustments Upon Changes in Capitalization
or Merger. Subject to any required action by the stockholders of the
Purchaser, the number of shares
24
of AmeriPath Stock covered by the Stock Right, the price per share and
the aggregate number of shares which have been authorized for issuance
hereunder, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of AmeriPath Stock resulting
from a stock dividend or through any recapitalization,
reclassification, stock split-up, combination or exchange of shares
(other than any such combination or exchange of AmeriPath Stock through
which shares are issued to effect an acquisition of another Person.
Such adjustment shall be reasonably made by the Board of Directors of
AmeriPath, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the
Purchaser of shares of stock of any class, or securities convertible
into shares of stock of any class (whether in connection with an
acquisition, employee benefit, stock or stock option plan, private or
public offering of securities, or otherwise), shall affect, and no
adjustment by reason thereof shall be made with respect to, the number
of shares of AmeriPath Stock subject to this Stock Right. Price per
share calculations used in this Agreement shall also be adjusted to
reflect changes in the capitalization of the Purchaser such that (on an
aggregate basis) the value of such shares before the adjustment event
shall equal the value of such shares immediately after such adjustment
event.
(i) Reservation of Shares. The Purchaser will at all times
reserve for issuance and delivery all shares of AmeriPath Stock from
time to time receivable by Sellers hereunder. All such shares shall be
duly authorized and, when issued, shall be validly issued, fully paid
and non-assessable and free of all preemptive rights.
(j) Fractional Shares. No fractional shares or scrip
representing fractional shares shall be issued hereunder, but the
Purchaser shall round down to the nearest whole number the number of
shares of AmeriPath Stock required to be issued and delivered in
accordance with Schedule 1.3.
(k) Rights of the Sellers. The Sellers shall not, solely by
virtue of the Stock Rights, be entitled to any rights of a stockholder
in the Company, either at law or in equity, until AmeriPath Stock is
issued and delivered to the Sellers and the rights of the Sellers are
limited as expressed in this Agreement.
(l) Failure to Deliver. If the Sellers become obligated to
sell any AmeriPath Stock to the Purchaser as a result of the exercise
of a Call under this Agreement or otherwise, and a Seller fails to
deliver such stock (or the certificates evidencing such stock) in
accordance with the terms of this Agreement, the Purchaser may, at the
sole and absolute discretion of the Board of Directors of AmeriPath, in
addition to all other remedies available to the Purchaser, tender to
such Seller the purchase price for such shares as is herein specified.
Upon tender of such purchase price to such Seller, the Purchaser, upon
written notice to such Seller, may cancel on its books the certificate
or certificates evidencing the shares of AmeriPath Stock so called, and
thereupon all of the Seller's rights in and to such AmeriPath Stock
shall terminate.
25
(m) Put Option of Sellers. Notwithstanding anything to the
contrary set forth in this Agreement, each Seller shall have an
exclusive and irrevocable option, exercisable by notice to the
Purchaser given no later than February 15, 2002 (or, with respect to
disputed amounts only, if any, within thirty (30) days after the
resolution of a dispute with respect to the final contingent payments),
to sell to the Purchaser for $15.00 per share (and thus to require the
Purchaser to purchase) all, but not less than all, of the AmeriPath
Stock owned or held by such Seller(s), if, and only if, the AmeriPath
Stock is not, on such date, traded on the American Stock Exchange, New
York Stock Exchange, or quoted on the Nasdaq National Market. The
Purchaser hereby irrevocably agrees to purchase and acquire such
AmeriPath Stock on the terms and subject to the conditions set forth
herein.
(n) All Cash Option of Sellers. Notwithstanding anything to
the contrary set forth in this Agreement, if, and only if prior to the
second anniversary of the Closing Date, AmeriPath Stock is not traded
on the American Stock Exchange, New York Stock Exchange, or quoted on
the Nasdaq National Market, each Seller shall have an exclusive and
irrevocable option, exercisable by notice to the Purchaser given 30
days prior to any issuance of AmeriPath Stock under the Stock Rights,
to receive from the Purchaser, instead of all, but not less than all,
the AmeriPath Stock that such Seller(s)s is/are entitled to receive
under this Section 1.3, the value of such AmeriPath Stock that the
Seller(s) is/are entitled to receive as set forth on Schedule 1.3 (and
thus to require the Purchaser to make the contingent purchase price
payment in cash and not in AmeriPath Stock). For purposes of the
preceding sentence "value" shall be deemed to mean $15 per share.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND SLA
The Sellers, hereby make the following representations and warranties
to the Purchaser, each of which shall be deemed material (and the Purchaser, in
executing, delivering and consummating this Agreement, has relied and will rely
upon the material correctness and completeness of each of such representations
and warranties notwithstanding any independent investigation):
2.1 Corporate Organization, Qualification, etc. SLA is a professional
service corporation duly organized, validly existing and in good standing under
the laws of the State of Florida with full corporate power and authority to
carry on its business as it is now being conducted and to own, operate and lease
its properties and assets as they are currently owned, operated, and leased. SLA
is duly qualified or licensed to do business in good standing in the
jurisdictions set forth on Schedule 2.1 attached hereto, those being every
jurisdiction in which the conduct of SLA's business, the ownership or lease of
its properties, or the transactions contemplated by this Agreement, require it
to be so qualified or licensed and the failure to be so qualified or licensed
would have a Material Adverse Effect (as defined in Section 12.3). SLA's
articles of incorporation have not been amended or supplemented since January 1,
1984 other than as required pursuant to Section 4.9 below, and are in full force
and effect as of the date hereof.
26
True, complete and correct copies of SLA's articles of incorporation and
by-laws, as presently in effect, are attached hereto as Exhibit 2.1.
2.2 Subsidiaries. Except as listed on Schedule 2.2, SLA has no
Subsidiaries (as defined in Section 12.3) nor any investment or other interest
in, or any outstanding loan or advance to or from, any Person, including any
officer, director or shareholder.
2.3 Capital Stock. As of the date hereof, the authorized capital stock
of SLA consists of ONE HUNDRED (100) shares, $1.00 per share par value. The
stock record book of SLA has been delivered to the Purchaser for inspection
prior to the date hereof and is complete and correct and all requisite Federal
and State documentary stamps have been affixed thereon and canceled. The SLA
Shares constitute all of the issued and outstanding shares of capital stock of
SLA, and all of the SLA Shares are owned beneficially and of record by the
Sellers.
2.4 Corporate Record Books. The corporate minute books of SLA have been
made available to the Purchaser, are complete and correct in all material
respects and contain all of the documented and material proceedings of the
shareholders and directors of SLA.
2.5 Title to Stock. All of the issued and outstanding shares of the
capital stock of SLA that are, and at the Closing will be, owned by the Sellers
are duly authorized, validly issued, fully paid and nonassessable, and are free
of all Liens (as defined in Section 12.3). Upon delivery of the Purchase Price
to the Sellers at the Closing, the Sellers will convey, and the Purchaser will
own and hold, good and marketable title to the SLA Shares, free and clear of all
Liens or contractual restrictions or limitations whatsoever.
2.6 Options and Rights. Except as set forth in Schedule 2.6, there are
no outstanding subscriptions, options, warrants, rights, securities, contracts,
commitments, understandings or arrangements under which SLA is bound or
obligated to issue any additional shares of its capital stock or rights to
purchase shares of its capital stock. Except as set forth on Schedule 2.6, other
than the Shareholders' Agreement (which will be canceled prior to the Closing),
there are no agreements, arrangements or understandings between the Sellers
and/or SLA and any other Person regarding the SLA Shares (or the transfer,
disposition, holding or voting thereof).
2.7 Authorization, Etc. SLA has full power and authority and the
Sellers have full capacity to enter into this Agreement and the agreements and
documents contemplated hereby and perform their respective obligations hereunder
and thereunder. The execution, delivery and performance of this Agreement and
all other agreements and transactions contemplated hereby have been duly
authorized by the Board of Directors of SLA and no other corporate proceedings
on its part are necessary to authorize this Agreement and the transactions
contemplated hereby. The Sellers are entering into this Agreement on their own
volition, free from any undue influence or coercion. Upon execution and delivery
of this Agreement by the parties hereto this Agreement and all other agreements
contemplated hereby shall constitute the legal, valid and binding obligation of
each of SLA and the Sellers, enforceable against each such party in accordance
with their respective terms, except as may otherwise be limited under any
applicable state or federal bankruptcy laws or laws affecting creditors rights
generally.
27
2.8 No Violation. The execution and delivery by SLA and the Sellers of
this Agreement, and any and all other agreements contemplated hereby, and the
fulfillment of and compliance with the respective terms hereof and thereof by
SLA and the Sellers do not and will not, (a) conflict with or result in a
material breach of the terms, conditions or provisions of, (b) constitute a
material default or event of default under (with due notice, lapse of time or
both), (c) result in the creation of any Lien upon the capital stock or assets
of SLA pursuant to, (d) give any third party the right to accelerate any
material obligation under, (e) result in a material violation of, or (f) require
any authorization, consent, approval, exemption or other action by or notice to
any court or Authority pursuant to, the articles of incorporation or by-laws of
SLA or any Regulation, Order or Contract (as defined in Section 12.3) to which
SLA or the Sellers are subject. SLA and the Sellers will comply with all
applicable Regulations and Orders imposed upon them in connection with the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby.
2.9 Financial Statements. Attached as Exhibit 2.9 hereto are the
following financial statements of SLA: (i) Balance sheets (prepared on a
modified cash basis) for the fiscal years ended December 31, 1994 and 1995, and
the six months ended June 30, 1996 (the "Balance Sheets"), and (ii) statements
of revenues and expenses (prepared on a modified cash basis) for the fiscal
years ended December 31, 1995 and 1996 and the six months ended June 30, 1996
(the "Statements of Revenues and Expenses" and, collectively with the Balance
Sheets and the Statements of Revenues and Expenses, the "Financial Statements").
To the best of the Sellers' knowledge, the balance sheets included in the
Financial Statements fairly present the financial position of SLA on a modified
cash basis as at the respective dates thereof, and the statements of revenues
and expenses included in the Financial Statements (x) fairly present in all
material respects the results of operations for the periods therein referred to,
on a modified cash basis applied on a consistent basis, and (y) fairly present
in all material respects the financial condition of SLA at the respective date
of on a modified cash basis, and for the period covered by, such statements. To
the best of the Sellers' knowledge SLA has no material liability, whether
accrued, absolute or contingent, of a type required to be reflected on a balance
sheet or described in the notes thereto in accordance with GAAP, other than (i)
liabilities incurred since June 30, 1996, disclosed on Schedule 2.9(a) attached
hereto, (ii) liabilities covered by insurance or reinsurance (a complete and
detailed description of which is provided in Schedule 2.9(b)), and (iii) any
liabilities of SLA disclosed to Purchaser throughout this Agreement or in the
Schedules and Exhibits hereto. Schedule 2.9(c) contains a complete list of the
accounts payable of SLA.
2.10 Employees. To the best of the Sellers' knowledge, SLA has been for
the past four years, and currently is, in material compliance with all
applicable Federal, State and local Regulations and Orders affecting and
applicable to the employment and employment practices of SLA (including those
Regulations promulgated by the Equal Employment Opportunity Commission),
including terms and conditions of employment and wages and hours. SLA does
maintain "pension" and "welfare" benefit plans within the respective meanings of
sections 3(2) and 3(1) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA").
2.11 Absence of Certain Changes. Since June 30, 1996, there has
not been (a) any Material Adverse Change (as defined in Section 12.3) in the
business, prospects, financial
28
condition, revenues, expenses, accounts receivable, accounts payable or
operations of SLA; (b) any damage, destruction or loss, whether covered by
insurance or not, having a Material Adverse Effect, with regard to SLA's
properties and business; (c) any payment by SLA to, or any notice to or
acknowledgment by SLA of any amount due or owing to, SLA's self-insured carrier,
if any, in connection with any self-insured amounts or liabilities under health
insurance covering employees of SLA, in each case, in excess of a reserve
therefor on the balance sheet for the fiscal year ended December 31, 1995
included in the Financial Statements; (d) any declaration, setting aside or
payment of any dividend or distribution of tangible property in respect of SLA's
capital stock; (e) any material increase other than the ordinary course of
business in the rate of compensation or in the benefits payable or to become
payable by SLA to its directors, officers, employees or consultants; (f) any
amendment, modification or termination of any existing, or entering into any
new, contract, agreement, arrangement or plan relating to any salary, bonus,
insurance, pension, health or other employee welfare or benefit plan for or with
any directors, officers, employees or consultants of SLA; (g) any entry into any
material Contract not in the ordinary course of business, other than at the
recision of Xxxx Xxxxxxx, M.D.'s arrangement including without limitation
relating to any borrowing or capital expenditure; (h) any disposition by SLA of
any asset; or (h) any change by SLA in accounting methods or principles. Nothing
in this Section 2.11 shall be violated by SLA reimbursing its employees for
business expenses and paying discretionary bonuses to its employees, provided
there is cash on hand on the closing, as required pursuant to Section 2.31.
2.12 Contracts.
(a) Except as listed in Schedule 2.12 hereto, SLA is neither a
party to nor subject to any written:
(i) pension, profit sharing, bonus, retirement, stock
option, stock purchase or other plan providing for deferred or
other compensation to employees or any other employee benefit
plan (other than as set forth in Schedule 2.18 hereto), or any
Contract with any labor union;
(ii) employment or consultation agreement, or other
compensation Contract, commitment or arrangement, which is not
terminable on notice of 30 days' or less by SLA without
penalty or other financial obligation (and, except for
contracts listed on Schedule 2.12, no officer or employee of
SLA receives total salary, bonus and other compensation from
SLA of $30,000.00 or more per annum).
