<PAGE>
EXHIBIT 10.2
EXECUTION COPY
PARTNERSHIP INTEREST PURCHASE AGREEMENT
BY AND AMONG
POINT LOMA GENPAR, INC. AND POINT LOMA ACQUISITION, INC.,
AS THE BUYERS;
SURGICAL VENTURES, INC.,
AS THE SELLER;
AND
DAVID M. KUPFER, M.D.
<PAGE>
PARTNERSHIP INTEREST PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S>
<C>
ARTICLE I PURCHASE
AND
SALE...........................................................................
2
1.1 Purchase
and Sale of the Purchased
Interests...................................................
2
1.2 Closing
Date...................................................................................
2
1.3
Consideration..................................................................................
2
1.4 Closing
Deliveries.............................................................................
3
1.5 Further
Assurances.............................................................................
4
ARTICLE II REPRESENTATIONS
AND WARRANTIES OF THE SELLER AND
KUPFER..................................... 4
2.1
Organization...................................................................................
4
2.2
Authority......................................................................................
5
2.3 Formation
Documents............................................................................
5
2.4
Capitalization.................................................................................
5
2.5 Title to
Securities............................................................................
6
2.6 No
Subsidiaries................................................................................
6
2.7 Title to
Assets................................................................................
6
2.8 Condition
and Sufficiency of
Assets............................................................
7
2.9 Accounts
Receivable............................................................................
7
2.10 No
Violation...................................................................................
7
2.11 Governmental
Authorizations....................................................................
8
2.12 Financial
Statements...........................................................................
8
2.13 Absence of
Undisclosed
Liabilities.............................................................
8
2.14 Absence of
Certain
Changes.....................................................................
9
2.15
Taxes..........................................................................................
11
2.16
Litigation.....................................................................................
12
2.17 Compliance with
Laws...........................................................................
12
2.18
Licenses.......................................................................................
12
2.19
Payors.........................................................................................
12
2.20 Medical Staff
Matters..........................................................................
12
2.21 Health Care
Legal
Matters......................................................................
13
2.22 Environmental
Matters..........................................................................
15
2.23 Employee
Matters...............................................................................
16
2.24 Employee Benefit
Plans.........................................................................
16
2.25 Partnership
Contracts..........................................................................
18
2.26 Intellectual
Property..........................................................................
19
2.27 Competing
Interests............................................................................
19
2.28 No Conflict of
Interest........................................................................
19
2.29 Illegal
Payments...............................................................................
19
2.30
Insurance......................................................................................
20
2.31 Accredited
Investor; Disclosure
Materials......................................................
20
2.32 Investment
Intent..............................................................................
20
2.33 Restricted
Securities..........................................................................
21
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S>
<C>
2.34 Full
Disclosure................................................................................
21
ARTICLE III REPRESENTATIONS AND
WARRANTIES OF THE
BUYERS................................................ 21
3.1
Organization...................................................................................
21
3.2
Authority......................................................................................
21
3.3 No
Violation...................................................................................
22
3.4
Governmental
Authorizations....................................................................
22
3.5
Litigation.....................................................................................
22
3.6 No
Brokers.....................................................................................
22
3.7 Accredited
Investor............................................................................
22
3.8 Investment
Intent..............................................................................
22
3.9 Restricted
Securities..........................................................................
22
3.10 Full
Disclosure................................................................................
23
ARTICLE IV COVENANTS AND
AGREEMENTS....................................................................
23
4.1 Conduct of
Business............................................................................
23
4.2 Access and
Information.........................................................................
25
4.3
Supplemental
Disclosure........................................................................
25
4.4 Assistance
with Licenses and
Filings...........................................................
25
4.5
Substitution
Guarantor.........................................................................
25
4.6
Fulfillment of Conditions by the
Sellers.......................................................
25
4.7
Fulfillment of Conditions by the
Buyers........................................................
25
4.8
Distributions in Excess of Required
Capital....................................................
26
4.9 Consent to
Transfers...........................................................................
26
4.10
Publicity......................................................................................
26
4.11
Audit..........................................................................................
26
4.12 Transaction
Costs..............................................................................
26
4.13 No-Shop
Provisions.............................................................................
27
4.14
Nondisclosure..................................................................................
27
4.15 Certain Tax
Matters............................................................................
27
4.16 Employees and
Employee
Benefits................................................................
28
4.17 Treatment of
Partnership Assets After
Closing..................................................
28
4.18 Mutual
Walk-Away...............................................................................
28
ARTICLE V CLOSING
CONDITIONS..........................................................................
29
5.1 Conditions
to Obligations of the
Buyers........................................................
