Exhibit 2.1
FINAL EXECUTION COPY
ASSET CONTRIBUTION AND EXCHANGE
AGREEMENT
dated as of July 31,
2004
by and between
NOVAMED ACQUISITION COMPANY,
INC.,
PALM BEACH OUTPATIENT SURGICAL
CENTER, INC.
and
TOM M. COFFMAN,
M.D.
MADONNA COFFMAN
ASSET CONTRIBUTION AND EXCHANGE
AGREEMENT
THIS ASSET CONTRIBUTION AND
EXCHANGE AGREEMENT (this
“ Agreement ”) is dated effective as of 12:01
a.m. on July 31, 2004 (the “Closing Date” ), by
and among NovaMed Acquisition Company, Inc., a Delaware corporation
(“ NovaMed ”), Palm Beach Outpatient Surgical
Center, Inc., a Florida corporation (“ Seller
”), and Tom M. Coffman, M.D. and Madonna Coffman, as tenants
by the entireties (each individually a
“Shareholder” and collectively the
“Shareholders” ). NovaMed, Inc. (
“Nova” ), the owner of all of the issued and
outstanding shares of NovaMed, shall be a party to this Agreement
solely for the purpose of Nova’s agreement pursuant to
Article X hereof. Visual Health and Surgical Center, Inc.
and Eye Care and Surgery Center of Fort Lauderdale, Inc. shall be
parties to this Agreement solely for the purposes of their
respective agreements pursuant to Section 6.6 hereof.
Certain capitalized terms have the meanings provided in Section
13.1 .
RECITALS
A. Seller is engaged in the business
of owning and operating a licensed ambulatory surgery center (the
“ Facility ”) located at 2889 10
th
Avenue North, Lake
Worth, Florida 33461 (the “ Business ”).
Shareholders are the controlling shareholders of Seller, owning
94.118% of Seller, with Kevin Kelly, M.D. and his wife, Linda S.
Kelly, as tenants by the entireties, owning 5.882% of
Seller.
B. Pursuant to the terms hereof,
immediately prior to the Closing (as defined herein), Seller will
transfer substantially all of its assets, and certain liabilities
described herein, to a newly formed Delaware limited liability
company, NovaMed Surgery Center of Palm Beach, LLC (the “
New LLC ”) in exchange for one hundred percent (100%)
of the membership interests in the New LLC (“ New LLC
Interests ”).
C. As a condition precedent to
Closing, Seller must satisfy certain conditions as described in
this Agreement.
D. Contemporaneous with the
consummation of the transactions contemplated herein, Seller
desires to transfer to NovaMed, and NovaMed desires to acquire from
Seller, sixty percent (60%) of the total New LLC Interests in
exchange for the Purchase Price (as defined herein), all on the
terms and conditions hereinafter set forth.
ARTICLE I
CONTRIBUTION OF ASSETS TO NEW LLC
AND OTHER PRE-CLOSING
COVENANTS
NOW, THEREFORE,
in consideration of the mutual
covenants of the parties as hereinafter set forth and other good
and valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, the parties hereto hereby agree as
follows:
1.1 Formation of the New LLC
. Prior to the Closing, the New LLC will be formed pursuant to the
Certificate of Formation in the form attached hereto as Exhibit
1.1-1 .
1.2 Transfer of Assets to New
LLC . Immediately prior to the Closing, and as a condition
precedent to the transactions contemplated herein, Seller will
transfer (the “New LLC Asset Transfer” ) all of
the Assets, free and clear of all Liens (other than those set forth
on Schedule 4.2 ), in exchange for one hundred percent
(100%) of the New LLC Interests. As of the Closing, the assets
contributed into the New LLC as set forth herein will consist of
all of the assets and property necessary to conduct the Business as
it was conducted prior to the Closing (the
“Assets” ), including, without limitation, the
following (except to the extent that any of the following are
designated as Excluded Assets in Section 1.3 below):
(a) all inventory and supplies with
respect to the Business (collectively, the
“Inventory” );
(b) all of the tangible and
intangible personal property with respect to the Business,
including, without limitation, machinery, equipment, fixtures,
phone numbers, computer hardware and software that are listed on
Schedule 1.2(b) (collectively, the “Personal
Property” );
(c) all prepaid expenses relating to
the Business set forth on Schedule 1.2(c) (
“Prepaid Expenses” );
(d) all contract rights with respect
to those Material Contracts identified as Assumed Contracts on
Schedule 4.9 (collectively, the “Assumed
Contracts” ), purchase orders, licenses and leases
pertaining to the Business, including all leasehold improvements,
rights under any restrictive covenants accruing to the benefit of
the Business and any provider agreements relating to the operation
of the Business;
(e) all names and tradenames of
Seller and the Business, including, without limitation, the name
“Palm Beach Outpatient Surgical Center” and all
derivatives thereof;
(f) all records, files and papers
primarily pertaining to the Business, including general business
records, accounting records and Medical Records;
(g) all Permits and licenses
relating to the operation of the Business, to the extent
transferable;
(h) all causes of action, claims,
warranties, guarantees, refunds, rights of recovery and set-off of
every kind and character, relating primarily to the Assets or the
Business;
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(i) all casualty insurance and
warranty proceeds of Seller received after the Closing Date with
respect to damage to, nonconformance of, or loss to, the Assets;
and
(j) to the extent permitted by law,
all accounts receivable or other rights to receive payment owing to
Seller (the “Accounts Receivable” ).