(iii) Contract containing covenants or agreements
limiting the freedom of SLA or any of its employees to compete
in any line of business presently conducted by SLA with any
Person or to compete in any such line of business in any area;
29
(iv) Contract with the Sellers or with any affiliate
or relative of the Sellers (except for any Contract disclosed
in Schedule 2.12 pursuant to clauses (ii) or (iii) of this
Section 2.12(a);
(v) Contract relating to or providing for loans to
officers, directors, employees or Affiliates of SLA;
(vi) Contract under which SLA has advanced or loaned,
or is obligated to advance or loan, funds to any Person;
(vii) Contract relating to the incurrence, assumption
or guarantee of any indebtedness, obligation or liability (in
respect of money or funds borrowed), or otherwise pledging,
granting a security interest in or placing a Lien on any asset
of SLA;
(viii) guarantee or endorsement of any obligation;
(ix) Contract under which SLA is a lessee of or holds
or operates any property, real or Personal, owned by any other
party, except for any lease of real or Personal property under
which the aggregate annual rental payments do not exceed
$7,500.00;
(x) Contract pursuant to which SLA is lessor of or
permits any third party to hold or operate any property, real
or Personal, owned or controlled by SLA;
(xi) assignment, license, indemnification or Contract
with respect to any intangible property (including, without
limitation, any Proprietary Rights (as defined in Section
12.3));
(xii) warranty Contract with respect to its services
rendered (or to be rendered) or its products sold or leased;
(xiii) Contract which prohibits, restricts or limits
in any way the payment of dividends or distributions by SLA;
(xiv) Contract under which it has granted any Person
any registration rights (including piggyback rights) with
respect to any securities;
(xv) Contract for the purchase, acquisition or supply
of inventory and other property and assets, whether for resale
or otherwise in excess of $7,500.00;
(xvi) Contracts with independent agents, brokers,
dealers or distributors;
(xvii) sales, commissions, advertising or marketing
Contracts;
30
(xviii) Contracts providing for "take or pay" or
similar unconditional purchase or payment obligations;
(xix) Contracts with Persons with which, directly or
indirectly, a Seller also has a Contract;
(xx) Contract with a hospital, physician or other
health care provider or Person pursuant to which the cost of
providing health care services to the patients covered by such
Contract is assumed in whole or in part by such provider; or
(xxi) any other Contract which is material to SLA's
operations or business prospects, except those which (x) were
made in the ordinary course of business, (y) are terminable on
30 days' or less notice by SLA without penalty or other
financial obligation, and (z) in each case, involve aggregate
payments by or to SLA of $7,500.00 or less.
(b) To the best of the Seller's knowledge no consent of any
party to any Contract is required in connection with the execution,
delivery or performance of this Agreement, or the consummation of the
transactions contemplated hereby.
(c) To the best of the Sellers' knowledge, SLA has performed
in all material respects all obligations required to be performed by it
and is not in default in any respect under or in breach of nor in
receipt of any claim of default or breach under any Contract to which
SLA is subject (including without limitation all performance bonds,
warranty obligations or otherwise); no event has occurred which with
the passage of time or the giving of notice or both would result in a
default, breach or event of non-compliance under any material Contract
to which SLA is subject (including without limitation all performance
bonds, warranty obligations or otherwise); SLA does not have any
present expectation or intention of not fully performing all such
obligations; and SLA does not have any knowledge of any breach or
anticipated breach by the other parties to any such Contract to which
it is a party.
(d) Oral Arrangements. Other than as set forth on Schedule
2.12 and the supplement provided thereto, there are no material oral
arrangements of SLA known to Sellers.
2.13 True and Complete Copies. Copies of all Contracts and documents
delivered and to be delivered hereunder by the Sellers or SLA, to the best of
the Sellers' knowledge, are and will be true and complete copies of such
agreements, contracts and documents.
2.14 Title and Related Matters.
(a) To the best of the Sellers' knowledge, SLA has good and
marketable title to all of the properties and assets reflected in the
balance sheet for the fiscal year ended July 31, 1996 included in the
Financial Statements or acquired after the date thereof, free
31
and clear of all Liens, except (i) statutory Liens not yet delinquent,
(ii) such imperfections or irregularities of title, Liens, easements,
charges or encumbrances as do not detract from or interfere with the
present use of the properties or assets subject thereto or affected
thereby, otherwise impair present business operations at such
properties; or do not detract from the value of such properties and
assets, taken as a whole, or (iii) as reflected in the balance sheet
for the fiscal year ended July 31, 1996 included in Financial
Statements.
(b) SLA owns, and will on the Closing Date own, good and
marketable title to all the material personal property and assets,
tangible or intangible, used in its business, except as to those assets
leased all of which leases are in good standing and no party is in
material default thereunder. To the Sellers' best knowledge, except as
disclosed in this Agreement, none of the assets belonging to or held by
SLA is or will be on the Closing Date subject to any (i) Contracts of
sale or lease, or (ii) Liens. All machinery and equipment currently
used by SLA in the conduct of its business is in operating condition
and repair, ordinary wear and tear expected.
(c) Except as disclosed herein, there has not been since July
31, 1996, and will not be prior to the Closing Date, any sale, lease,
or any other disposition or distribution by SLA of any of its assets or
properties and any other assets now owned by it, except transactions in
the ordinary and regular course of business or as otherwise consented
to by the Purchaser. To the best of the Sellers' knowledge, after the
Closing, SLA, as the wholly-owned subsidiary of the Purchaser, will
own, or have the right to use, all properties and assets that are
currently used in connection with the business of the Sellers, with the
same rights and in the same manner that they were used prior to the
Closing Date.
(d) Schedule 2.14 attached hereto sets forth a description of
all real and material personal property owned or leased by SLA.
2.15 Litigation. Except as set forth on Schedule 2.15, there is no
Claim (as defined in Section 12.3) pending or, to the best knowledge of the
Sellers and SLA, threatened against either the Sellers or SLA which, if
adversely determined, would have a Material Adverse Effect on SLA. Nor is there
any Order outstanding against either the Sellers or SLA having, or which,
insofar as can reasonably be foreseen, in the future may have, a Material
Adverse Effect on SLA.
2.16 Tax Matters.
(a) SLA has filed all federal, state, and local tax reports,
returns, information returns and other documents (collectively, the
"Tax Returns") required to be filed with any federal, state, local or
other taxing authorities (each a "Taxing Authority", collectively, the
"Taxing Authorities") in respect of all relevant taxes, including
without limitation income, premium, gross receipts, net proceeds,
alternative or add-on minimum, ad valorem, value added, turnover,
sales, use, property, personal property (tangible and intangible),
stamp, leasing, lease, user, excise, duty, franchise, transfer,
license, withholding, payroll, employment, fuel, excess profits,
occupational and interest
32
equalization, windfall profits, severance, and other charges (including
interest and penalties) (collectively, the "Taxes") and in accordance
with all tax sharing agreements to which any Seller or SLA may be a
party. All Taxes required to be paid for all periods prior to and
including the Closing Date have been paid, including any of SLA's Taxes
that may be due or claimed to be due as a result of the consummation of
the transactions contemplated by this Agreement. All Taxes which are
required to be withheld or collected by SLA have been duly withheld or
collected and, to the extent required, have been paid to the proper
Taxing Authority or properly segregated or deposited as required by
applicable laws. There are no Liens for Taxes upon any property or
assets of SLA except for liens for Taxes not yet due and payable.
Neither the Sellers nor SLA has executed a waiver of the statute of
limitations on the right of the Internal Revenue Service or any other
Taxing Authority to assess additional Taxes or to contest the income or
loss with respect to any Tax Return. The basis of any depreciable
assets, and the methods used in determining allowable depreciation
(including cost recovery), is correct and in compliance with the
Internal Revenue Code of 1986, as amended and the regulations
thereunder (the "Code").
(b) No audit of SLA or SLA's Tax Returns by any Taxing
Authority is currently pending or to the best of the Sellers' knowledge
threatened, and no issues have been raised by any Taxing Authority in
connection with any Tax Returns. No material issues have been raised in
any examination by any Taxing Authority with respect to SLA which
reasonably could be expected to result in a proposed deficiency for any
other period not so examined, and there are no unresolved issues or
unpaid deficiencies relating to such examinations. The items relating
to the business, properties or operations of SLA on the Tax Returns
filed by or on behalf of SLA for all taxable years (including the
supporting schedules filed therewith), available copies of which have
been supplied to the Purchaser, in all material respects state
accurately the information requested with respect to SLA and such
information was derived from the books and records of SLA.
(c) SLA has not made nor has become obligated to make, nor
will, as a result of any event connected with the Closing, become
obligated to make, any "excess parachute payment" as defined in Section
280G of the Code (without regard to subsection (b)(4) thereof).
(d) The Sellers shall cause SLA to file all Tax Returns and
reports with respect to Taxes which are required to be filed for Tax
periods ending on or before the Closing Date (a "Pre-Closing Tax
Return"), and SLA shall pay all Taxes due in respect of such
Pre-closing Tax Returns to the appropriate Taxing Authority; and SLA
shall pay all costs associated with the preparation thereof.
2.17 Compliance with Law and Applicable Government Regulations. To the
best of the Sellers' knowledge, SLA is presently complying in respect of its
operations, equipment, practices, real property, plants, laboratories,
structures, and other property, and all other aspects of its business and
operations, with all applicable Regulations and Orders, including, but not
limited to, applicable Health Care Laws (as defined in Section 12.3), all
applicable Regulations relating
33
to the safe conduct of business, environmental protection, quality and labeling,
antitrust, Taxes, consumer protection, equal opportunity, discrimination,
health, sanitation, fire, zoning, building and occupational safety, where such
failure or failures would individually or in the aggregate have a Material
Adverse Effect. There are no Claims pending, nor to the best knowledge of SLA
are there any Claims threatened, nor have the Sellers received any written
notice, regarding any violations of any Regulations and Orders enforced by any
Authority claiming jurisdiction over SLA, including any requirement of OSHA or
any pollution and environmental control agency (including air and water).
(a) Schedule 2.17(a) attached hereto sets forth all required
permits, licenses, provider numbers, orders, franchises and approvals
(collectively, "Permits") from all Federal, state, local and foreign
governmental regulatory bodies held by SLA. The Permits listed on
Schedule 2.17(a) are the only Permits that are required for SLA to
conduct its business as presently conducted, except for those the
absence of which would not have any Material Adverse Effect on the
assets, financial condition, results of operations or future prospects
of SLA. To the best of the Sellers' knowledge, each such Permit is in
full force and effect and, to the best of the knowledge of SLA, no
suspension or cancellation of any such Permit is threatened and there
is no basis for believing that such Permit will not be renewable upon
expiration.
(b) SLA has all required licenses to provide health care
services in the jurisdictions set forth in Schedule 2.17(b) hereto,
which such licenses are all those necessary to conduct the business of
SLA in the jurisdictions in which SLA presently operates. Schedule
2.17(b) also sets forth a true and complete description of the status
of each such license. Except as set forth on Schedule 2.17(b), neither
any Seller nor SLA is aware of any event, transaction, correspondence
or circumstance which would have, or could foreseeably have, a Material
Adverse Effect on one or more of such licenses.
2.18 ERISA and Related Matters.
(a) Benefit Plans; Obligations to Employees. Except as set
forth in Schedule 2.18 hereto, neither SLA, nor any ERISA Affiliate of
SLA, is a party to or participates in or has any liability or
contingent liability with respect to:
(i) any "employee welfare benefit plan" or "employee
pension benefit plan" or "multi-employer plan" (as those terms
are respectively defined in Sections 3(1), 3(2) and 3(37) of
ERISA); or
(ii) any retirement or deferred compensation plan,
incentive compensation plan, stock plan, unemployment
compensation plan, vacation pay, severance pay, bonus or
benefit arrangement, insurance or hospitalization program or
any other fringe benefit arrangements for any employee,
director, consultant or agent, whether pursuant to contract,
arrangement, custom or informal understanding, which does not
constitute an "employee benefit plan" (as defined in Section
3(3) of ERISA).
34
For purposes of this Section, the term "ERISA
Affiliate" shall mean any trade or business, whether or not
incorporated, that together with SLA would be deemed a "single
employer" within the meaning of Section 4001(b)(i) of ERISA.
(b) Plan Documents and Reports. A true and correct copy of
each of the Benefit Plans listed on Schedule 2.18, and all contracts
relating thereto, or to the funding thereof, including, without
limitation, all trust agreements, insurance contracts, investment
management agreements, subscription and participation agreements and
record keeping agreements, each as in effect on the date hereof, has
been supplied to the Purchaser. In the case of any Benefit Plan that is
not in written form, the Purchaser has been supplied with an accurate
description of such Benefit Plan as in effect on the date hereof. A
true and correct copy of the three most recent annual reports and
accompanying schedules, the three most recent actuarial reports, and
the most recent summary plan description and Internal Revenue Service
determination letter with respect to each such Benefit Plan, to the
extent applicable, and a current schedule of assets (and the fair
market value thereof assuming liquidation of any asset which is not
readily tradeable) held with respect to any funded Benefit Plan has
been supplied to the Purchaser by SLA, and there have been no material
changes in the financial condition in the respective Plans from that
stated in the annual reports and actuarial reports supplied.
(c) Compliance with Laws; Liabilities. As to all Benefit
Plans, except as otherwise specified on Schedule 2.18, SLA is in
compliance in all material respects with the terms of all Benefit plans
and every Benefit Plan is in compliance with all of the requirements
and provisions of ERISA and all other laws and regulations applicable
thereto, including without limitation the timely filing of all annual
reports or other filings required with respect to such Benefit Plans.
None of the assets of any Benefit Plan are invested in employer
securities or employer real property, as those terms are defined in
Section 407(d) of ERISA. There have been no "prohibited transactions"
(as described in Section 406 of ERISA or Section 4975 of the Code) with
respect to any Benefit Plan and neither SLA nor any ERISA Affiliate of
SLA has otherwise engaged in any prohibited transaction. There has been
no "accumulated funding deficiency" as defined in Section 302 of ERISA,
nor has any reportable event as defined in Section 4043(b) of ERISA
occurred with respect to any Benefit Plan. Actuarially adequate
accruals for all obligations or contingent obligations under the
Benefit Plans are reflected in SLA's balance sheet for the fiscal year
ended December 31, 1995 included in Financial Statements provided to
the Purchaser and such obligations include a pro rata amount of the
contributions which would otherwise have been made in accordance with
past practices for the plan years which include the Closing Date.
(d) Prior to the Closing Date, SLA shall take the necessary
steps to approve termination of SLA's Pension Benefit Plan. After the Closing
Date, the Sellers, who are the Trustees of the Pension Benefit Plan, will
commence winding up and terminating such plan upon Internal Revenue Service
approval of paying out all plan account balances to the participants (or to the
participants IRA's). Neither Purchaser, nor SLA after the Closing Date, shall
have any
35
rights in the SLA's Pension Benefit Plan, trust accounts, or proceeds therefrom,
which accounts shall belong solely to the applicable employee.