29
5.2 Conditions
to Obligations of the Seller and
Kupfer............................................. 30
ARTICLE VI
INDEMNIFICATION.............................................................................
31
6.1
Indemnification of the
Buyers..................................................................
31
6.2
Indemnification of the
Sellers.................................................................
33
6.3
Survival.......................................................................................
33
6.4
Notice.........................................................................................
34
6.5 Defense of
Claims..............................................................................
34
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S>
<C>
6.6
Determination of
Losses........................................................................
35
ARTICLE VII
MISCELLANEOUS...............................................................................
36
7.1
Termination....................................................................................
36
7.2
Notices........................................................................................
37
7.3 Attorneys'
Fees and
Costs......................................................................
37
7.4
Brokers........................................................................................
37
7.5
Severability...................................................................................
38
7.6
Counterparts...................................................................................
38
7.7
Interpretation.................................................................................
38
7.8
Assignment.....................................................................................
38
7.9 Entire
Agreement,
Amendment....................................................................
38
7.10 Specific
Performance, Remedies Not
Exclusive...................................................
38
7.11 GOVERNING
LAW..................................................................................
39
7.12
Drafting.......................................................................................
39
7.13
Usage..........................................................................................
39
7.14 Certain
Definitions............................................................................
39
</TABLE>
iii
<PAGE>
EXECUTION COPY
PARTNERSHIP INTEREST PURCHASE AGREEMENT
This
Partnership Interest Purchase Agreement (this "Agreement") is
made
and entered into as of December 2, 2005
(the "Effective Date"), by and among
Point Loma GenPar, Inc., a Nevada
corporation ("GenPar"); Point Loma
Acquisition, Inc., a Nevada corporation
("Newco" and, together with GenPar, each
individually a "Buyer" and collectively the
"Buyers"); Surgical Ventures, Inc.,
a California corporation (the "Seller");
and David M. Kupfer, M.D., an
individual residing in and licensed to
practice medicine in the State of
California ("Kupfer").
RECITALS
WHEREAS,
the Seller is the legal and beneficial owner and holder of
record
of a general partnership interest in Point
Loma Surgical Center, L.P., a
California limited partnership (the
"Partnership"), having a Percentage Interest
(as defined in the Partnership Agreement
(as defined in Section 5.1(j))) of 1%
(the "GP Interest"), and is the sole
general partner named in the Partnership
Agreement;
WHEREAS,
the Seller is also the legal and beneficial owner and holder of
record of a limited partnership interest
having a Percentage Interest of 77%;
WHEREAS,
the remaining limited partnership interest in the Partnership,
having an aggregate Percentage Interest of
22%, is legally and beneficially
owned and held of record by the Persons (as
defined in Section 2.16) identified
as "Non-Selling Limited Partners" in
Schedule 2.4 to this Agreement;
WHEREAS,
the Partnership engages in the business of operating the Point
Loma Surgical Center located at 3434 Midway
Drive, Suite 1006, San Diego,
California 92110 (the "Business");
WHEREAS,
the Seller desires to sell to GenPar, and GenPar desires to
purchase from the Seller, the GP Interest,
on the terms and subject to the
conditions set forth in this Agreement;
WHEREAS,
the Seller also desires to sell to Newco, and Newco desires to
purchase from the Seller, a limited
partnership interest having a Percentage
Interest of 50% (the "LP Interest" and,
together with the GP Interest, the
"Purchased Interests"), on the terms and
subject to the conditions set forth in
this Agreement;
WHEREAS,
Kupfer owns 100% of the issued and outstanding stock of the
Seller and will receive substantial direct
and indirect benefits from the
transactions contemplated by this
Agreement, and the Buyers have required that
Kupfer enter into this Agreement as a
condition to the Buyers' execution hereof;
and
WHEREAS,
Kupfer owns 100% of the issued and outstanding stock of Elite
Surgical Management, Inc., a California
corporation ("Elite"), which provides
certain services to the
<PAGE>
Partnership, and desires to cause Elite to
sell to Surgical Center Management,
Inc., a Nevada corporation and an Affiliate
of the Buyers ("SCMI"), and SCMI
desires to purchase from Elite, the Elite
Assets (as defined in Section 1.4(g));
NOW,
THEREFORE, in consideration of the foregoing premises and the
mutual
representations, warranties, covenants and
agreements set forth herein, and
other good and valuable consideration, the
receipt and sufficiency of which is
hereby acknowledged, the parties agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1
Purchase and Sale of the Purchased Interests.