To the extent any personal property,
inventory, supplies, equipment and contracts owned by any
Shareholder or any of Seller and Shareholders’ respective
Affiliates are primarily used in, or are necessary for the
continued conduct of the Business, and would otherwise be deemed
Assets, then Seller or Shareholder will cause such party to
contribute such assets and property to Seller for contribution to
the New LLC, free and clear of all Liens, prior to the Closing
Date.
1.3 Excluded Assets .
Notwithstanding anything to the contrary contained herein, the
Assets do not include the following (collectively, the
“Excluded Assets” ):
(a) Seller’s rights under this
Agreement, including the consideration paid to Seller pursuant to
this Agreement;
(b) the tax records relating to the
Business;
(c) Employee Benefit Plans relating
to the employees of the Business and any and all rights therein or
in the assets thereof;
(d) all Material Contracts not
identified as Assumed Contracts on Schedule 4.9 ;
(e) all cash-on-hand and cash
equivalents as of the Closing Date;
(f) all personal effects of Seller
or Shareholders not used in connection with the operation of the
Business as specified in Schedule 1.3(f) , including,
without limitation, personal hand instruments that certain
Shareholders have purchased on their own or have had from previous
practice, which are essentially duplicative with instruments owned
by Seller, but which such Shareholders prefer to utilize;
and
(g) any and all other items listed
on Schedule 1.3(f) or otherwise designated as an Excluded
Asset in this Agreement.
1.4 Excluded Liabilities .
Notwithstanding anything to the contrary contained in this
Agreement or in any Transaction Document, and regardless of whether
such liability is disclosed in this Agreement, in any of the
Transaction Documents or on any Schedule or Exhibit hereto or
thereto other than the New LLC Assumed Liabilities (as defined in
this Section below), the New LLC will not assume, agree to pay,
perform and discharge or in any way be responsible for any debts,
liabilities or obligations of the Business, Seller, Shareholders or
any of their respective Affiliates of any kind or nature
whatsoever, arising out of, relating to, resulting from, or caused
by any transaction, status, event, condition, occurrence or
situation relating to, arising out of or in connection with the
Business, the Assets, Seller or any Shareholder existing, arising
or occurring on or prior to the Closing Date, including, without
limitation, any liabilities or obligations relating to or arising
from the Excluded Assets (the “Excluded
Liabilities” ). Notwithstanding
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the foregoing, Seller will contribute into New
LLC, and New LLC will assume and thereafter pay and fully satisfy
when due, all liabilities and obligations: (a) which arose prior to
the New LLC Asset Transfer and represent normal and current trade
payables incurred by Seller in connection with the operation of the
Business in the ordinary course of business, consistent with past
custom and practice (and which are not delinquent), including,
without limitation, those specifically set forth on Schedule
1.4(a) ( “Accounts Payable” ); (b) the other
accrued liabilities of Seller which have been incurred in the
ordinary course of business, consistent with past custom and
practice and which are specifically set forth on Schedule
1.4(b) ( “Accrued Liabilities” ); and (c)
first arising after the New LLC Asset Transfer under any Assumed
Contract (except for any liability or obligation arising from any
breach or failure to perform under any of the foregoing prior to
the Closing Date) (all such liabilities and obligations to be so
contributed into, and assumed by, the New LLC being collectively
referred to herein as the “New LLC Assumed
Liabilities” ).
1.5 Satisfaction of
Liabilities . Excluding the New LLC Assumed Liabilities, Seller
agrees to satisfy all liabilities of Seller relating to the
Business prior to the New LLC Asset Transfer or as soon as is
reasonably practicable thereafter, which liabilities include,
without limitation:
(a) all payroll expense and other
compensation due and owing Seller’s employees for the period
preceding the Closing Date (excluding any paid time off or other
employee-related accruals to the extent they are included in
Accrued Liabilities; and
(b) all Taxes, including payroll
taxes, sales taxes and income taxes accrued up to the New LLC Asset
Transfer (but excluding any such Taxes to the extent they are
included in Accrued Liabilities).