2.19 Intellectual Property.
(a) Except as set forth on Schedule 2.19, SLA has no trade
name, service xxxx, patent, copyright or trademark related to its
business.
(b) SLA has the right to use each Proprietary Right listed in
Schedule 2.19, and except as otherwise set forth therein, each of such
Proprietary Right is, and will be on the Closing Date, free and clear
of all royalty obligations and Liens. There are no Claims pending, or
to the best knowledge of the Sellers, threatened, against the Sellers
and their use of any of the Proprietary Rights listed on Schedule 2.19
infringes the rights of any Person. The Sellers have no knowledge of
any conflicting use of any of such Proprietary Rights.
(c) SLA is not a party in any capacity to any franchise,
license or royalty agreement respecting any Proprietary Right and there
is no conflict with the rights of others in respect to any Proprietary
Right now used in the conduct of its business.
(d) Internal Software Applications.
(i) Licensed Software. To the best of the Sellers'
knowledge, the current software applications used by SLA in
the operation of its business (the "Software") to the extent
it is licensed from any third party licensor or constitutes
"off-the-shelf" software, is held by SLA legitimately. To the
best of the Sellers' knowledge, all of SLA's computer hardware
has legitimately-licensed software installed therein, to the
extent licensing is required.
2.20 Environmental Matters. Except as disclosed in Schedule 2.20: To
the Sellers' best knowledge, (a) neither SLA's business nor the operation
thereof violates any applicable Environmental Law (as defined in Section 12.3)
in effect as of the date hereof and no condition or occurrence which, with
notice or the passage of time or both, would constitute a violation of any
Environmental Law; (b) SLA is in possession of all Environmental Permits (as
defined in Section 12.3) required under any applicable Environmental Law for the
conduct or operation of SLA's business (or any part thereof), and SLA is in full
compliance with all of the requirements and limitations included in such
Environmental Permits; (c) SLA has not stored or used any pollutants,
contaminants or hazardous or toxic wastes, substances or materials on or at any
of its property or facilities except for inventories which are used or to be
used in the ordinary course of SLA's business (which inventories have been
sorted or used in accordance with all applicable Environmental Permits and all
Environmental Laws, including all so-called "Right to Know" laws); (d) SLA has
not received any notice from any Authority or any private Person that SLA's
business or the operation of any of its facilities is in violation of any
Environmental Law or any Environmental Permit or that it is responsible (or
potentially responsible) for the cleanup of any pollutants, contaminants, or
hazardous or toxic wastes, substances or materials at, on or beneath
36
any of SLA's property, or at, on or beneath any land adjacent thereto or in
connection with any waste or contamination site; (e) SLA is not the subject of
any Federal, state, local, or private Claim involving a demand for damages or
other potential liability with respect to a violation of Environmental Laws or
under any common law theories relating to operations or the condition of any
facilities or property (including underlying groundwater) owned, leased, or
operated by SLA; (f) SLA has not buried, dumped, disposed, spilled or released
any pollutants, contaminants or hazardous or wastes, substances or materials on,
beneath or adjacent to any of its property or any property adjacent thereto; (g)
no by-products of any manufacturing or mining process employed in the operation
of SLA's business which may constitute pollutants, contaminants or hazardous or
toxic wastes, substances or materials under any Environmental Law are currently
stored or otherwise located on any of SLA's property; (h) no property now or
previously owned, leased or operated by SLA, is listed or proposed for listing
on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any
other federal or state list of sites requiring investigation or clean-up; (i)
there are no underground storage tanks, active or abandoned, including petroleum
storage tanks, on or under any property now or previously owned, leased or
operated by SLA; (j) SLA has not directly transported or directly arranged for
the transportation of any Hazardous Material to any location which is listed or
proposed for listing on the National Priories List pursuant to CERCLA, on the
CERCLIS or on any for listing or on any federal or state list or which is the
subject of federal, state or local enforcement actions or other investigations
which may lead to material against SLA for any remedial work, damage to natural
resources or personal injury, including Claims under CERCLA; and (k) there are
no polychlorinated biphenyls, radioactive materials or friable asbestos present
at any property now or previously owned or leased by SLA. To the Sellers' best
knowledge, SLA has timely filed all reports required to be filed with respect to
all of its property and facilities and has generated and maintained all required
data, documentation and records under all applicable Environmental Laws.
2.21 Dealings with Affiliates. Schedule 2.21 hereto sets forth a
complete list, including the parties, of all existing written agreements and
arrangements between SLA and any one or more Affiliates of SLA.
2.22 Banking Arrangements. Schedule 2.22 attached hereto sets forth the
name of each bank in or with which SLA, as of the Closing Date, has an account,
credit line or safety deposit box, and a brief description of each such account,
credit line or safety deposit box, including the names of all Persons currently
authorized as of the Closing Date, to draw thereon or having access thereto. SLA
has no material liability or obligation relating to funds or money borrowed by
or loaned to SLA (whether under any credit facility, line of credit, loan,
indenture, advance, pledge or otherwise).
2.23 Insurance. Schedule 2.23 attached hereto sets forth a list and
brief description, including dollar amounts of coverage, of all policies of
fire, liability, professional liability and other forms of insurance held by SLA
as of the date hereof. To the best of the Sellers' knowledge, such policies are
valid, outstanding and enforceable policies, as to which premiums have been paid
currently. Neither SLA nor any of the Sellers know of any state of facts, or of
the occurrence of any event which might reasonably (a) form the basis for any
Claim against
37
SLA not fully covered by insurance for liability on account of any express or
implied warranty or tortious omission or commission, or (b) result in material
increase in insurance premiums of SLA.
2.24 Consents. Schedule 2.24, annexed hereto, sets forth a complete
list of consents of governmental and other regulatory agencies or authorities,
foreign or domestic, of which Sellers are aware are required to be received by
or on the part of SLA and the Sellers to enable SLA or the Sellers to enter into
and carry out this Agreement in all material respects. All such requisite
consents have been, or prior to the Closing will have been, obtained.
2.25 Investment Representations. In the event, in connection with this
Agreement or any agreement or transaction contemplated hereby, AmeriPath offers
or sells, or is deemed to offer or sell, any securities of AmeriPath to a Seller
(including AmeriPath Stock pursuant to Section 1.3), then each Seller hereby
represents and warrants to AmeriPath as follows:
(a) Each Seller has been offered, and up to the Closing Date
and the time(s) of issuance of the AmeriPath Stock shall be offered,
the opportunity to ask questions of, and receive answers from,
AmeriPath and its Subsidiaries, and the Sellers have been given full
and complete access to all available information and data relating to
the business and assets of AmeriPath and its Subsidiaries, have
obtained such additional information about AmeriPath and its
Subsidiaries which the Sellers have deemed necessary in order to
evaluate the opportunities, both financial and otherwise, with respect
to AmeriPath and, except as set forth herein, have not relied on any
representation, warranty or other statement concerning the Purchaser
and its Subsidiaries in their evaluation of the decision to consummate
the transactions contemplated herein. On the basis of the foregoing,
each Seller is familiar with the operations, business plans and
financial condition of AmeriPath.
(b) Each Seller understands that he must bear the economic
risk of the AmeriPath Stock, if and when issued to such Seller, for an
indefinite period of time because, except as provided in this
Agreement, (i) each Seller understands that AmeriPath proposes to issue
and deliver the shares of AmeriPath Stock issuable in accordance with
this Agreement, without compliance with the registration requirements
of the Securities Act, that for such purpose AmeriPath will rely upon
the representations, warranties, covenants and agreements contained
herein, as well as any additional representations, warranties,
covenants, agreements and certifications reasonably requested by
AmeriPath to be delivered by the Sellers at such time(s) of issuance of
the AmeriPath Stock; and that such noncompliance with registration is
not permissible unless such representations and warranties are correct
and such covenants and agreements are performed at and as of the time
of issuance; (ii) each Seller understands that, under existing rules of
the SEC, there are substantial restrictions in the transferability of
his shares of AmeriPath Stock; his shares of AmeriPath Stock may be
transferred only if registered under the Securities Act or if an
exemption from such registration is available; it is possible that
Sellers may not be able to avail themselves of the provisions of Rule
144 promulgated by the SEC under the Securities Act with respect to the
transfer of such shares; (iii) the AmeriPath Stock may not be sold,
transferred, pledged, or otherwise disposed of except pursuant to
38
Purchaser's Shareholders Agreement (for so long as same remains in
effect), and may not be sold without an opinion of counsel delivered
and reasonably satisfactory to AmeriPath that registration under the
Securities Act or any applicable state securities law is not required;
and (iv) AmeriPath neither has an obligation to register a sale of the
AmeriPath Stock held by any Seller nor has it agreed to do so in the
future.
(c) Each Seller is an "accredited investor", as such term is
defined in Rule 501 of Regulation D promulgated under the Securities
Act in that each Seller, as of the date of this Agreement, either (a)
(either individually or jointly with such Seller's spouse) has a net
worth in excess of $1,000,000; or (b) had an individual income in
excess of $200,000 in each of the two most recent years or joint income
with such Seller's spouse in excess of $300,000 in each of those years,
and reasonably expects reaching the same income level in the current
year.
(d) Each Seller is a sophisticated investor familiar with the
type of risks inherent in the acquisition of securities such as the
shares of AmeriPath Stock and such Seller's financial position is such
that such Seller can afford to retain his shares of AmeriPath Stock for
an indefinite period of time without realizing any direct or indirect
cash return on such Seller's investment.
(e) Each Seller received this Agreement and first learned of
the transactions contemplated hereby in Florida. Each Seller executed
and will execute all documents contemplated hereby in Florida, and
intends that the laws of Florida govern this transaction. Each Seller
is a resident of Florida.
(f) Each Seller understands, agrees and acknowledges that the
AmeriPath Stock has not been registered under the Florida Securities
Act or the Securities Act in reliance upon exemption provisions
contained therein which AmeriPath believes are available. Any sale made
pursuant to such exemption provisions is voidable by the purchaser
within three business days after the first tender of consideration is
made by the purchaser to the issuer, an agent of the issuer or an
escrow agent. A withdrawal within such three-day period will be without
any further liability to any Person (except that the Purchase Price
attributable to such withdrawal must be returned to the Purchaser). To
accomplish this withdrawal, a purchaser need only send a letter or
telegram to AmeriPath at the address set forth herein, indicating his
or her intention to withdraw. Such letter or telegram should be sent
and postmarked prior to the end of the aforementioned third business
day. It is advisable to send such letter by certified mail, return
receipt requested, to ensure that it is received and also to evidence
the date it was mailed. If the request is made orally, in Person or by
telephone, to a representative of AmeriPath, a written confirmation
that the request has been received should be requested.
(g) Each Seller is acquiring his shares of AmeriPath Stock for
such Seller's own account and not with a view to, or for sale in
connection with, the distribution thereof within the meaning of the
Securities Act.
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(h) Each Seller understands that the certificates evidencing
his shares of AmeriPath Stock, when and if issued, will bear
appropriate restrictive legends.
2.26 Accounts Receivable; Inventories. The accounts receivable of SLA
reflected on Schedule 2.26 attached hereto on the date hereof are valid, genuine
and subsisting, arise out of bona fide sales and deliveries of goods,
performance of services or other business transactions and are not subject to
defenses, set-offs or counterclaims. Since December 31, 1995, supplies have been
purchased by SLA in the ordinary course of business, consistent with anticipated
seasonal requirements, and the volumes of purchases thereof and orders therefor
have not been reduced or otherwise changed in anticipation of the transactions
contemplated by this Agreement. SLA is not aware of any material adverse
conditions affecting the supply of materials available to SLA, and, to the best
knowledge of SLA, the consummation of the transactions contemplated hereby will
not adversely affect any such supply.
2.27 Brokerage. Neither SLA nor any Seller has employed any broker,
finder, advisor, consultant or other intermediary in connection with this
Agreement or the transactions contemplated by this Agreement who is or might be
entitled to any fee, commission or other compensation from SLA or any Seller, or
from the Purchaser or its Affiliates, upon or as a result of the execution of
this Agreement or the consummation of the transactions contemplated hereby.
2.28 Improper and Other Payments. Except as set forth on Schedule 2.28
hereto, to the Sellers' best knowledge, (a) neither SLA, any director, officer,
employee thereof, nor, to SLA's knowledge, any agent or representative of SLA
nor any Person acting on behalf of any of them, has made, paid or received any
unlawful bribes, kickbacks or other similar payments to or from any Person or
Authority, (b) no improper foreign payment (as defined in the Foreign Corrupt
Practices Act) has been made, and (c) the internal accounting controls of SLA
are believed by SLA's management to be adequate to detect any of the foregoing
acts by SLA under current circumstances.
2.29 Participation in Audits. Except as set forth in Schedule 2.29, SLA
has not been informed of any Recoupment Claims (as hereinafter defined) arising
in connection with audits or reviews conducted by Medicaid, Medicare or private
insurance companies. To the best knowledge of SLA and the Sellers there is no
basis for any Recoupment Claims based upon cost reports, claims or bills
submitted or to be submitted in connection with services rendered by SLA prior
to the Closing Date. For purposes of this Section 2.29 the term "Recoupment
Claim" shall mean any recoupment or overpayment, set-off, penalty or fine,
pending or to the knowledge of SLA and the Sellers threatened by any third-party
payor or governmental authority having jurisdiction over SLA for amounts arising
from or related to payments to SLA for services rendered prior to the Closing.
2.30 Health Care Laws & Regulations.
(a) Fraud and Abuse. Except as set forth on Schedule 2.30(a),
to the best of the Sellers' and SLA's knowledge, SLA and its officers,
directors, employees, shareholders and providers, have not
intentionally engaged in any activities which are
40
prohibited under federal Medicaid statues, 42 U.S.C. Section 1320a-7a
and 7b, or the regulations promulgated pursuant to such statutes or
related state or local statutes or regulations or which are prohibited
by rules of professional conduct or which otherwise could constitute
fraud, including but not limited to the following: (i) making or
causing to be made a false statement or representation of a material
fact in any application for any benefit or payment; (ii) making or
causing to be made any false statement or representation of a material
fact for use in determining rights to any benefit or payment; (iii)
failing to disclose knowledge by a claimant of the occurrence of any
event materially affecting the initial or continued right to any
benefit or payment on its behalf or on behalf of another, with intent
to secure such benefit or payment fraudulently; and (iv) soliciting,
paying or receiving any remuneration (including any kickback, bribe, or
rebate), directly or indirectly, overtly or covertly, in cash or in
kind or offering to pay such enumeration (a) in return for referring an
individual to a Person for the furnishing or arranging for the
furnishing of any item or service for which payment may be made in
whole or in part by Medicare or Medicaid, or (b) in return for
purchasing, leasing, or ordering or arranging for or recommending
purchasing, leasing, or ordering any good, facility, service, or item
for which payment may be made in whole or in part by Medicaid; subject,
in the case of (iv) to the lack of clarity in the law relating to the
marketing of Medicare risk products by brokers.