(a) Pursuant to the terms and subject to the conditions set
forth
herein,
GenPar hereby agrees to purchase from the Seller, and the
Seller
hereby
agrees to sell to GenPar, the GP Interest, for the
consideration
set forth
in Section 1.3(a).
(b) Pursuant to the terms and subject to the conditions set
forth
herein,
Newco hereby agrees to purchase from the Seller, and the Seller
hereby
agrees to sell to Newco, the LP Interest, for the consideration
set
forth in
Section 1.3(b).
1.2
Closing Date. The consummation of the sale and purchase of the
Purchased Interests (the "Closing") will
take place at the offices of Vsource,
Inc., a Delaware corporation and indirect
parent of the Buyers ("VSCE"), located
at 7855 Ivanhoe Avenue, Suite 200, La
Jolla, California 92037, at 11:00 a.m.
local time on January 31, 2006, or at such
other date, time and place as is
mutually agreed among the parties or, if
all of the conditions to the
obligations of the parties set forth in
Article V have not been satisfied or
waived by January 31, 2006, and there is no
agreement among the parties as to
another day, on the day that is two
business days following the date on which
all such conditions (other than those
conditions to be satisfied at the time of
the Closing) have been satisfied or waived
(such date being herein called the
"Closing Date"). The Closing will be
effective as of 12:01 a.m. on the Closing
Date.
1.3
Consideration.
(a) As consideration in full for the sale and purchase of the
GP
Interest,
GenPar will pay to the Seller an aggregate of $25,000 (the "GP
Purchase
Price"). The GP Purchase Price will be payable at the Closing
by
the
transfer by GenPar to the Seller of the Series A GP Shares (as
defined
below).
(b) As consideration in full for the sale and purchase of the
LP
Interest,
Newco will pay to the Seller an aggregate of $1,250,000 (the
"LP
Purchase
Price"). The LP Purchase Price will be payable at the Closing
by
the
issuance by Newco to the Seller of the Series A LP Shares and
the
Series B
Shares (each as defined below).
2
<PAGE>
(c) "Series A Preferred Stock" means the Series A Exchangeable
Preferred
Stock, par value $0.01 per share, of Newco, the Certificate of
Designation of which will be substantially in the form of Exhibit
A
attached
hereto;
(d) "Series A GP Shares" means the 2,500 shares of Series A
Preferred
Stock that will be issued to GenPar by Newco prior to the
Closing,
and which will be transferred to the Seller by GenPar at the
Closing as
full consideration for the sale and purchase of the GP
Interest;
(e) "Series A LP Shares" means the 29,375 shares of Series A
Preferred
Stock that will be issued to the Seller by Newco at the Closing
as partial
consideration for the sale and purchase of the LP Interest;
(f) "Series B Preferred Stock" means the Series B Exchangeable
Redeemable
Preferred Stock, par value $0.01 per share, of Newco, the
Certificate of Designation of which will be substantially in the
form of
Exhibit B
attached hereto (the "Series B Certificate of Designation");
(g) "Series B Shares" means the 19,125 shares of Series B
Preferred
Stock that
will be issued to the Seller by Newco at the Closing as partial
consideration for the sale and purchase of the LP Interest;
1.4
Closing Deliveries. At the Closing:
(a) GenPar will transfer to the Seller the Series A GP Shares,
and
will
deliver to the Seller certificates representing the Series A GP
Shares,
duly endorsed for transfer or accompanied by a stock power duly
executed
in blank, and any other documents that are necessary to
transfer
to the
Seller good title to the Series A GP Shares;
(b) Newco will issue to the Seller the Series A LP Shares and
the
Series B
Shares, and will deliver to the Seller certificates
representing
the Series
A LP Shares and the Series B Shares and any other documents
that are
necessary to transfer to the Seller good title to the Series A
LP
Shares and
the Series B Shares;
(c) the Seller will execute and deliver to the Buyers any
documents
that are
necessary to transfer to GenPar and Newco good title to the GP
Interest and the LP
Interest, respectively, including, without limitation,
the
Assignment of GP Interest and the Assignment of LP Interest (as
defined in
Sections 5.1(m) and (n), respectively);
(d) GenPar will be admitted to the Partnership as successor
general
partner in
accordance with Section 12.19 of the Partnership Agreement;
(e) Newco will be admitted to the Partnership as a limited
partner
in
accordance with Section 12.8 of the Partnership Agreement;
(f) the Seller will transfer and deliver to GenPar the originals
or
copies of
all of the books, records, ledgers, electronic media,
proprietary information and other data and all other written or
electronic
depositories of information of and relating to the Partnership;
3
<PAGE>
(g) Kupfer will cause Elite to execute and deliver to SCMI any
documents
that are necessary to transfer to SCMI good title to, a valid
leasehold interest in or a valid
and enforceable right to use, as
applicable, any and all assets owned, leased or otherwise used by
Elite,
in
connection with its provision of services to the Partnership or
otherwise
(collectively, the "Elite Assets"), including, without
limitation, a Bill of Sale, substantially in the form of Exhibit
C
attached
hereto (the "Bill of Sale"), which Bill of Sale will include a
complete
and accurate listing of all of the Elite Assets; and
(h) the Buyers and the Seller will execute and deliver the
documents
required
to be delivered by each of them pursuant to Article V.