ARTICLE II
SALE OF NEW LLC INTERESTS BY
SELLER TO NOVAMED
In reliance upon the representations
and warranties of NovaMed contained herein, and on the terms and
conditions hereinafter set forth, Seller hereby agrees to sell,
assign, transfer, convey and deliver to NovaMed (or its designee)
at the Closing, free and clear of all Liens, all of Seller’s
right, title and interest in and to sixty percent (60%) of the
issued and outstanding New LLC Interests. In reliance upon the
representations and warranties of Seller and Shareholders contained
herein, and on the terms and conditions hereinafter set forth,
NovaMed hereby agrees to purchase such New LLC Interests from
Seller for the Purchase Price set forth in Article III
hereof.
ARTICLE III
CONSIDERATION AND MANNER OF
PAYMENT
3.1 Purchase Price . The
aggregate purchase price for sixty percent (60%) of the New LLC
Interests shall be $7,180,000 (the “Purchase
Price” ).
3.2 Payment of Purchase Price
. At the Closing, NovaMed will pay to Seller, by wire transfer of
immediately available funds to Seller’s designated bank
account, an amount equal to the Purchase Price, according to the
wire transfer instructions attached as Exhibit 3.2
.
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ARTICLE IV
SELLER’S AND
SHAREHOLDERS’ REPRESENTATIONS AND WARRANTIES
Each of Seller and Shareholders
represents and warrants, jointly and severally, to NovaMed as of
the Closing Date, as follows:
4.1 Seller’s Organization,
Good Standing and Authority . Seller is a corporation duly
organized, validly existing and in good standing under Florida law.
Each of Seller and Shareholders has full capacity, power, right and
authority to enter into and perform their respective obligations
under this Agreement and each of the Transaction Documents to which
each of them is a party. This Agreement and each of the Transaction
Documents to which each is a party have been duly executed and
delivered by each of Seller and Shareholders, and constitute the
valid and binding obligations of Seller and Shareholders,
enforceable against them in accordance with their respective terms,
except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally and the availability of
equitable remedies.
4.2 Assets . Seller has full
power and authority to carry on the Business as it is now being
conducted and to own and hold under lease the properties and assets
it now owns or holds under lease. The Assets constitute all
tangible or intangible property, rights and assets necessary for
the conduct by Seller of the Business as conducted during the
twelve months preceding the Closing Date. Seller has good and
marketable title to the Assets, in each case free and clear of any
and all Liens. Upon consummation of the transactions contemplated
by this Agreement, Seller will have conveyed, and the New LLC will
be vested with, good and marketable title to the Assets, free and
clear of all Liens. All of the Assets that are personal property
are in operable condition and repair, except for reasonable wear
and tear, and Seller and the Shareholders have no knowledge that
any of the Assets require any repair or replacement in the
foreseeable future except for maintenance in the ordinary course of
business. Except as set forth on Schedule 4.2 , none of the
Assets are held under any lease, security agreement, conditional
sales contract or other title retention or security agreement or is
located other than at the Facility.
4.3 Approvals . Except as set
forth on Schedule 4.3 , no consent, approval, order or
authorization of, or registration, declaration or filing with, any
national, state, provincial, local, governmental, judicial, public,
quasi-public or administrative authority or agency (collectively,
“Governmental Authority” ) or other Person is
required to be made or obtained by Seller or any Shareholder in
connection with the authorization, execution, delivery and
performance of this Agreement or any other Transaction Document, or
the consummation of the transactions contemplated hereby and
thereby.
4.4 New LLC Interests .
Immediately prior to the Closing Date, Seller will be the only
record and beneficial holder of the New LLC Interests. Seller has
good and marketable title to the New LLC Interests free and clear
of all Liens, and has full right, power and authority to transfer
the New LLC Interests to NovaMed as provided herein, without
obtaining the consent of any third party (other than the Manager of
the New LLC (the “Manager” ) as set forth in the
terms and conditions of the Operating Agreement (as defined in
Section 7.3(b)) of the New LLC). Upon consummation of the
transactions contemplated herein, Seller shall have transferred
good and marketable title to the New LLC Interests free and clear
of all Liens.
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4.5 Financial Statements .
Seller has previously delivered to NovaMed unaudited financial
statements of Seller, to the extent available as of and for the
years ending December 31, 2001, December 31, 2002, and December 31,
2003 and interim financial statements ending June 30, 2004,
consisting of an income statement and balance sheet (
“Financial Statements” ). Except as set forth on
Schedule 4.5 , each of the Financial Statements (a) has been
prepared in accordance with generally accepted accounting
principles; (b) is true, complete and correct in all material
respects as of the respective dates and for the respective periods
above stated; (c) fairly presents in all material respects the
financial position of Seller at such dates and the results of its
operations for the periods ended on such dates, subject in the case
of interim financial statements, to normal recurring year-end
adjustments (the effect of which will not be materially adverse)
and the absence of notes; and (d) is consistent with Seller’s
books and records.