(b) Third-Party Payors. To the best of the Sellers' knowledge,
all Contracts with third-party payors were entered into by SLA in the
ordinary course of business. To the best of the Sellers' knowledge, SLA
will have made available to the Purchaser, as of the Closing Date, an
accurate and complete list of all third-party payors which have
agreements with SLA (as set forth on Schedule 2.30(b)), together with
accurate and complete copies of all such Contracts. Except as set forth
on Schedule 2.30(b), to the best of the Sellers' knowledge, SLA is in
compliance with each third-party payor's Contract, and SLA has properly
charged and billed in accordance with the terms of those Contracts,
including, where applicable, billing and collection of all deductibles
and co-payments.
(c) Compliance with Medicare and Medicaid Programs. To the
best of the Sellers' actual knowledge, SLA has timely and accurately
filed all requisite claims and other reports required to be filed in
connection with all state and federal Medicare and Medicaid programs in
which SLA participates due on or before the Closing Date except to the
extent that the failure to file such claims and reports would not
result in a Material Adverse Effect on SLA. Except as set forth on
Schedule 2.30(c) hereto, there are no Claims pending or, to SLA's
knowledge, threatened or scheduled before any Authority, including
without limitation, any intermediary, carrier, the Administrator of the
Health Care Financing Administration, the Florida Department of Health
and Rehabilitative Services, the Agency for Health Care Administration
or any other state or federal agency with respect to any Medicare and
Medicaid claim filed by SLA on or before the Closing Date, or program
compliance matters, which would have a Material Adverse Effect on SLA,
or its assets, the operations or utility thereof, or the consummation
of the transactions contemplated hereby. SLA has delivered to the
Purchaser accurate and
41
complete copies of any Claims, actions or appeals listed on Schedule
2.30(c). Except for routinely scheduled reviews pursuant to SLA's
Medicare and Medicaid Contracts, no valid review or program integrity
review related to SLA has been conducted by any Authority in connection
with the Medicare or Medicaid programs and no such review is scheduled,
or to SLA's knowledge, pending or threatened against or affecting SLA,
its business, assets, or the consummation of the transactions
contemplated hereby.
(d) Rate Limitations and Rates. To the best of the Sellers'
knowledge, each facility currently operated by SLA charges rates and
accordingly bills for services which are legal and proper, and SLA's
standard and Medicare rates are set forth on Schedule 2.30(d). Certain
reimbursement rates established by third-party payors are subject to
retrospective adjustment, which adjustments to the best of the Sellers'
knowledge, are set forth on said Schedule 2.30(d).
(e) Reimbursement Documentation. To the best of the Sellers'
knowledge, SLA has filed when due any and all cost reports and other
documentation and reports, if any, required to be filed by third-party
payors and governmental agencies in material compliance with applicable
contractual provisions and/or laws, regulations and rules.
(f) Patient Referrals. No Person having a "financial
relationship" with SLA, as that term is defined in 42 U.S.C. Section
1395nn, is in a position, directly or indirectly, to refer patients or
services to SLA, other than referrals which comply with, or fall within
an exception of, the requirements of 42 U.S.C. Section 1395nn and the
regulations promulgated pursuant thereto.
2.31 Financial Condition at Closing. At and as of Closing, SLA shall
have cash on hand equal to $50,000.00.
2.32 Disclosure. Neither this Agreement nor any of the exhibits,
attachments, written statements, documents, certificates or other items prepared
for or supplied to the Purchaser by or on behalf of the Sellers or SLA with
respect to the transactions contemplated hereby contains any untrue statement of
a material fact or omits a material fact necessary to make each statement
contained herein or therein not misleading. Any document or item disclosed by
Sellers to Purchaser in this Agreement, or in a Schedule or Exhibit hereto,
shall be deemed disclosed for all purposes including other sections of the
Agreement which may require disclosure of such document or item. Each Seller
makes the representations and warranties in this Article II as to himself and
SLA. Accordingly each Seller is only individually responsible for the
representations made as they relate to each such Seller(s) and is jointly and
severally responsible for the representations made as they relate to SLA, but is
not responsible for any inaccuracy of the representations and warranties made by
the other Seller(s), but rather solely such other Seller(s) shall be responsible
for the inaccurate representation or warranty that related to him (them).
42
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Sellers as follows:
3.1 Corporate Organization, etc. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with full corporate power and authority to carry on its business as it
is now being conducted and to own, operate and lease its properties and assets.
The Purchaser is duly qualified or licensed to do business in good standing in
every jurisdiction in which the conduct of its business, and the ownership or
lease of its properties, require it to be so qualified or licensed, and the
failure to be so qualified or licensed would have a material adverse effect on
its business. True, complete and correct copies of Purchaser's and AmeriPath
Florida's charters and by-laws, as presently in effect, are attached as Exhibit
3.1.
3.2 Subsidiaries. Other than the Subsidiaries of the Purchaser listed
in Schedule 3.2 hereto, the Purchaser has no Subsidiaries.
3.3 Authorization, Etc. The Purchaser has full corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The Board of Directors of the Purchaser has duly authorized
the execution, delivery and performance of this Agreement, the Contingent Notes
and the other agreements and transactions contemplated hereby, and no other
corporate proceedings on its part are necessary to authorize this Agreement and
the transactions contemplated hereby. Upon execution and delivery of this
Agreement by the parties hereto this Agreement shall, and upon issuance of the
Contingent Notes in accordance with the provisions hereof the Contingent Notes
shall, constitute legal, valid and binding obligations of the Purchaser,
enforceable against the Purchaser in accordance with their respective terms
except as may otherwise be limited under any applicable state or federal
bankruptcy laws or laws affecting creditors rights generally.
3.4 No Violation. The execution, delivery and performance by the
Purchaser of this Agreement, and all other agreements contemplated hereby, and
the fulfillment of and compliance with the respective terms hereof and thereof
by the Purchaser, do not and will not (a) conflict with or result in a material
breach of the terms, conditions or provisions of, (b) constitute a material
default or event of default under (with due notice, lapse of time or both), (c)
give any third party the right to accelerate any material obligation under, (d)
result in a material violation of, or (e) require any authorization, consent,
approval, exemption or other action by or notice to any Authority pursuant to,
the certificate of incorporation or by-laws of the Purchaser, or any Regulation
to which the Purchaser is subject, or any Contract or Order to which the
Purchaser or its properties are subject. The Purchaser will comply with all
applicable Regulations and Orders imposed upon it in connection with its
execution, delivery and performance of this Agreement and the transactions
contemplated hereby.
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3.5 Governmental Authorities; Consents. The Purchaser has complied in
all material respects with all applicable Regulations in connection with its
execution, delivery and performance of this Agreement and the agreements and
transactions contemplated hereby. The Purchaser is not required to submit any
notice, report, or other filing with, or obtain any consent from, any Authority
in connection with its execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby. To Purchaser's knowledge,
no authorization, consent, approval, exemption or notice is required to be
obtained by the Purchaser from any Authority or from any other party in
connection with the execution, delivery, and performance of this Agreement and
the agreements and transactions contemplated hereby.
3.6 Issuance of AmeriPath Stock. All shares of AmeriPath Stock required
to be issued by AmeriPath to the Sellers, in accordance with the terms and
subject to the conditions set forth in this Agreement, shall, upon issuance and
delivery, be duly authorized, validly issued, fully paid and non-assessable and
free from all Liens or contractual restrictions or limitations whatsoever,
except as set forth in this Agreement and Purchaser's Shareholders' Agreement or
as otherwise created by a Seller.
3.7 Additional Purchaser Representations: Books and Records; Financial
Statements. To the best of Purchaser's knowledge, the Purchaser Financial
Statements (as defined below) fairly present its financial position, business
and operations, and are maintained in accordance with reasonable business
standards and do not fail to reflect any material activity, charge, expense,
income or other action or attribute of the Purchaser. True and complete copies
of the Purchaser's financial statements for the year ended December 31, 1995,
and the six (6) months ended June 30, 1996 (collectively, the "Purchaser
Financial Statements") have been delivered to the Sellers. Such financial
statements have been prepared in accordance with generally accepted accounting
principles consistently applied (except for purchase accounting adjustments that
may be required by GAAP) and accurately reflect the Purchaser's business,
operations, financial results, financial position, expenses, incomes, assets and
liabilities and are complete in all material respects as of their respective
dates. There has been no material adverse change to Purchaser's financial
position since the financial statements dated June 30, 1996.
3.8 Compliance. To the best of Purchaser's knowledge, Purchaser has not
failed to comply with any applicable Regulation or Order which could result in a
material adverse effect to its business, operations or financial position.
3.9 Capitalization. Schedule 3.9 hereto sets forth the Purchaser's
authorized, issued and outstanding securities, as well as its outstanding
options with respect to its securities pursuant to Purchaser's stock option
plan, and securities reserved for issuance pursuant to completed acquisitions
each as of the date hereof.
3.10 Litigation. Other than as described in Schedule 3.10, there is no
Claim (as defined in Section 12.3) pending or, to the best knowledge of the
Purchaser, threatened against the Purchaser which, if adversely determined,
would have a material adverse effect on Purchaser. Nor is there any Order
outstanding against the Purchaser having, or which, insofar as can reasonably be
foreseen, in the future may have, a material adverse effect on Purchaser.
44
3.11 No Additional Seller Representations. Purchaser has been offered
the opportunity to ask questions of, and receive answers from, the Sellers, and
the Purchaser has been given access to available information and data relating
to the business and assets of SLA, has obtained such additional information
about SLA which the Purchaser has deemed necessary in order to evaluate the
opportunities, both financial and otherwise, with respect to SLA and, other than
statements made in the Agreement, has not relied on any representation, warranty
or other statement of Sellers or SLA concerning SLA or the SLA Shares, in its
evaluation of the decision to consummate the transactions contemplated herein.
Purchaser has had an opportunity to review and is familiar with the Contracts of
SLA which SLA and Sellers have provided to Purchaser prior to the Closing Date.
On the basis of the foregoing, to Purchaser's knowledge, it is familiar with the
operations, business, and financial condition of SLA.
3.12 Tax Matters.
(a) Purchaser has filed all Tax Returns required to be filed
with any Taxing Authority in respect of all relevant Taxes and in
accordance with all tax sharing agreements to which any Purchaser may
be a party. There are no Liens for Taxes upon any property or assets of
Purchaser except for liens for Taxes not yet due and payable. The
Purchaser has not executed a waiver of the statute of limitations on
the right of the Internal Revenue Service or any other Taxing Authority
to assess additional Taxes or to contest the income or loss with
respect to any Tax Return.
(b) No audit of Purchaser's Tax Returns by any Taxing
Authority is currently pending or to the best of Purchaser's knowledge
threatened, and no issues have been raised by any Taxing Authority in
connection with any Tax Returns. No material issues have been raised in
any examination by any Taxing Authority with respect to Purchaser which
reasonably could be expected to result in a proposed deficiency for any
other period not so examined, and there are no unresolved issues or
unpaid deficiencies relating to such examinations.
3.13 Dealing with Affiliates. Schedule 3.13 hereto sets forth a
complete list, including the parties, of all current material written agreements
and arrangements between Purchaser and any of its executive officers, directors
or holders of 5% or more of Purchaser's outstanding securities.
45
3.14 Disclosure. Neither this Agreement nor any of the exhibits,
attachments, written statements, documents, certificates or other items prepared
for or supplied to the Sellers by or on behalf of the Purchaser with respect to
the transactions contemplated hereby contains any untrue statement of a material
fact or omits a material fact necessary to make each statement contained herein
or therein not misleading.
ARTICLE IV
COVENANTS OF THE SELLERS
From the date hereof until the Closing, except in the ordinary course
of business, or as otherwise consented to or approved by the Purchaser in
writing, which consent shall not be unreasonably withheld, SLA covenants and
agrees that it shall act, and the Sellers shall cause SLA to so act or refrain
from acting where required hereinafter, to comply with the following:
4.1 Regular Course of Business. SLA shall operate its business
diligently and in good faith and in the ordinary and usual course, materially
consistent with past management practices; shall maintain all of its respective
material properties in the same order and condition as of the date hereof, shall
maintain (except for expiration due to lapse of time) all material leases and
Contracts in effect without change except as expressly provided herein; shall
materially comply with the provisions of all Regulations and Orders applicable
to SLA and the conduct of its business; shall not cancel, release, waive or
compromise any debt, Claim or right in its favor; shall not alter the rate or
basis of compensation of any of its officers, directors, employees or
consultants; shall maintain insurance and reinsurance coverage as in effect on
the date hereof up to the Closing Date; and shall materially preserve the
business of SLA intact, and use its reasonable best efforts to keep available
for SLA and the Purchaser the services of the officers and employees of SLA, and
to preserve the good will of clients, patients, suppliers and others having
business relations with SLA.
4.2 Amendments. Except as provided in Section 4.9 of this Agreement, no
change or amendment shall be made in the articles of incorporation or by-laws of
SLA. SLA shall not merge with or into or consolidate with any other corporation
or Person, acquire substantially all of the assets of any Person or change the
character of its business.
4.3 Capital Changes; Pledges. Except as contemplated under this
Agreement, SLA shall not issue or sell any shares of its capital stock of any
class or issue or sell any securities convertible into, or options, warrants to
purchase or rights to subscribe to, any shares of its capital stock and SLA
shall not pledge or otherwise encumber any shares of its capital stock.
4.4 Dividends. SLA shall not declare, pay or set aside for payment any
dividend or other distribution in respect of its capital stock, nor shall SLA,
directly or indirectly, redeem, purchase or otherwise acquire any shares of its
capital stock, other than clarifying and documenting the lack of any equity
interest of Xxxx Xxxxxxx, M.D. in SLA.
46
4.5 Capital and Other Expenditures. SLA shall not make any material
capital expenditures, or commitments with respect thereto.