1.5
Further Assurances. At or after the Closing, and without
further
consideration, the Seller will execute and
deliver to Newco or GenPar such
further instruments of conveyance and
transfer as either of them may reasonably
request in order more effectively to convey
and transfer the GP Interest to
GenPar or the LP Interest to Newco,
respectively, or for aiding, assisting,
collecting and reducing to possession any
of the Purchased Interests and
exercising rights with respect thereto. The
parties agree to cooperate
reasonably with each other and with their
respective representatives in
connection with any steps required to be
taken as part of their respective
obligations under this Agreement before and
after the Closing, and shall (a)
furnish upon request to each other such
further information; (b) execute and
deliver to each other such other documents;
and (c) do such other acts and
things, all as any other party may
reasonably request for the purpose of
carrying out the intent of this Agreement
and the transactions contemplated
hereby, including, without limitation,
providing any information necessary to
complete as well as execute one or more
Federal Health Care Provider/Supplier
Enrollment Application CMS Form 855B.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND KUPFER
As a
material inducement to the Buyers to enter into this Agreement
and
consummate the transactions contemplated
hereby, the Seller and Kupfer, jointly
and severally, represent and warrant to the
Buyers that the statements contained
in this Article II (subject to the
disclosures contained in the Schedules
referenced herein) are true and correct as
of the Effective Date. The
disclosures in any particular Schedule
referenced herein shall qualify as
disclosures with respect to all other
Schedules referenced herein only where
specifically cross-referenced or, in the
absence of a specific cross-reference,
only where the disclosure made in any
particular Schedule referenced herein is
sufficient on its face, without reference
to attachments or underlying
documentation (excluding appendices to the
Schedules, which shall be deemed part
of the Schedules), to alert the Buyers to
the relevance of the disclosure to
such other Schedules referenced herein.
2.1
Organization. The Partnership is a limited partnership and the
Seller
is a corporation, each duly organized,
validly existing and in good standing
under the laws of the State of California,
and each has full power to own its
properties and to conduct its business as
presently conducted. The Partnership
is not qualified to do business in any
foreign jurisdiction, and no such
qualification is now required or will be
required prior to the Closing. Set
forth in Schedule 2.1 is
4
<PAGE>
a list of all fictitious business names
under which the Partnership operates,
all of which are registered in the County
of San Diego.
2.2
Authority. Each of the Seller and Kupfer has all requisite
power,
authority and capacity, corporate,
individual or otherwise, to execute, deliver
and perform under this Agreement and the
other agreements, certificates and
instruments to be executed by the Seller or
Kupfer in connection with or
pursuant to this Agreement (collectively,
the "Seller Documents"). The
execution, delivery and performance by the
Seller of each Seller Document to
which it is a party has been duly
authorized by all necessary action, corporate
or otherwise, on the part of the Seller.
This Agreement has been, and at the
Closing the other Seller Documents will be,
duly executed and delivered by the
Seller and Kupfer (to the extent each is a
party thereto). This Agreement is,
and, upon execution and delivery by the
Seller and Kupfer at the Closing, each
of the other Seller Documents will be, a
legal, valid and binding agreement of
the Seller and Kupfer (to the extent each
is a party thereto), enforceable
against the Seller and Kupfer in accordance
with its terms, except as such
enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent
conveyance or similar laws affecting the
enforcement of creditors' rights
generally and subject to general principles
of equity (regardless of whether
enforcement is sought in a proceeding at
law or in equity).
2.3
Formation Documents. The Seller or Kupfer has delivered to the
Buyers
true, correct and complete copies of the
Partnership's certificate of limited
partnership, all partnership agreements in
effect during the last five years,
minute books and equity record books, as
applicable. Such records include
minutes or consents reflecting all actions
taken by the general partner or the
limited partners of the Partnership from
the date of organization of the
Partnership through the Effective Date.
2.4
Capitalization.