4.6 Absence of Undisclosed
Liabilities . The New LLC has no material debts, liabilities or
obligations of any nature (whether accrued, absolute, contingent,
direct, indirect, perfected, or otherwise and whether due or to
become due) arising out of transactions entered into at or prior to
the Closing, or any transaction, series of transactions, action or
inaction at or prior to the Closing, or any state of facts or
condition existing at or prior to the Closing (regardless of when
such liability or obligation is asserted), including but not
limited to liabilities or obligations on account of Taxes or
governmental charges or penalties, interest or fines thereon or in
respect thereof, except (a) to the extent specifically reflected
and accrued for or reserved against in the Financial Statements,
(b) for liabilities specifically delineated on Schedule 4.6
, or (c) liabilities incurred in the ordinary course of business
since the date of the Financial Statements.
4.7 Inventory . All of the
Inventory is usable in the ordinary course of business, is fully
paid for and not subject to consignment or conditional sales
arrangements and no material portion of the Inventory is obsolete
or damaged.
4.8 Taxes . Seller has filed
all Tax Returns on a timely basis that it is required to have filed
in connection with the operation of the Business, and such returns
are true, complete and correct. Seller has paid all Taxes, interest
and penalties, if any, reflected on such Tax Returns or otherwise
due and payable by them. Any deficiencies proposed as a result of
any governmental audits of such Tax Returns have been paid or
settled, and there are no present disputes as to Taxes payable by
Seller in connection with the operation of the Business. With
respect to all amounts of Taxes imposed on Seller for which Seller
is or could be liable, whether to taxing authorities (as, for
example, under the law) or to other Persons, with respect to all
taxable periods or portions of periods ending on or before the
Closing Date, all applicable Tax laws and agreements have been
materially complied with, and all such amounts required to be paid
by Seller to taxing authorities or others on or before the Closing
Date have been paid, or have been materially accrued for or
reserved against on the Financial Statements. No material issues
have been raised and are currently pending by any taxing authority
in connection with any of the Tax Returns. No waivers of statutes
of limitations with respect to the Tax Returns have been given by
or requested from the Shareholders or Seller. There are no Liens
for Taxes (other than current taxes not yet due and payable) upon
any asset of Seller. Seller is not a party to any Tax-indemnity,
Tax-sharing, Tax allocation or other similar agreements or
arrangements.
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4.9 Material Contracts .
Schedule 4.9 is a correct and complete list of every
material written contract, agreement, relationship or commitment,
every material oral contract, commitment, agreement or
relationship, to which Seller or any Shareholder is a party or by
which Seller or any Shareholder is bound, as they relate to the
Business (the “ Material Contracts ”), correct
and complete copies of which previously have been made available to
NovaMed. Except as set forth on Schedule 4.9 , neither
Seller nor any Shareholder is in default, and no event has occurred
which with the giving of notice or the passage of time or both
would constitute a default by such party, under any Material
Contract, and, to the knowledge of Seller or any Shareholder, no
event has occurred which with the giving of notice or the passage
of time or both would constitute a default by any party to any such
Material Contract.
4.10 Real Property . As it
relates to the Business, Seller does not own any real property.
Seller has a valid leasehold interest in the real property
described in Schedule 4.10 (collectively, the
“Leased Real Property” ), free and clear of all
Liens, except for Liens for current property taxes not yet due and
payable. The Leased Real Property constitutes all real properties
used or occupied by Seller in connection with the Business or
reflected on the Financial Statements. Upon execution of the Lease
Agreement (as hereinafter defined), the New LLC will have a valid
leasehold interest in the Leased Real Property, which leasehold
interest will be free and clear of all Liens, except for Liens
created by the New LLC. With respect to the Leased Real Property
and except as set forth on Schedule 4.10 : (a) Seller has
all easements and rights necessary to conduct the Business; (b) no
portion thereof is subject to any pending or, to the knowledge of
Seller or any Shareholder, threatened condemnation proceeding or
proceeding by any public authority; (c) the buildings, plants and
structures, including heating, ventilation and air conditioning
systems, roof, foundation and floors, are in good operating
condition and repair, subject only to ordinary wear and tear, and
are not in violation of any zoning or other Rules; (d) there are no
leases, subleases, licenses, concessions or other agreements,
written or oral, granting to any party or parties the right of use
or occupancy of any portion of any parcel of Leased Real Property;
and (e) the Leased Real Property is supplied with utilities and
other services reasonably necessary for the operation of such
facilities.