4.6 Cash and Cash Equivalents. Cash and cash equivalents shall be
preserved, and expended, solely in the ordinary and usual course of business.
4.7 Borrowing. SLA shall not incur, assume or guarantee any
indebtedness, obligations or liabilities not reflected on the Financial
Statements (or the balance sheets included therein), except in the ordinary
course of business or for purposes of consummation of the transactions
contemplated by this Agreement and in such case only after consultation with the
Purchaser.
4.8 Other Commitments. Except as set forth in this Agreement, incurred
or transacted in the ordinary course of business, or permitted in writing by the
Purchaser, SLA shall not enter into any material transaction or make any
commitment or incur any material obligation (including entering into any real
property leases).
4.9 Amendments to Charter. Prior to the Closing, the Sellers shall
cause SLA's articles of incorporation to be amended, among other things, to (i)
change the company's name (by dropping the "P.A." designation and adding
"Inc."); (ii) provide that the company is subject to Section 607 of the Florida
Statutes (the Florida Business Corporation Act), and not Section 621 of the
Florida Statutes (the Professional Service Corporation Act), and delete any
inconsistent references, and (iii) provide that the company may operate for any
lawful purpose, and to allow Persons other than those licensed to practice
pathology in the State of Florida to own shares of SLA's capital stock. All of
such amendments (together, the "SLA Charter Amendments") shall be in form and
substance reasonably satisfactory to AmeriPath.
4.10 Full Access and Disclosure.
(a) SLA shall afford to the Purchaser and its counsel,
accountants and other authorized representatives reasonable access
during business hours to SLA's facilities, properties, books and
records, subject to all applicable confidentiality agreements, in order
that the Purchaser may have full opportunity to make such reasonable
investigations as it shall desire to make of the affairs of SLA,
provided such investigations do not interfere with the ordinary course
of SLA's business; and the Sellers shall cause SLA's officers,
employees and auditors to furnish such additional financial and
operating data and other information as the Purchaser shall from time
to time reasonably request including, without limitation, any internal
control recommendations applicable to SLA made by SLA's independent
auditors in connection with any examination of SLA's Financial
Statements and books and records.
(b) From time to time prior to the Closing Date, SLA shall
promptly supplement or amend information previously delivered to the
Purchaser with respect to any matter hereafter arising which, if
existing or occurring at the date of this Agreement, would have been
required to be set forth herein or disclosed.
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(c) In connection with any "due diligence" examination
performed by the Purchaser with respect to the business of SLA, the
Sellers shall fully cooperate with the Purchaser.
4.11 Confidentiality. Commencing on the date hereof through and
including the Closing Date or termination of this Agreement, the Sellers and SLA
shall, and shall cause its principals, officers and other personnel and
authorized representatives to, hold in confidence, and not disclose to any other
party without the Purchaser's prior consent, all written and oral information
furnished or disclosed by or received from the Purchaser or its officers,
directors, employees, agents, counsel and auditors in connection with the
transactions contemplated hereby, except as may be required by applicable law or
as otherwise contemplated herein.
4.12 Breach of Agreement. Neither the Sellers nor SLA shall
intentionally take any action which, if taken on or prior to the Closing Date,
would constitute a material breach of this Agreement.
4.13 Fulfillment of Conditions Precedent. SLA and the Sellers shall use
their best efforts to obtain at their expense, on or prior to the Closing Date,
all such waivers, Permits, consents, approvals or other authorizations from
third parties and Authorities, and to do all things as may be necessary in
connection with the transactions contemplated by this Agreement in order to
fully and expeditiously consummate the transactions contemplated by this
Agreement.
ARTICLE V
COVENANTS OF THE PURCHASER
The Purchaser hereby covenants and agrees with SLA and the Sellers that
prior to the Closing or the termination of this Agreement:
5.1 Confidentiality. The Purchaser shall, and shall cause its
principals, officers and other Personnel and authorized representatives to, hold
in confidence, and not disclose to any other party without the Sellers' prior
consent, all information received by it from the Sellers or SLA's officers,
directors, employees, agents, counsel and auditors in connection with the
transactions contemplated hereby except as may be required by applicable law or
as otherwise contemplated herein.
5.2 Full Access and Disclosure.
(a) The Purchaser shall afford to SLA and the Sellers, and
their counsel, accountants and other authorized representatives
reasonable access during business hours to the Purchaser's facilities,
properties, books and records, subject to applicable confidentiality
agreements, in order that the Sellers may have full opportunity to make
such reasonable investigations as they shall desire to make of the
affairs of the Purchaser, provided such investigations do not interfere
with the ordinary course of Purchaser's
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business; and the Purchaser shall cause its officers, employees and
auditors to furnish such additional financial and operating data and
other information as the Sellers shall from time to time reasonably
request including, without limitation, any internal control
recommendations applicable to the Purchaser made by the Purchaser's
independent auditors in connection with any examination of the
Purchaser's financial statements and books and records.
(b) From time to time prior to the Closing Date, the Purchaser
shall promptly supplement or amend information previously delivered to
SLA and/or the Sellers with respect to any matter hereafter arising
which, if existing or occurring at the date of this Agreement, would
have been required to be set forth herein or disclosed.
(c) The Purchaser shall fully cooperate in connection with any
"due diligence" examination performed by SLA or the Sellers with
respect to the business of the Purchaser. For purposes of this Section
5.2, "Purchaser" shall mean and include AmeriPath and its Subsidiaries.
5.3 Breach of Agreement. Purchaser shall not intentionally take any
action which, if taken on or prior to the Closing Date, would constitute a
material breach of this Agreement.
5.4 Fulfillment of Conditions Precedent. Purchaser shall use its best
efforts to obtain at its expense, on or prior to the Closing Date, all such
waivers, Permits, consents, approvals or other authorizations from third parties
and Authorities, and to do all things as may be necessary in connection with the
transactions contemplated by this Agreement in order to fully and expeditiously
consummate the transactions contemplated by this Agreement.
ARTICLE VI
OTHER AGREEMENTS
The parties hereto further agree, on or before the Closing Date, as
follows:
6.1 Further Assurances. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
reasonably necessary, proper or advisable under applicable Regulations to
consummate and make effective the transactions contemplated by this Agreement.
In furtherance and not in limitation of the preceding sentence, the parties
hereto shall use their best efforts to cause the Closing to take place on or
before September 30, 1996. If at any time after the Closing Date the Purchaser
shall consider or be advised that any further deeds, assignments or assurances
in law or in any other things are reasonably necessary, desirable or proper to
vest, perfect or confirm, of record or otherwise, in the Purchaser (or SLA, as
appropriate), the title to any property or rights of the Sellers acquired or to
be acquired by reason of, or as a result of, the acquisition, the Sellers agree
that the Sellers shall execute and deliver all such proper deeds, assignments
and assurances in law and do all things necessary, desirable
49
or proper to vest, perfect or confirm title to such property or rights in SLA
and otherwise to carry out the purpose of this Agreement. Likewise, at any
Sellers' request, after the Closing Date, Purchaser shall perform such
reasonable acts that are necessary to fully perform all obligations of Purchaser
hereunder and to otherwise carry out the purposes of this Agreement.
6.2 Agreement to Defend. In the event any action, suit, proceeding or
investigation of the nature specified in Sections 7.2 or 8.2 is commenced,
whether before or after the Closing Date, all the parties hereto agree to
cooperate and use their best efforts to reasonably defend against and respond
thereto.
6.3 Consents. Without limiting the generality of Section 6.1, each of
the parties hereto shall use their best efforts to obtain all permits,
authorizations, consents and approvals of all Persons and governmental
authorities necessary, proper or advisable in connection with the consummation
of the transactions contemplated by this Agreement prior to the Closing Date.
6.4 No Solicitation or Negotiation. Unless and until this Agreement is
terminated, neither any Seller nor SLA through its directors, officers,
employees, representatives, agents, advisors, accountants and attorneys shall
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal with respect to, or engage in negotiations concerning, or
provide any confidential information or data to any Person with respect to, or
have any discussions with any Persons relating to, any acquisition, business
combination or purchase of all or any significant asset of, or any equity
interest in, SLA (other than terminating any interest that Xx. Xxxxxxx may have
in SLA), or otherwise facilitate any effort or attempt to do or seek any of the
foregoing, and shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing.
6.5 No Termination of Sellers' Obligations by Subsequent Incapacity,
Etc. The Sellers specifically agree that the obligations of the Sellers
hereunder, including, without limitation, obligations pursuant to Article XI and
Section 6.4 shall not be terminated by their death or incapacity.
6.6 Employment Agreements. SLA and the Sellers shall, at or prior to
the Closing, terminate the existing employment agreements between SLA and each
of the Sellers, and each Seller shall enter into an Employment Agreement with
AmeriPath Florida in the form of Exhibit 6.6 attached hereto (the "Employment
Agreements").
6.7 Public Announcements. Neither Purchaser, the Sellers nor SLA nor
any Affiliate, representative or shareholder of any such Persons, shall disclose
any of the terms of this Agreement to any third party (other than the
Purchaser's advisors and senior lending group and the Sellers' advisors) without
the other party's prior written consent, unless required by any applicable law.
The form, content and timing of any and all press releases, public announcements
or publicity statements (except for any disclosures under or pursuant to Federal
or State securities laws in connection with the registration of AmeriPath's
securities or otherwise) with respect to this Agreement or the transactions
contemplated hereby shall be subject to the prior mutual
50
approval of the Purchaser and the Sellers. No press releases, public
announcements or publicity statements shall be released by either party without
prior mutual agreement.
The parties hereto further agree, from and after the Closing Date, as
follows:
6.8 Deliveries After Closing. From time to time after the Closing, at
the Purchaser's and the Sellers' request and without expense to SLA or the
Sellers, respectively, and without further consideration from the requesting
party, the Sellers and the Purchaser shall execute and deliver such other
instruments of conveyance and transfer and take such other action as the
Purchaser or the Sellers reasonably may require to convey, transfer to and vest
in the Purchaser, and to put the Purchaser in possession of, any rights or
property to be sold, conveyed, transferred or delivered hereunder, and to
effectuate all of the Sellers' entitlement to the Purchase Price hereunder.
6.9 Non-Competition Covenant.
(a) As a material and valuable inducement for the Purchaser to
enter into this Agreement, pay and deliver the Purchase Price
consideration and consummate the transactions provided for herein,
during the "Restricted Period" (as hereinafter defined), each Seller
agrees that he shall not, directly or indirectly, alone or as a
partner, officer, director, employee, consultant, agent, independent
contractor, member or stockholder of any Person:
(i) engage in the practice of pathology within 30
miles from any facility in which DSLA operated as of the date
of the Closing Date; provided, however, that such radius shall
not be less than the SLA Territory (the "Restricted
Territory"); or
(ii) from any facility or location, whether within or
without the Restricted Territory, (x) perform pathology
services for any patient, laboratory or health care provider
located in the Restricted Territory or (y) perform pathology
services for any patient, laboratory or health care provider
who was or is a customer, client or patient of an AmeriPath
Affiliate or who is known to Seller to be a prospective
customer, client or patient of an AmeriPath Affiliate with
whom such AmeriPath Affiliate is engaged in discussions;
except that it shall not be a violation of this Section 6.9
for the Sellers to perform pathology services in the
Restricted Territory during the Restricted Period (a) as an
employee of a local, federal or state government or agency;
(b) in performing the Sellers's duties as a member of the
United States military services or the National Guard; or (c)
on a locum tenens basis.
(b) As used in this Agreement, the term "Restricted Period"
for each Seller, shall mean and include a period of five (5) years,
from the Closing to the fifth (5th) anniversary of the Closing;
provided, however, should the Purchaser (i) fail to make any payments
of money or AmeriPath Stock required under this Agreement, the Secured
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Notes, the Contingent Notes or such Seller's Employment Agreement, and
such failure shall continue for a period of 45 days following notice of
such non-payment or (ii) terminate such Seller's Employment Agreement
without cause, the Restricted Period for such Seller shall equal zero
(0) days.
(c) Each Seller further agrees that during the Restricted
Period, the Seller will not knowingly, directly or indirectly, (a)
solicit the employment of any employee, agent or consultant of any
AmeriPath Affiliate who was such at any time during the twelve (12)
months preceding the Sellers's termination of employment with the
AmeriPath Affiliate, or (b) induce any employee of an AmeriPath
Affiliate to leave the employ of any such AmeriPath Affiliate, unless
in each case the Seller obtains the prior written consent of AmeriPath.
(d) Each Seller covenants and agrees that the restrictions set
forth in this Section 6.9 are fair, reasonable and necessary to protect
the interests of AmeriPath and its Affiliates, such restrictions were
negotiated and bargained for and the consideration delivered in
connection with this Agreement reflects and assumes the Seller's strict
compliance with, and the enforceability by the Purchaser of, these
restrictions.
(e) Each Seller acknowledges and agrees that the provisions of
Section 6.9 and Section 6.10 are material and of the essence to this
Agreement. In addition, if the scope of any restriction or covenant
contained in either such Section should be or become too broad or
extensive to permit enforcement thereof to its fullest extent, then
such restriction or covenant shall be enforced to the maximum extent
permitted by law, and the Sellers hereby consent and agree that (a) it
is the parties intention and agreement that the covenants and
restrictions contained herein be enforced as written, and (b) in the
event a court of competent jurisdiction should determine that any
restriction or covenant contained herein is too broad or extensive to
permit enforcement thereof to its fullest extent, the scope of any such
restriction or covenant may be modified accordingly in any judicial
proceeding brought to enforce such restriction or covenant, but should
be modified to permit enforcement of the restrictions and covenants
contained herein to the maximum extent the court, in its judgment, will
permit.