4.11 Litigation . Except as
set forth on Schedule 4.11 , there are no claims,
counterclaims, actions, suits, orders, proceedings (arbitration,
mediation or otherwise), investigations or judgments pending or, to
the knowledge of Seller or any Shareholder, threatened against or
involving Seller, the Business or, with respect to the Business,
any Shareholder, or relating to the transactions contemplated
hereby, at law or in equity, in any court or agency, or before or
by any Governmental Authority, nor, to the knowledge of Seller or
any Shareholder, are there any facts, conditions or incidents that
could be reasonably expected to result in any such actions, suits,
proceedings (arbitration, mediation or otherwise) or
investigations. Except as set forth on Schedule 4.11 ,
neither Seller nor any Shareholder is subject to any judgment,
order or decree of any court or Governmental Authority. None of the
matters set forth on Schedule 4.11 would likely result in
any Material Adverse Effect on Seller, the Assets, the Business or
New LLC.
4.12 Compliance with Applicable
Laws; Permits.
(a) Each of Seller and Shareholders,
in their conduct of the Business, have complied, in all material
respects, with applicable federal, state and local laws and the
rules
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and regulations of all Governmental Authorities
having authority over them, including, without limitation, agencies
concerned with Fraud and Abuse Laws and Medicare and Medicaid
requirements applicable to the Shareholders’ and
Seller’s billing procedures in their conduct of the Business
(except denials of claims in the ordinary course of business).
Neither Seller nor any Shareholder has received any written notice
of Seller’s violation of any such rules or regulations,
whether corrected or not, within the last five (5) years. Seller is
eligible to receive payment under Titles XVIII and XIX of the
Social Security Act.
(b) Seller holds all the permits,
licenses and other approvals of Governmental Authorities material
for the current conduct, ownership, use, occupancy and operation of
the Business and the Leased Real Property, including, without
limitation, those identified on Schedule 4.12(b) (
“Permits” ). Seller is in compliance in all
material respects with such Permits, all of which are in full force
and effect, and Seller has not received any notices (written or
oral) to the contrary.
4.13 Transaction Not a Breach
. The execution, delivery and performance by Seller and
Shareholders of this Agreement and the Transaction Documents will
not:
(a) Result in a breach of any of the
terms or conditions of, or constitute a default under, or in any
manner release any party thereto from any obligation under any
mortgage, note, bond, indenture, contract, agreement, license or
other instrument or obligation of any kind or nature by which
Seller or Business may be bound or affected;
(b) violate or conflict with any
order, writ or injunction of any court, administrative agency or
Governmental Authority to which Seller or any Shareholder is
subject;
(c) Constitute an event which would
permit any party to terminate any agreement or accelerate the
maturity of any indebtedness or other obligation;
(d) Violate any provision of the
organizational documents of Seller; or
(e) Result in the creation or
imposition of any Lien upon any property of Seller.
4.14 Conduct of Business .
Since the Review Date, Seller has conducted the Business in the
ordinary course of business, consistent with past custom and
practice, and has incurred no material liabilities other than in
the ordinary course of business, consistent with past custom and
practice, and there has been no Material Adverse Effect on the
assets, financial condition, operating results, employee or patient
relations, business activities or business prospects of Seller or
the Business. Without limitation of the foregoing, since the Review
Date, Seller has not, except in the ordinary course of business,
consistent with past custom and practice, or as otherwise set forth
on Schedule 4.14 :
(a) Incurred any obligation or
liability, absolute, accrued, contingent or otherwise, whether due
or to become due, whether individually or in the aggregate, that
has had or could be reasonably expected to result in a Material
Adverse Effect;
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(b) Voluntarily or involuntarily
sold, transferred, abandoned, surrendered, leased or otherwise
disposed of any of its assets material to the operation of
Seller;
(c) Waived or released any right of
substantial value;
(d) Received any notice of
termination of any contract, lease or other agreement, or suffered
any damage, destruction or loss that, individually or in the
aggregate, has had or could be reasonably expected to result in a
Material Adverse Effect;
(e) Instituted, settled or agreed to
settle any litigation, action, proceeding or
arbitration;
(f) Made a material purchase
commitment other than in the ordinary course of business,
consistent with past custom and practice;
(g) Modified the timing, course of
conduct or other cash management activities with respect to the
collection of Accounts Receivable of the Business;
(h) Failed to pay any Accounts
Payable or any other obligations consistent with past practices,
except for bona fide disputes arising in the ordinary course of
business;
(i) Entered into any material
transaction, contract or commitment other than in the ordinary
course of business, consistent with past custom and practice, other
than the transactions contemplated by the Transaction
Documents;
(j) Suffered any event or events,
whether individually or in the aggregate, that has had or could be
reasonably expected to result in a Material Adverse Effect on the
Business; or
(k) Issued any equity interests or
entered into any agreement or understanding to do so.
4.15 Health, Safety and
Environment . Seller has never generated, transported, treated,
stored, disposed of or otherwise handled any Hazardous Materials at
any site, location or facility in connection with its business or
any of its assets in material violation of any applicable
Environmental and Safety Requirements (as hereinafter defined).
Seller: (i) is in material compliance with all applicable federal,
state and local laws, rules, regulations, ordinances and relating
to public health and safety, worker health and safety and pollution
and protection of the environment, all as amended (“
Environmental and Safety Requirements ”), and (ii)
possesses, or as described on Schedule 4.15 has timely
applied for, all material permits, licenses, certifications and
approvals and has filed all notices or applications required
thereby or pertaining thereto. Seller has never received any
written notice of any private, administrative or judicial inquiry,
investigation, order or action, or any written notice of any
intended or threatened private, administrative, or judicial
inquiry, investigation, order or action relating to the presence or
alleged presence of Hazardous Materials in, under or upon any
property currently leased or owned by Seller, nor is Seller aware
of any such inquiry, investigation, order, action or notice. There
are no pending, or to the knowledge of Seller or any Shareholder,
threatened,
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investigations, actions, orders or proceedings
(or written notices of potential investigations, actions, orders or
proceedings) from any Governmental Authority or any third party
alleging non-compliance with Environmental and Safety
Requirements.
4.16 Employees . Schedule
4.16 is a true, complete and correct list setting forth as of
the date stated thereon the names and current compensation rate and
compensation of all individuals employed by Seller. There has been
no material increase, other than in the ordinary course of
business, consistent with past custom and practice, in the
compensation or rate of compensation payable to any employees of
Seller since the Review Date, nor since that date has there been
any promise to any employee listed on Schedule 4.16 , orally
or in writing, of any bonus or increase in compensation, except for
increases in the ordinary course of business consistent with
Seller’s past compensation practices and listed on
Schedule 4.16 , and obligations incurred under existing
bonus, insurance, pension or other Employee Benefit Plans described
on Schedule 4.19 or Schedule 4.20 . Except as set
forth on Schedule 4.16 , there has been no promise to any
employee listed on Schedule 4.16 , orally or in writing, of
any guaranty of employment following the Closing Date.
4.17 Insurance . Seller has
obtained and maintained in full force and effect commercially
reasonable amounts of insurance to protect it and the Business
against the types of liabilities, including medical malpractice,
customarily insured against by Persons operating a business of
similar size and nature to the Business, and all premiums due on
such policies have been paid. Such insureds have complied in all
material respects with the provisions of all such policies. Seller
has previously delivered to NovaMed complete and correct copies of
all such policies, together with all riders and amendments thereto
in the possession of Seller. Except as set forth on Schedule
4.17 , there are no claims or asserted claims reported to
insurers under such policies, including all medical malpractice
claims and similar types of claims, actions or proceedings asserted
against any of Seller and the Shareholders at any time within the
past five (5) years.
4.18 Affiliate Transactions .
Excluding ordinary course distributions to its equity holders and
other than as set forth on Schedule 4.18 , there are no
transactions involving the transfer of any cash, property or rights
to or from Seller from, to or for the benefit of any Affiliate or
former Affiliate of Seller ( “Affiliate
Transactions” ) during the period commencing January 1,
2001 through the date hereof or any existing commitments of Seller
to engage in the future in any Affiliate Transactions.
4.19 Employee Benefit Plans .
Except as set forth in Schedule 4.19 , neither Seller nor
any Plan Affiliate has maintained, sponsored, adopted, made
contributions to or obligated itself to make contributions to or to
pay any benefits or grant rights under or with respect to any
“Employee Pension Benefit Plan” (as defined in Section
3(2) of ERISA), “Employee Welfare Benefit Plan” (as
defined in Section 3(1) of ERISA), “multi-employer
plan” (as defined in Section 3(37) of ERISA), any collective
bargaining agreement, plan of deferred compensation, medical plan,
life insurance plan, long-term disability plan, dental plan or
other plan providing for the welfare of any of Seller’s
employees or former employees or beneficiaries thereof, personnel
policy (including but not limited to vacation time, holiday pay,
bonus programs, moving expense reimbursement programs and sick
leave), material fringe benefit, excess benefit plan, bonus or
incentive plan (including but not limited to stock options,
restricted stock, stock
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bonus and deferred bonus plans), severance
agreement, salary reduction agreement, top hat plan or deferred
compensation plan, change-of-control agreement, employment
agreement, consulting agreement or any other benefit, program,
policy, arrangement, agreement or contract (collectively,
“Employee Benefit Plans” ), whether or not
written or terminated, which could give rise to or result in Seller
or such Plan Affiliate having any debt, liability, claim or
obligation of any kind or nature, whether accrued, absolute,
contingent, direct, indirect, known or unknown, perfected or
inchoate or otherwise and whether or not due or to become due.
Correct and complete copies of all Employee Benefit Plans
previously have been made available to NovaMed. The Employee
Benefit Plans are in compliance in all material respects with
governing documents and agreements and with applicable laws. Seller
acknowledges that it will be solely responsible for administering
and/or terminating its Employee Benefit Plans following the
Closing.