6.10 Non-disclosure; Confidentiality.
(a) Confidential Information. By virtue of each Seller's
employment, association or involvement with an AmeriPath Affiliate, the
Sellers may obtain confidential or proprietary information developed,
or to be developed, by an AmeriPath Affiliate. "Confidential
Information" means all proprietary or business-sensitive information,
whether in oral, written, graphic, machine-readable or tangible form,
and whether or not registered, and including all notes, plans, records,
documents and other evidence thereof, including but not limited to all:
patents, patent applications, copyrights, trademarks, trade names,
service marks, service names, "know-how," patient lists, details of
client or consulting contracts, pricing policies, operational methods,
marketing plans or strategies, product development techniques or plans,
procurement and sales activities,
52
promotion and pricing techniques, credit and financial data concerning
customers, business acquisition plans or any portion or phase of any
scientific or technical information, discoveries, computer software or
programs used or developed in whole or in part by any AmeriPath
Affiliate (including source or object codes), processes, procedures,
formulas or improvements of any AmeriPath Affiliate; algorithms;
computer processing systems and techniques; price lists; customer
lists; procedures; improvements, concepts and ideas; business plans and
proposals; technical plans and proposals; research and development;
budgets and projections; technical memoranda, research reports, designs
and specifications; new product and service developments; comparative
analyses of competitive products, services and operating procedures;
and other information, data and documents now existing or later
acquired by an AmeriPath Affiliate, regardless of whether any of such
information, data or documents qualify as a "trade secret" under
applicable Federal or State law. "Confidential Information" shall not
include (a) any information which is in the public domain during the
period of service by the Sellers or becomes public thereafter, provided
such information is not in the public domain as a consequence of
disclosure by a Seller in violation of this Agreement, (b) any
information obtained by Sellers separate and apart from their
association or involvement with an AmeriPath Affiliate and (c) any
information not considered confidential information by similar
enterprises operating in the clinical or anatomical laboratory industry
or otherwise in the ordinary course.
(b) Non-Disclosure. Each Seller agrees that, except as
directed by the Seller's employer (which employer is an AmeriPath
Affiliate), as required or otherwise contemplated under this Agreement
or the Employment Agreement or as otherwise required by law, he will
not at any time (during the term of the Seller's employment by an
AmeriPath Affiliate or at any time thereafter), except as may be
expressly authorized by the AmeriPath Affiliate in writing, disclose to
any Person or use any Confidential Information whatsoever for any
purpose whatsoever, or permit any Person whatsoever to examine and/or
make copies of any reports or any documents or software (whether in
written form or stored on magnetic, optical or other mass storage
media) prepared by him or that come into his possession or under his
control by reason of his employment by an AmeriPath Affiliate or by
reason of any consulting or software development services he has
performed or may in the future perform for an AmeriPath Affiliate which
contain or are derived from Confidential Information, other than in the
ordinary course of business as needed to perform the Seller's normal
functions for the AmeriPath Affiliate. Each Seller further agrees that
while employed at an AmeriPath Affiliate, no Confidential Information
shall be removed from the AmeriPath Affiliate's business premises,
other than in the ordinary course of business and as needed to perform
the Seller's normal functions for the AmeriPath Affiliate, without the
prior written consent of such AmeriPath Affiliate.
(c) AmeriPath Group Property. As used in this Agreement, the
term "AmeriPath Group Property" means all documents, papers, computer
printouts and disks, records, customer or patient lists, files,
manuals, supplies, computer hardware and software, equipment, inventory
and other materials that have been created, used or obtained by any
AmeriPath Affiliate, or otherwise belonging to any AmeriPath Affiliate,
53
as well as any other materials containing Confidential Information
as defined above. Each Seller recognizes and agrees that:
(i) All the AmeriPath Group Property shall be and
remain the property of the AmeriPath Affiliate to which such
belongs;
(ii) The Sellers will preserve, use and hold the
AmeriPath Group Property only for the benefit of AmeriPath and
its Affiliates and to carry out the business of the AmeriPath
Affiliate, AmeriPath and its Affiliates; and
(iii) When the Seller's employment is terminated, the
Seller will immediately deliver and surrender to the AmeriPath
Affiliate all the AmeriPath Group Property, including all
copies, extracts or any other types of reproductions, which
the Seller has in his possession or control.
6.11 Rule 144 Best Efforts. Following such time, if any, that AmeriPath
is or may become, and solely while AmeriPath is, a public company with its
securities registered under the Securities Exchange Act of 1934, as amended, and
listed or quoted for trading by a national securities exchange or inter-dealer
quotation system, AmeriPath will ensure that AmeriPath is in compliance with the
requirements of Rule 144 under the Securities Exchange Act of 1934, as amended,
applicable to the issuer of securities, so as to facilitate non-registered sales
of AmeriPath Stock by the Sellers who then own AmeriPath Stock consistent with
the requirements and limitations of Rule 144. Nothing in this Section 6.11 shall
be deemed as either (i) any representation or warranty that Ameripath will
become or remain a public company with securities registered under the
Securities Act, or (ii) any covenant or agreement by AmeriPath to register,
under federal or state securities laws or otherwise, any AmeriPath securities
issued to, or held by, the Sellers.
6.12 Real Estate. The Purchaser, at the Closing, shall purchase and
acquire from the Partnership, the Assets of the Partnership. The Partnership, by
executing and delivering this Agreement, agrees to sell, transfer and convey the
Assets to the Purchaser on the terms of this Section 6.12, subject to the
conditions of this Agreement. The Partnership and AmeriPath Florida shall enter
into a seven (7) year lease (the "Lease"), a form of which is attached as
Exhibit 6.12 hereto, to lease the facility SLA is presently utilizing for a fair
market value rent of $10/square foot, plus all real estate taxes and condominium
assessment fees. An appropriate Xxxx of Sale shall be executed and delivered by
the Partnership to the Purchaser to transfer the Assets.
6.13 Delivery of Purchaser Statements. Purchaser covenants that,
commencing on the Closing Date through and including March 31, 2002, Purchaser
shall deliver to each Seller (without the need for each Seller to request such
delivery) copies of Purchaser's monthly, quarterly and annual financial
statements and all amendments thereto, the annual financial statement to be
audited by independent public accountants, at such times as such financial
statements are finalized. Purchaser covenants that such financial statements
shall be prepared in accordance with general accepted accounting principles and
will fully and fairly reflect the Purchaser's financial position and financial
results as of their dates. Purchaser further covenants
54
to provide to each Seller from time to time, after Closing Date and until March
31, 2002, such other information about the Purchaser's business, operations,
financial position and capitalization as each such Seller shall reasonably
request in connection with such Seller's acquisition of AmeriPath Stock pursuant
to Section 1.3 hereof.
6.14 Stock Options. Subject to the approval of the Board of Directors
of AmeriPath, AmeriPath shall grant non-statutory options (the "Options") to
purchase an aggregate of 15,000 shares of AmeriPath Stock to the persons
designated by the Managing Director of the Southwest Florida Division in his
discretion, such designation to made promptly after the Closing. As a condition
to such grant and issuance, each Optionee shall be required to enter into a
Non-Qualified Stock Option Agreement in the form of Exhibit 6.5 hereto (the
"Grant Agreement"). The Options shall be granted pursuant to and in accordance
with the AmeriPath Stock Option Plan and each Grant Agreement and shall be
subject to the terms and conditions of such plan and agreement.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
Each and every material obligation of the Purchaser under this
Agreement shall be subject to the satisfaction in all material respects, on or
before the Closing Date, of each of the following conditions, unless waived in
writing by the Purchaser:
7.1 Representations and Warranties; Covenants and Agreements. The
representations and warranties of the Sellers contained in Article II and
elsewhere in this Agreement and all information contained in any exhibit,
certificate, schedule or attachment hereto or in any writing delivered by, or on
behalf of, the Sellers or SLA to the Purchaser, shall be true and correct in all
material respects when made and shall be true and correct in all material
respects on the Closing Date as though then made, except as expressly provided
herein. The Sellers and SLA shall have performed and complied in all material
respects with all agreements, covenants and conditions and shall have made all
deliveries required by this Agreement to be performed, delivered and complied
with by them prior to the Closing Date. The Sellers and the president of SLA
shall have executed and delivered to the Purchaser a certificate, dated the
Closing Date, certifying to the foregoing.
7.2 No Injunction. No preliminary or permanent injunction or other
Order, decree or ruling issued by any Authority, or any Regulation promulgated
or enacted by any Authority shall be in effect, which would prevent the
consummation of the transactions contemplated hereby.
7.3 Third Party Consents. The Sellers and SLA shall have obtained all
required consents, approvals, waivers or other authorizations with respect to
the execution, delivery and performance of this Agreement by Sellers and SLA and
the consummation of the transactions contemplated hereby, such that the
contracts and leases listed in Schedule 7.3 hereto shall remain in effect
(without default, acceleration, termination, assignment, right of termination or
55
assignment, payment, increase in rates or compensation payable, penalty,
interest or other adverse effect) from and after the Closing Date in materially
the same manner as such contracts and leases operated and were in effect before
the Closing Date.
7.4 No Material Adverse Change. There shall have been no Material
Adverse Change since the date of this Agreement. The Purchaser shall have
received a certificate (which shall be addressed to the Purchaser), dated the
Closing Date, of the president of SLA, certifying to the foregoing.
7.5 Employment Agreements. The Sellers shall have terminated their
existing employment agreements with SLA and each of the Sellers shall have
executed and delivered to the Purchaser an Employment Agreement with AmeriPath
Florida in the form of Exhibit 6.6 attached hereto.
7.6 Opinion of Seller's Counsel. The Purchaser shall have received an
opinion of counsel to the Sellers and SLA (which will be addressed to the
Purchaser and its senior lenders), dated the Closing Date, in the form of
Exhibit 7.6 hereto.
7.7 Delivery of SLA Share Certificates. The Sellers shall have executed
and delivered to AmeriPath this Agreement, or a counterpart hereof, and shall
have delivered at the Closing stock certificates representing all of the SLA
Shares, duly endorsed for transfer to the Purchaser, together with stock powers
duly executed in blank.
7.8 Shareholders' Agreement. At the Closing, the Sellers shall have
executed and delivered to AmeriPath a counterpart signature page to that certain
Shareholders' Agreement, dated as of February 29, 1996, by and among AmeriPath
and each of the stockholders of AmeriPath (the "Shareholders' Agreement"),
pursuant to which each Seller agrees to be bound by all of the provisions and
entitled to all of the rights of the Shareholders' Agreement, in accordance with
their terms, to the same extent as if he had been an original signatory thereto,
for so long as such agreement is valid.
7.9 Subordination Agreement. At the Closing, the Sellers shall have
executed and delivered the Subordination Agreement, attached hereto as Exhibit
7.8, pursuant to which each Seller agrees to be bound by all of the provisions
of the Subordination Agreement in accordance with their terms.
7.10 SLA Charter Amendments. SLA, which as of the date hereof is
organized as a professional service corporation under Chapter 621 of the Florida
Statutes, shall have taken all appropriate and required board of director and
shareholder action to approve, and shall have filed with the Florida Department
of State in form acceptable for filing, an amendment to SLA's articles of
incorporation, which amendment (i) shall be in form and substance reasonably
satisfactory to AmeriPath, and (ii) shall include the SLA Charter Amendments (as
such term is defined in Section 4.9 hereof).
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7.11 Creditors. The creditors and amounts set forth on Schedule 7.11
hereto are the correct amounts owed in order for such creditors to have been
paid in full and release all Liens, if any, in favor of such creditors.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
Each and every material obligation of the Sellers under this Agreement
shall be subject to the satisfaction in all material respects, on or before the
Closing Date, of each of the following conditions unless waived in writing by
the Sellers:
8.1 Representations and Warranties; Performance. The representations
and warranties of the Purchaser contained in Article III and elsewhere in this
Agreement and all information contained in any exhibit, schedule or attachment
hereto, delivered by or on behalf of the Purchaser to the Sellers, shall be true
and correct in all material respects when made and shall be true and correct in
all material respects on the Closing Date as though then made, except as
expressly provided herein. The Purchaser shall have performed and complied in
all material respects with all agreements, covenants and conditions required by
this Agreement to be performed and complied with by them prior to the Closing
Date. The Chief Operating Officer of the Purchaser shall have executed and
delivered to the Sellers a certificate, dated the Closing Date, certifying to
the foregoing.
8.2 No Injunction. No preliminary or permanent injunction or other
Order, decree or ruling issued by any Authority, or any Regulation promulgated
or enacted by any Authority shall be in effect, which would prevent the
consummation of the transactions contemplated hereby.
8.3 Material Adverse Change. There shall have been no material adverse
change since the date of this Agreement. The Sellers shall have received a
certificate (which shall be addressed to the Sellers), dated the Closing Date,
of the president of SLA, certifying to the foregoing.
8.4 Third Party Consents. The Purchaser shall have obtained all
required consents, approvals, waivers or other authorizations with respect to
the execution, delivery and performance of this Agreement by Purchaser and the
consummation of the transactions contemplated hereby.
8.5 Purchase Consideration. The Sellers shall have received from the
Purchaser the consideration (in the form of cash, AmeriPath Stock and Contingent
Notes) required to be delivered at Closing and to which the Sellers are entitled
pursuant to Section 1.1 (and as set forth on Schedule 1.1.) hereof.
8.6 Employment Agreements. AmeriPath Florida shall have executed and
delivered to each of the Sellers the Employment Agreements.
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8.7 Opinion of Purchaser's Counsel. The Sellers shall have received an
opinion of counsel to the Purchaser, dated the Closing Date, in the form of
Exhibit 8.7 hereto.
ARTICLE IX
CLOSING
9.1 Closing. Unless this Agreement shall have been terminated or
abandoned pursuant to the provisions of Article X hereof, a closing of the
transactions contemplated by this Agreement (the "Closing") shall be held on
October 11, 1996, or on such other date which is mutually agreed upon in writing
following the satisfaction or waiver of the conditions to closing set forth in
Article VII and Article VIII hereof (the "Closing Date").
9.2 Closing Deliveries. At the Closing,
(a) the Sellers and SLA shall deliver or cause to be
delivered to the Purchaser:
(i) a certificate or certificates (or affidavits of
lost certificates) evidencing all of the SLA Shares, duly
endorsed for transfer with all necessary transfer stamps
affixed;
(ii) the Officer's Certificates required by Sections
7.1 and 7.4;
(iii) copies of all consents and approvals required
by Sections 7.3, and 7.10;
(iv) the Opinion of Counsel required by Section 7.6;
(v) the Employment Agreements required by Section
7.5;
(vi) the counterpart signature pages to the
Shareholders' Agreement required by Section 7.7;
(vii) the Subordination Agreement required by Section
7.8;
(viii) a certificate, signed by the secretary of SLA,
as to the articles of incorporation and by-laws of SLA, the
resolutions adopted by the board of directors and shareholders
of SLA in connection with this Agreement, the incumbency of
certain officers of SLA and the jurisdictions in which SLA is
qualified to conduct business, in form reasonably acceptable
to the Purchaser;
(ix) certificates issued by the appropriate
governmental authorities evidencing the good standing, with
respect to both the conduct of business and the payment of all
franchise taxes, of SLA as of a date not more than ten (10)
days prior to the Closing Date, as a corporation organized
under the laws of the State
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of Florida and as a foreign corporation authorized to do
business under the laws of the various jurisdictions where it
is so qualified.