4.20 Personnel Agreements, Plans
and Arrangements . Except as listed in Schedule 4.20 ,
neither Seller nor any Shareholder is a party to or obligated in
connection with the Business with respect to any outstanding
contracts with current or former employees, agents, consultants, or
advisers.
4.21 Certain Payments . None
of Seller, the Shareholders, any director, officer, agent, or
employee of Seller or any other Person associated with or acting
for or on behalf of Seller has, directly or indirectly, made any
contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) for
securing patients or referrals, (ii) for patients or referrals
secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of Seller, or (iv)
in violation of any law.
4.22 Workers Compensation .
Schedule 4.22 sets forth all expenses, obligations, duties
and liabilities relating to any pending, ongoing, or to
Seller’s knowledge, threatened claims by employees and former
employees of Seller, and the extent of any specific accrual on or
reserve therefor set forth on the Financial Statements, for costs,
expenses and other liabilities under any workers compensation laws,
regulations, requirements or programs. Except as set forth on
Schedule 4.22 , no claim, injury, fact, event or condition
exists which would give rise to a material claim by any employees
or former employees (including dependents and spouses) of Seller
under any workers compensation laws, regulations, requirements or
programs. Since the Review Date, there has been no material change,
other than in the ordinary course of business, in the information
disclosed in Schedule 4.22 .
4.23 Accounts Receivable/Accounts
Payable.
(a) Accounts Receivable .
Except as set forth on Schedule 4.23(a) , the Accounts
Receivable are valid, binding and legally enforceable obligations
and are owned by Seller free and clear of all Liens, and, except
for contractual allowances, reserves for bad debts and other
adjustments that are consistent with those adjustments made in
preparing the Financial Statements, will not be subject to any
offset, counterclaim or other adverse claim or defense, and may be
transferred to the New LLC to the extent permitted by law. The
Accounts Receivable arose in the ordinary and usual course of the
business, and the Accounts Receivable are set forth on the books
and records of Seller. Schedule 4.23(a) contains a complete
and accurate list of all Accounts Receivable as of the date stated
thereon, which list represents the Accounts Receivable after
adjusting for contractual allowances and bad debt
reserves.
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(b) Accounts Payable and Accrued
Liabilities . Schedule 1.4(a) and Schedule 1.4(b)
sets forth a complete and correct list of the Accounts Payable and
Accrued Liabilities. Each of the Accounts Payable and Accrued
Liabilities are valid and have been incurred in connection with the
operation of the Business in the ordinary course of business,
consistent with Seller’s past custom and practice.
4.24 Brokers . Except as set
forth on Schedule 4.24 , all negotiations relating to this
Agreement and the Transaction Documents, and the transactions
contemplated hereby and thereby, have been carried on without the
intervention of any Person acting on behalf of any of Seller or
Shareholders in such a manner as to give rise to any valid claim
for any broker’s or finder’s fee or similar
compensation against NovaMed. Seller will be responsible for all
broker’s or finder’s fees or similar compensation
payable to such Persons listed on Schedule 4.24 , including,
without limitation, The Bloom Organization, LLC.
4.25 No Misrepresentation .
None of the representations and warranties of Seller and
Shareholders set forth in this Agreement, in any of the
certificates, schedules, lists, documents, exhibits, or other
instruments delivered, or to be delivered, to NovaMed as
contemplated by any provision hereof (including the Transaction
Documents), contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements contained
herein or therein not misleading. To the knowledge of Seller or any
Shareholder, there are no material facts which have not been
disclosed to NovaMed which have a Material Adverse Effect, or could
reasonably be anticipated to have a Material Adverse Effect, on the
Business or Seller’s or any Shareholder’s ability to
consummate the transactions contemplated hereby.
4.26 HIPAA . Seller and
Shareholders represents and warrants that (a) all of the Assets
being sold and/or provided by Seller to NovaMed under this
Agreement, including without limitation, any computer hardware
and/or software, are in compliance with the Health Insurance
Portability and Accountability Act of 1996 (Public Law 104-91, 42
U.S.C. 1301 et. seq. ) and regulations promulgated
thereunder (collectively, “ HIPAA ”), and
applicable state laws having similar subject matter to HIPAA
(“ State HIPAA ”), and (b) Seller conducted its
business and activities, including, without limitation, its billing
and collection activities, its medical records management
activities, and its general practice management activities, in a
manner that complied with HIPAA and State HIPAA.
4.27 No Other Representations or
Warranties . Neither the Seller nor any of the Shareholders
shall be deemed to have made to NovaMed any representation or
warranty other than expressly made by the Seller and Shareholders
in this Agreement or the other Transaction Documents. Without
limiting the generality of the foregoing, and except as expressly
covered by a representation and warranty contained in this
Agreement or the other Transaction Documents, neither the Seller
nor the Shareholders make any representation or warranty to NovaMed
with respect to (i) any future projection, estimates or budgets
heretofore delivered to or made available to NovaMed of future
revenues, expenses or expenditures, future results of operations
(or any component thereof), future cash flows or future financial
condition (or any component thereof) of the Business, or (ii) any
other information or documents made available to NovaMed or its
counsel or advisors with respect to the Seller, the Shareholders
the Business or the New LLC.
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ARTICLE V
NOVAMED’S REPRESENTATIONS
AND WARRANTIES
NovaMed hereby represents and
warrants to Seller as of the Closing Date as follows:
5.1 Organization . NovaMed is
duly organized, validly existing and in good standing under the
laws of the State of Delaware.
5.2 Authorization . NovaMed
has full power, right and authority to enter into and perform its
obligations under this Agreement and each of the Transaction
Documents to which it is a party. The execution, delivery and
performance by NovaMed of this Agreement and each of the
Transaction Documents to which it is a party have been duly and
properly authorized by all requisite corporate action in accordance
with applicable law and with NovaMed’s Certificate of
Incorporation. This Agreement and each of the Transaction Documents
to which NovaMed is a party have been duly executed and delivered
by NovaMed and are the valid and binding obligation of NovaMed and
are enforceable against NovaMed in accordance with their respective
terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally and the availability of
equitable remedies.
5.3 Transaction Not a Breach
. The execution, delivery and performance of this Agreement and the
Transaction Documents by NovaMed will not violate and conflict
with, or result in the breach of any of the terms, conditions, or
provisions of NovaMed’s Certificate of Incorporation or of
any contract, agreement, mortgage, or other instrument or
obligation of any nature to which NovaMed is a party or by which
NovaMed is bound.
5.4 Approvals . Except as set
forth on Schedule 5.4 , no consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Authority or other Person is required to be made or
obtained by NovaMed in connection with the authorization,
execution, delivery and performance of this Agreement or any other
Transaction Document, or the consummation of the transactions
contemplated hereby and thereby.
5.5 Litigation . Except as
set forth on Schedule 5.5 , there are no claims,
counterclaims, actions, suits, orders, proceedings (arbitration,
mediation or otherwise), investigations or judgments pending or, to
the knowledge of NovaMed, threatened against or involving NovaMed
relating to the transactions contemplated hereby, at law or in
equity, in any court or agency, or before or by any Governmental
Authority, nor, to the knowledge of NovaMed, are there any facts,
conditions or incidents that could be reasonably expected to result
in any such actions, suits, proceedings (arbitration, mediation or
otherwise) or investigations against or involving NovaMed relating
to the transactions contemplated hereby.
5.6 Acquisition of New LLC
Interests . NovaMed is acquiring the New LLC Interests for its
own account and not with a view to the distribution or resale
thereof. NovaMed has no intention of selling the New LLC Interests
in a public distribution in violation of federal securities laws or
any applicable state securities laws.
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5.7 Broker . All negotiations
relating to this Agreement and the Transaction Documents, and the
transactions contemplated hereby and thereby, have been carried on
without the intervention of any Person acting on behalf of NovaMed
in such a manner as to give rise to any valid claim for any
broker’s or finder’s fee or similar compensation
against Seller.
5.8 No Misrepresentation .
None of the representations and warranties of NovaMed set forth in
this Agreement or in any of the certificates, schedules, lists,
documents, exhibits, or other instruments delivered, or to be
delivered, to Seller as contemplated by any provision hereof
(including the Transaction Documents), contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements contained herein or therein not misleading. To
the knowledge of NovaMed, there are no material facts which have
not been disclosed to Seller and the Shareholders which have a
Material Adverse Effect, or could reasonably be anticipated to have
a Material Adverse Effect, on NovaMed’s ability to consummate
the transactions contemplated hereby
ARTICLE VI
ADDITIONAL
AGREEMENTS
6.1 Release of Liens and Lien
Searches . Seller shall procure all applicable release of liens
with respect to those Liens set forth on Schedule 4.2 ,
prior to the New LLC Asset Transfer. Seller shall use its
reasonable efforts to provide NovaMed with all information and
other assistance required for the parties to file all applicable
UCC termination statements (in form and manner required by NovaMed
or its lenders). Following the filing of all such UCC termination
statements, and unless otherwise mutually agreed upon by Seller and
NovaMed, there shall be no remaining financing statements,
judgments, taxes or other Liens outstanding against any of the
Assets or the Business as of the Closing Date.
6.2 Employees; Labor
Relations.
(a) Continuing Employees .
New LLC shall offer to employ the employees of Seller listed on
Schedule 6.2(a) (the “ Continuing Employees
”) as of the Closing Date, on the terms and conditions
established by New LLC in its sole discretion. Such offer of
employment by New LLC shall not be deemed to create a continuing
right to employment for any Continuing Employees. Seller shall be
solely r