(x) such other certified resolutions, documents and
certificates as are required to be delivered by the Sellers or
SLA pursuant to the provisions of this Agreement.
(b) The Purchaser shall deliver to the Sellers:
(i) the consideration (in the form of cash,
AmeriPath Stock, and the Contingent Notes) required to be
paid or delivered to the Sellers at Closing in accordance
with Section 1.1 (to be distributed to the Sellers in
accordance with Schedule 1.1).
(ii) copies of all consents and approvals required
by Section 8.4;
(iii) the Officer's Certificate required by Section
8.1;
(iv) the Employment Agreements required by Section
8.6;
(v) the Opinion of Counsel required by Section
8.7;
(vi) a certificate, signed by the secretary of
Purchaser, as to the articles of incorporation and by-laws of
Purchaser, the resolutions adopted by the board of directors
and shareholders of Purchaser in connection with this
Agreement, the incumbency of certain officers of Purchaser and
the jurisdictions in which Purchaser is qualified to conduct
business, in form acceptable to SLA.
(vii) certificates issued by the appropriate
governmental authorities evidencing the good standing, with
respect to both the conduct of business and the payment of all
franchise taxes, of Purchaser and AmeriPath Florida as of a
date not more than ten (10) days prior to the Closing Date, as
a corporation organized under the laws of the State of
Delaware and Florida, respectively, and as a foreign
corporation authorized to do business under the laws of the
various jurisdictions where it is so qualified; and
(viii) such other certified resolutions, documents
and certificates as are required to be delivered by the
Purchaser pursuant to the provisions of this Agreement.
(c) The Partnership shall deliver to the Purchaser:
(i) the Assets
(ii) the Xxxx of Sale; and
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(iii) the Lease
(d) The Purchaser shall deliver to the Partnership:
(i) the cash consideration for the Assets; and
(ii) the Lease
ARTICLE X
TERMINATION AND ABANDONMENT
10.1 Methods of Termination. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time:
(a) by the unanimous consent of the Purchaser, the Sellers and
SLA;
(b) by the Purchaser or all of the Sellers and SLA if the
Closing does not occur on or before September 30, 1996; provided,
however, that if any party has materially breached or defaulted with
respect to its respective material obligations under this Agreement on
or before such date, such party may not terminate this Agreement
pursuant to this Section 10.1(b), and each other party to this
Agreement shall at its option enforce its rights against such breaching
or defaulting party and seek any remedies against such party, in either
case as provided hereunder and by applicable law;
(c) by the Purchaser if as of the Closing Date (including any
extensions) any of the conditions specified in Article VII hereof shall
not have been materially satisfied or if SLA or any of the Sellers is
otherwise in material default under this Agreement; or
(d) by all, but not less than all, of the Sellers, if as of
the Closing Date (including any extensions) any of the conditions
specified in Article VIII hereof shall not have been materially
satisfied or if Purchaser is otherwise in material default under this
Agreement.
10.2 Procedure Upon Termination. In the event of termination and
abandonment pursuant to Section 10.1 hereof, and subject to the proviso
contained in Section 10.1(b), this Agreement shall terminate and shall be
abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:
(a) each party shall redeliver all documents and other
material of any other party relating to the transactions contemplated
hereby, whether obtained before or after the execution hereof, to the
party furnishing the same;
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(b) all information received by any party hereto with respect
to the business of any other party or SLA (other than information which
is a matter of public knowledge or which has heretofore been or is
hereafter published in any publication for public distribution or filed
as public information with any governmental authority) shall not at any
time be used for the advantage of, or disclosed to third parties by,
such party to the detriment of the party furnishing such information;
and
(c) no party hereto shall have any further liability or
obligation to any other party under or in connection with this
Agreement; provided, however, the non-breaching or non-defaulting party
shall not be foreclosed from bringing a Claim or cause of action or
otherwise recovering from the breaching or defaulting party.
ARTICLE XI
SURVIVAL OF TERMS; INDEMNIFICATION
11.1 Survival. All of the terms and conditions of this Agreement,
together with the representations, warranties and covenants contained herein or
in any instrument or document delivered or to be delivered pursuant to this
Agreement, shall survive the execution of this Agreement and the Closing
notwithstanding any investigation heretofore or hereafter made by or on behalf
of any party hereto; provided, however, that (a) the agreements and covenants
set forth in this Agreement shall survive and continue until all obligations set
forth therein shall have been performed and satisfied; and (b) all
representations and warranties shall survive and continue until:
(1) with respect to the representations and
warranties in Sections 2.16 (tax matters), 2.18 (ERISA
matters), 2.20 (environmental matters) and 2.30 (health care
regulatory matters), until sixty (60) days following the
expiration of the applicable statute of limitations;
(2) with respect to the representations and
warranties in Sections 2.3 and 3.9 (capitalization), 2.5
(title to the SLA Shares), 3.6 (Issuance of AmeriPath Stock)
and 2.6 (options and rights on capital stock), these
representations shall survive and continue forever and without
limitation; and
(3) with respect to all other representations and
warranties, the earlier of (i) date upon which AmeriPath
receives from its outside auditors the audited financial
statements for AmeriPath's fiscal year ending December 31,
1998 (the "1998 Audit Date"), except for representations,
warranties and indemnities for which an indemnification Claim
shall be pending as of the 1998 Audit Date, in which event
such indemnities shall survive with respect to such Claim
until the final disposition thereof, or (ii) April 30, 1999.
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11.2 Indemnification by the Sellers. Subject to this Article XI, the
Purchaser and its officers, directors, employees, shareholders, representatives
and agents shall be indemnified and held harmless by the Sellers, at all times
after the date of this Agreement, against and in respect of any and all damage,
loss, deficiency, liability, obligation, commitment, cost or expense (including
the fees and expenses of counsel) resulting from, or in respect of, any of the
following:
(a) Any misrepresentation, breach of warranty, or
non-fulfillment of any obligation on the part of the Sellers or SLA
under this Agreement, any document relating thereto or contained in any
schedule or exhibit to this Agreement or from any misrepresentation in
or omission from any certificate, schedule, other agreement or
instrument by the Sellers or SLA hereunder;
(b) Any and all liabilities of SLA of any nature whether
accrued, absolute, contingent or otherwise, and whether known or
unknown, existing at the Closing Date to the extent not reflected and
reserved against in the statement of assets and liabilities for the
quarter ended March 31, 1996 included in the Financial Statements or
not otherwise adequately disclosed in this Agreement or the schedules
or exhibits thereto, including, without limitation:
(i) All Tax liabilities of SLA, together with any
interest or penalties thereon or related thereto, through the
Closing Date and any Tax liability of SLA arising in
connection with the transactions contemplated hereby. Any
Taxes, penalties or interest attributable to the operations of
SLA prior to the Closing Date, payable as a result of an audit
of any tax return, shall be deemed to have accrued in the
period to which such Taxes, penalties or interest are
attributable;
(ii) All environmental liabilities relating to any of
SLA's properties, including federal, state and local
environmental liability, together with any interest or
penalties thereon or related thereto, that arose through the
Closing Date, but excluding any amount for which there is an
adequate accrual and reserve on the statement of assets and
liabilities for the quarter ended March 31, 1996 included in
the Financial Statements;
(iii) All claims by Medicare, Medicaid, or any other
third party payor relating to reimbursement for services
provided by SLA prior to the Closing Date ("Reimbursement
Claims"). Indemnification by Sellers for Reimbursement Claims
shall include all costs incurred by Purchaser for such claims,
including, but not limited to, applicable investigative and
audit expenses, attorneys fees, reimbursement costs, and any
fines and penalties levied against SLA; and
(c) All demands, assessments, judgments, costs and reasonable
legal and other expenses arising from, or in connection with any Claim
incident to any of the foregoing.
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(d) All Claims of the Purchaser shall be resolved in
accordance with Section 11.4.
11.3 Indemnification by the Purchaser. Subject to this Article XI, the
Sellers and their heirs, assigns, representatives and agents shall be
indemnified and held harmless by the Purchaser, at all times after the date of
this Agreement, against and in respect of any and all damage, loss, deficiency,
liability, obligation, commitment, cost or expense (including the fees and
expenses of counsel) resulting from, or in respect of, any misrepresentation,
breach of warranty, or non-fulfillment of any obligation on the part of the
Purchaser under this Agreement, any document relating thereto or contained in
any schedule or exhibit to this Agreement or from any misrepresentation in or
omission from any certificate, schedule, other agreement or instrument by the
Purchaser hereunder.
11.4 Third-Party Claims. Except as otherwise provided in this
Agreement, the following procedures shall be applicable with respect to
indemnification for third-party Claims. Promptly after receipt by the party
seeking indemnification hereunder (hereinafter referred to as the "indemnitee")
of notice of the commencement of any (a) Tax audit or proceeding for the
assessment of Tax by any taxing authority or any other proceeding likely to
result in the imposition of a Tax liability or obligation, or (b) any action or
the assertion of any Claim, liability or obligation by a third party (whether by
legal process or otherwise), against which Claim, liability or obligation the
other party to this Agreement (hereinafter the "indemnitor") is, or may be,
required under this Agreement to indemnify such indemnitee, the indemnitee will,
if a Claim thereon is to be, or may be, made against the indemnitor, notify the
indemnitor in writing of the commencement or assertion thereof and give the
indemnitor a copy of such Claim, process and all legal pleadings. The indemnitor
shall have the right to assume the defense of such action with counsel of
reputable standing unless such action: (i) is likely to result in injunctions or
other equitable remedies in respect of the indemnitee or its business; or (ii)
is likely to result in liabilities which, taken with other than existing Claims
under this Article XI, would not be fully indemnified hereunder. The indemnitor
and the indemnitee shall cooperate in the defense of such Claims. In the case
that the indemnitor shall assume or participate in the defense of such audit,
assessment or other proceeding as provided herein, the indemnitee shall make
available to the indemnitor all relevant records and take such other action and
sign such documents as are necessary to defend such audit, assessment or other
proceeding in a timely manner. If the indemnitee shall be required by judgment
or a settlement agreement to pay any amount in respect of any obligation or
liability against which the indemnitor has agreed to indemnify the indemnitee
under this Agreement, the indemnitor shall promptly reimburse the indemnitee in
an amount equal to the amount of such payment plus all reasonable expenses
(including legal fees and expenses) incurred by such indemnitee in connection
with such obligation or liability subject to this Article XI. Upon an indemnitor
making payment hereunder, the indemnitor shall be subrogated to the rights of
the indemnitee.
Prior to paying or settling any Claim against which an indemnitor is,
or may be, obligated under this Agreement to indemnify an indemnitee, the
indemnitee must first supply the indemnitor with a copy of the claim and an
opportunity to defend against or settle same as set forth herein and must first
receive the written approval of the terms and conditions of any
63
settlement from the indemnitor prior to settling any claims. An indemnitor shall
have the right to settle any Claim against the indemnitee, subject to the prior
written approval of the indemnitee, which approval shall not be unreasonably
withheld and may not be withheld at all if the settlement includes the complete
release of the indemnitee.
An indemnitee shall have the right to employ its own counsel
in any case, but the fees and expenses of such counsel shall be at the expense
of the indemnitee unless (a) the employment of such counsel shall have been
authorized in writing by the indemnitor in connection with the defense of such
action or Claim, or (b) the indemnitor shall not have employed, or is prohibited
under this Section 11.4 from employing, counsel in the defense of such action or
Claim.
11.5 Indemnification Basket; Maximum Liability. Neither the Sellers, on
the one hand, or the Purchaser, on the other hand, shall be entitled to
indemnification under this Article XI, unless and until their or its,
respectively, total damage exceeds $50,000, and then only to the extent of
aggregate damages in excess of $50,000; provided, however, that such threshold
shall not apply to actions against Purchaser for failure to make payments of
cash or stock due pursuant to this Agreement. In the event that such threshold
amount is exceeded with respect to a claim by Purchaser against SLA, then the
threshold shall be deemed to also be met with respect to each Seller. The
maximum liability under this Agreement for each Seller with respect to such
Seller's personal obligations shall be the total value of the Purchase Price
that such Seller has received. Each Seller shall be severally liable with
respect to matters personal to such Seller and jointly and severally liable with
respect to matters affecting SLA.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by a written agreement
signed by SLA, the Purchaser and the Sellers.
12.2 Entire Agreement. This Agreement, including the schedules and
exhibits hereto and the documents, annexes, attachments, certificates and
instruments referred to herein and therein, embodies the entire agreement and
understanding of the parties hereto in respect of the agreements and
transactions contemplated by this Agreement and supersedes all prior agreements,
representations, warranties, promises, covenants, arrangements, communications
and understandings, oral or written, express or implied, between the parties
with respect to such transactions. There are no agreements, representations,
warranties, promises, covenants, arrangements or understandings between the
parties with respect to such transactions, other than those expressly set forth
or referred to herein.
12.3 Certain Definitions.
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"Affiliate" means, with regard to any Person, (a) any other
Person, directly or indirectly, controlled by, under common control of,
or controlling such first Person, (b) any other Person, directly or
indirectly, in which such first Person holds, of record or
beneficially, five percent or more of the equity or voting securities,
(c) any other Person that holds, of record or beneficially, five
percent or more of the equity or voting securities of such first
Person, (d) any other Person that, through Contract, relationship or
otherwise, exerts a substantial influence on the management of such
first Person's affairs, (e) any other Person that, through Contract,
relationship or otherwise, is influenced substantially in the
management of their affairs by such first Person, or (f) any director,
officer, partner or individual holding a similar position in respect of
such first Person.
"Authority" means any governmental, regulatory or
administrative body, agency, arbitrator, any court or judicial
authority, any public, private or industry regulatory agency,
arbitrator authority, whether international, national, federal, state
or local.
"Claim" means any action, claim, lawsuit, demand, suit,
inquiry, hearing, investigation, notice of a violation, litigation,
proceeding, arbitration, or other dispute, whether civil, criminal,
administrative or otherwise, whether pursuant to contractual
obligations or otherwise.
"Contract" means any written agreement, contract, commitment,
instrument or other binding arrangement or understanding.
"Environmental Law" means any Regulation, Order, settlement
agreement or governmental requirement, which relates to or otherwise
imposes liability or standards of conduct concerning mining or
reclamation of mined land, discharges, emissions, releases or
threatened releases of noises, odors or any pollutants, contaminants or
hazardous or toxic wastes, substances or materials, whether as matter
or energy, into ambient air, water, or land, or otherwise relating to
the manufacture, processing, generation, distribution, use, treatment,
storage, disposal, cleanup, transport or handling of pollutants,
contaminants, or hazardous wastes, substances or materials, including
(but not limited to) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Resource Conservation and
Recovery Act of 1976, as amended, the Toxic Substances Control Act of
1976, as amended, the Federal Water Pollution Control Act Amendments of
1972, the Clean Water Act of 1977, as amended, any so-called
"Superlien" law, and any other similar Federal, state or local
statutes.
"Environmental Permit" shall mean Permits, certificates,
approvals, licenses and other authorizations required by Environmental
Law and necessary or desirable for the Corporation's business.
"GAAP" means generally accepted accounting principles, applied
on a consistent basis.
65
"Health Care Laws" means any Federal, state, or local
Regulation or Order, of any Authority, which relates to or otherwise
imposes liability or standards of conduct concerning the licensure,
certification, qualification, operation, of a health maintenance
organization, pharmacy, home health agency or other aspect of a
corporation's business subject to such Health Care Laws, including but
not limited to Chapter 400, Florida Statutes, governing home health
agencies; Chapter 641, Florida Statues, The Health Maintenance
Organization Act; Chapter 465, Florida Statutes, the Florida Pharmacy
Act; Sections 499.001 to .081, Florida Statutes, the Florida Drug and
Cosmetic Act; Chapter 893, Florida Statutes, the Florida Comprehensive
Drug Abuse Prevention and Control Act; Sections 455.236 to .239,
Florida Statutes, the Patient Self-Referral Act; Section 627.6699,
Florida Statutes, the Employee Health Care Access Act; Sections 409.026
and 409.912, Florida Statutes, 21 U.S.C. Section 301-392, the Federal
Food Drug and Cosmetic Act; 21 U.S.C. Section 821 et seq., the Federal
Drug Abuse Act; Section 1128B of the Social Security Act; The Clinical
Laboratory Improvement Amendments of 1988; 42 U.S.C. Section 1320a-7b,
42 C.F.R. Part 1001, 42 CFR Chapter IV, Subchapter C; Sections 1876 or
1903 of the Social Security Act; 45 CFR, Part 74; 45 CFR, Part 92; 42
CFR 455.109 Section 306 of the Clean Air Act; 42 U.S.C. Section
1857(h) et seq., Section 508 of the Clean Water Act; 33 U.S.C. Section
1368 et seq., Executive Order 11738 and Environmental Protection
Agency regulations; 40 CFR Part 15, Title VI of the Civil Rights Act
of 1964; 42 U.S.C. Section 2000 d et seq., Section 504 of the
Rehabilitation Act of 1933; 29 U.S.C. Section 7940; Title IX of the
Education Amendments of 1972, 20 U.S.C. Section 1681 et seq., the
Age Discrimination Act of 1975; 42 U.S.C. Section 6101 et seq.,
Section 654 of OBRA '81; 42 U.S.C. Section 9849 and the Americans with
Disabilities Act of 1990; P.L. 101-336, OBRAs 1986 through 1993, as
amended, and any other similar Federal, state or local Regulations.
"Lien" means any security interest, lien, mortgage, pledge,
hypothecation, encumbrance, Claim, easement, restriction or interest of
another Person of any kind or nature.
"Material Adverse Change" means any development or change
which has, had or would have a Material Adverse Effect.
"Material Adverse Effect" means any circumstances, state of
facts or matters which has, or might reasonably be expected to have, a
material adverse effect in respect of SLA's business, operations,
properties, assets, condition (financial or otherwise), results, plans,
strategies or prospects.
"Order" means any decree, judgment, award, order, injunction,
rule, consent of or by an Authority.
"Person" means any corporation, partnership, joint venture,
company, syndicate, organization, association, trust, entity, Authority
or natural person.
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"Proprietary Rights" means any patent, patent application,
copyright, trademark, trade name, service xxxx, service name, trade
secret, know-how, confidential information or other intellectual
property or proprietary rights.
"Regulation" means any law, statute, rule, regulation,
ordinance, requirement, announcement or other binding action of or by
an Authority.
"Subsidiary" means any Person which the Purchaser or SLA, as
the case may be, owns, directly or indirectly, 50% or more of the
outstanding stock or other equity interests.
12.4 Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given (i) when delivered if delivered by hand, (ii) three days after
mailing if mailed, first class certified mail with postage paid, or (iii) the
next business day if sent by overnight receipted courier service:
(a) If to SLA, to:
Drs. Xxxxxxxxxxx, Xxxxxx and Associates, P.A.
0000 Xxxxx Xxxxxx
Xxxxx 000
Xx. Xxxxx, Xxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, M.D., President
If to a Seller, to:
Xxxxxxxx Xxxxxxxxxxx, M.D.
0000 Xxxxxxx Xxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Xxxxxx X. Xxxxxx, M.D.
0000 Xxxx Xxxxxxxxx Xxxxx
Xx. Xxxxx, Xxxxxxx 00000
Xxxxx X. Xxxxxxx, M.D.
0000 Xxxxxxx Xxxxx
Xx. Xxxxx, Xxxxxxx 00000
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in each case with a copy to:
XxXxxxxxx Will & Xxxxx
000 X. Xxxxxxxx Xxxx., 00xx Xxxxx
Xxxxx, Xxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxx, Esq.
or to such other person or address as the Sellers or
SLA shall furnish by notice to the Purchaser in writing.
(b) If to the Purchaser to:
AmeriPath, Inc.
000 Xxxxxxx Xxxxx Xxxx, Xxxxx 000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxx X. New, President
with a copy to:
Greenberg, Traurig, Hoffman,
Lipoff, Xxxxx & Xxxxxxx, P.A.
000 X. Xxx Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
or to such other person or address as the Purchaser
shall furnish by notice to Sellers in writing.
12.5 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties.
12.6 Governing Law. The Agreement shall be governed by the laws of the
State of Florida as to all matters, including but not limited to matters of
validity, construction, effect and performance.
12.7 Consent to Jurisdiction; Service of Process. SLA and the Sellers
hereby irrevocably submit to the jurisdiction of the state or federal courts
located in Broward, Dade, County, Florida in connection with any suit, action or
other proceeding arising out of or relating to this Agreement and the
transactions contemplated hereby, and hereby agree not to assert, by way of
motion, as a defense, or otherwise in any such suit, action or proceeding that
the suit, action or proceeding is brought in an inconvenient forum, that the
venue of the suit, action or proceeding is improper or that this Agreement or
the subject matter hereof may not be enforced by such courts.
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12.8 Injunctive Relief. The parties hereto agree that in the event of a
breach of any provision of this Agreement, the aggrieved party or parties may be
without an adequate remedy at law. The parties therefore agree that in the event
of a breach of any provision of this Agreement, the aggrieved party or parties
may elect to institute and prosecute proceedings in any court of competent
jurisdiction to enforce specific performance or to enjoin the continuing breach
of such provision, as well as to obtain damages for breach of this Agreement. By
seeking or obtaining any such relief, the aggrieved party shall not be precluded
from seeking or obtaining any other relief to which it may be entitled.
12.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.10 Headings. The article, section and subsection headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement (or any provision hereof).
12.11 Binding Effect. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the signatories to this
Agreement and each of their respective successors and permitted assigns.
12.12 Delays or Omissions; Waiver. No delay or omission to exercise any
right, power or remedy accruing to any party hereto, upon any breach or default
of any other party under this Agreement, shall impair any such right, power or
remedy of such party nor shall it be construed to be a waiver of, or estoppel
with respect to, any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any party hereto of any breach
or default under this Agreement, or any waiver on the part of any party of any
provisions, obligations, covenants, agreements or conditions of this Agreement
must be made in writing and shall be effective only to the extent specifically
set forth in such writing. All remedies, either under this Agreement or by law
or otherwise afforded to any party, shall be cumulative and not alternative.
Whenever this Agreement requires or permits consent by or on behalf of any party
hereto, such consent shall be given in writing.
12.13 Severability. Unless otherwise provided herein, if any provision
of this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
12.14 Expenses. All fees, costs and expenses (including, without
limitation, legal, auditing and accounting fees, costs and expenses) incurred in
connection with considering, pursuing, negotiating, documenting or consummating
this Agreement and the transactions contemplated hereby shall be borne and paid
solely by the party incurring such fees, costs and expenses, and Purchaser shall
be deemed the party who incurred the expense of SLA's audit.
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12.15 Arbitration. If any dispute arises with respect to this Agreement
between two or more of the parties to it, each party to the dispute shall use
its best efforts to resolve the dispute amicably. If after 20 days the dispute
has not been resolved, any of the parties may elect to submit the dispute to
mediation by an independent certified circuit civil mediator selected jointly by
the parties by giving notice, in accordance with Section 12.4, to the other
parties of its election to mediate ("Mediation Notice"). If a party elects to
mediate a dispute, the other parties must mediate the dispute, although the
result of the mediation will not be binding on either party. If the parties fail
to jointly select a mediator within 15 days after the effective date of the
Mediation Notice, each party shall submit to the other party a proposed list of
not less than eight certified circuit civil mediators to mediate the dispute
within 25 days after the effective date of the Mediation Notice. A party who
fails to submit a proposed list of mediators within the prescribed 25-day period
waives the right to select a mediator and the other party may select the
mediator. If both paries timely submit their proposed lists of mediators, each
party shall select two mediators from the other party's list and Purchaser's
regular legal counsel shall blindly select the mediator from a box containing
the names of each mediator so selected on a "3 x 5" card. The mediator shall
convene a meeting of the parties to the dispute within 21 days after his or her
appointment.
Any party to a dispute that arises with respect to this Agreement may,
prior to receipt of Mediation Notice or after an attempted resolution throughout
the mediation process described in the paragraph above, elect to submit the
dispute to binding non-appealable arbitration before a panel of arbitrators in
accordance with the rules of the American Arbitration Association by giving the
other party a notice of arbitration, in accordance with Section 12.4, (the
"Arbitration Notice"). If the parties do not resolve the dispute through
mediation, arbitration will be the sole and exclusive method of resolving the
dispute. All parties must arbitrate the dispute, and each party will be barred
from filing a lawsuit concerning the subject matter of the dispute, except to
obtain an equitable remedy.
The parties shall make every effort to select a mutually acceptable
Florida corporate lawyer who is rated "AV" by Xxxxxxxxxx-Xxxxxxx law directory
to arbitrate the dispute. If within 10 days after the effective date of the
Arbitration Notice the parties are unable to select such an arbitrator, an
arbitration panel will be selected. The arbitration panel will consist of three
arbitrators. At least one of the arbitrators must be a Florida corporate lawyer
who is rated "AV" by Xxxxxxxxxx-Xxxxxxx law directory. Each party shall select
an arbitrator within 20 days after the effective date of the Arbitration Notice
and the two selected arbitrators shall select the third. A party who fails to
select an arbitrator within the prescribed 20-day period waives the right to
select an arbitrator, and two arbitrators chosen by the other party will select
the third arbitrator.
Every mediator or arbitrator must be independent (not a lawyer or
relative of a party to this Agreement or an officer, director, employee, or
shareholder of AmeriPath) without any economic or financial interest of any kind
in the outcome of the mediation or arbitration. Each arbitrator's conduct will
be governed by the Code of Ethics for Arbitrators in Commercial Disputes (1986)
(as amended or any successor thereto) that has been approved and recommended by
the American Bar Association or the American Arbitration Association.
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Within 45 days after the date of the election or appointment of the
last arbitrator, the arbitration panel shall convene a hearing for the dispute
to be held on such date and at such time and place in Dade County, Florida, as
the arbitration panel designates upon 21 days' advance notice to the parties to
the dispute. The arbitration panel shall render its decision within 30 days
after the conclusion of the hearing. The decision of the arbitration panel will
be binding and conclusive as to all the parties to the dispute and, upon the
pleading of any party to the dispute, any court having jurisdiction may enter a
judgment of any award rendered in the arbitration, which may include an award of
any damages. The arbitration panel shall hear and decide the dispute based on
the evidence produced, notwithstanding the failure or refusal to appear by a
party who has been duly notified of the date, time, and place of the hearing.
The parties agree that the cost of the arbitrators or mediators in any mediation
or arbitration shall be shared equally by the parties to the dispute.
12.16 Attorneys' Fees. Subject to required arbitration pursuant to
Section 12.16 if any party to this Agreement seeks to enforce the terms and
provisions of this Agreement, then the prevailing party in such action,
including arbitration, shall be entitled to recover from the losing party all
costs in connection with such action, including without limitation reasonable
attorneys' fees, expenses and costs incurred at arbitration or the trial court
and all appellate levels (for equitable relief).
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IN WITNESS WHEREOF, the parties hereto have made and entered into this
Agreement the date first hereinabove set forth.
PURCHASER:
AMERIPATH, INC.,
By: /s/ Xxxxxx X. Xxxx
----------------------------------------
Xxxxxx X. Xxxx, Chief Financial Officer
SELLERS:
/s/ Xxxxxxxx Xxxxxxxxxxx, M.D.
-------------------------------------------
Xxxxxxxx Xxxxxxxxxxx, M.D.
/s/ Xxxxxx X. Xxxxxx, M.D.
-------------------------------------------
Xxxxxx X. Xxxxxx, M.D.
/s/ Xxxxx X. Xxxxxxx, M.D.
-------------------------------------------
Xxxxx X. Xxxxxxx, M.D.
DRS. XXXXXXXXXXX, XXXXXX AND
ASSOCIATES, INC.
By: /s/ Xxxxx X. Xxxxxxx, M.D.
-------------------------------------------
Xxxxx X. Xxxxxxx, M.D., President
XXXXXXXXXXX, XXXXXX REAL ESTATE
PARTNERSHIP
By: /s/ Xxxxxx X. Xxxxxx, M.D.
-------------------------------------------
Xxxxxx X. Xxxxxx, M.D., General Partner