(a) Set forth in Schedule 2.4 is a complete and accurate list of
all
of the
ownership interests in the Partnership and the capital account
balances
associated therewith. The Purchased Interests have been duly
authorized
and validly issued in compliance with all applicable Laws (as
defined in
Section 2.17) and the provisions of the Partnership Agreement
or any
applicable predecessor operating agreement of the Partnership,
and
are fully
paid and nonassessable and free of preemptive rights. The
Partnership does not have any equity interests reserved for
issuance.
(b) There are no outstanding options, warrants, convertible or
exchangeable securities or other rights, agreements, arrangements
or
commitments obligating the Seller or the Partnership, directly
or
indirectly, to issue, sell, purchase, acquire or otherwise transfer
or
deliver
any equity interest in the Partnership, or any agreement,
document,
instrument or obligation convertible or exchangeable therefor.
There are
no agreements, arrangements or commitments of any character
(contingent or otherwise) pursuant to which any Person is or may
be
entitled
to receive any payment based on the revenues or earnings, or
calculated
in accordance therewith, of the Partnership. There are no
voting
trusts, proxies or other agreements or understandings to which
the
Seller or
the Partnership is a party or by which the Seller or the
Partnership is bound with respect to the voting of any equity
interest in
the Partnership. Neither the GP
Interest nor the LP Interest was issued in
violation
of the
5
<PAGE>
Securities
Act of 1933, as amended (the "1933 Act"), or any applicable
state
securities Laws.
2.5 Title
to Securities. The Seller owns of record and beneficially the
Purchased Interests, free and clear of any
obligation, lien, claim, pledge,
security interest, liability, charge,
contingency or other encumbrance or claim
of any nature (a "Lien") other than as
provided in the Partnership Agreement.
Upon sale of the Purchased Interests and
delivery of certificates (or other
transfer documents included in the Seller
Documents) therefor to the Buyers
hereunder, GenPar will acquire the entire
legal and beneficial interests in the
GP Interest and Newco will acquire the
entire legal and beneficial interests in
the LP Interest, each free and clear of any
Lien and subject to no legal or
equitable restrictions of any kind other
than as provided in the Partnership
Agreement.
2.6 No
Subsidiaries. The Partnership does not have any subsidiaries or
own
any equity or debt interest or any form of
proprietary interest in any Person,
or any obligation, right or option to
acquire any such interest.
2.7 Title
to Assets.
(a) Set forth in Schedule 2.7(a) is a complete and accurate
list
(including
the street address, where applicable) of: (i) all real property
owned by
the Partnership; (ii) all real property leased by the
Partnership; (iii) each vehicle owned or leased by the Partnership;
and
(iv) each
other tangible asset owned or leased by the Partnership and
having a
book value in excess of $5,000. No tangible or intangible asset
used in or
associated with the Business is owned or leased by the Seller,
Kupfer or
any Affiliate (as defined in Section 7.14(a)) of the Seller or
Kupfer
(other than the Partnership).
(b) The Partnership has good and marketable title to all of the
assets it
purports to own and used in connection with the Business, and
owns all
of such assets free and clear of any Liens, other than Liens
set
forth in
Schedule 2.7(b), all of which will be released at or prior to
the
Closing,
and Permitted Liens (as defined in Section 7.14(e)). The
Partnership holds a valid leasehold interest in or otherwise has a
valid
and
enforceable right to use all of the assets used in connection with
the
Business
that it does not own.
(c) The real property owned or leased by the Partnership (the
"Real
Property")
is zoned for a classification that permits the continued use of
the Real
Property in the manner currently used by the Partnership.
Improvements included in the assets of the Partnership were
constructed,
and
remain, in compliance with all applicable covenants,
conditions,
restrictions and material Laws affecting the Real Property.
Final
certificates of occupancy have been issued for the improvements on
the
Real
Property permitting the existing use of such improvements. There
are
no actions
pending or, to the Knowledge of the Seller or Kupfer,
threatened
that would alter the current zoning classification of the Real
Property
or alter any applicable covenants, conditions, restrictions or
material
Laws that would adversely affect the use of the Real Property
in
the
Business. Neither the Partnership nor the Seller or Kupfer has
received
notice from any insurance company or Governmental Entity (as
defined in
Section 2.11) of any defects or inadequacies in the Real
Property
or the improvements thereon that would adversely affect the
insurability or usability of the Real Property or such improvements
or
6
<PAGE>
prevent
the issuance of new insurance policies thereon at rates not
materially
higher than present rates. To the Knowledge of the Seller or
Kupfer, no
fact or condition exists that would result in the
discontinuation of necessary utilities or services to the Real
Property or
the
termination of current access to and from the Real Property.
The
Seller is
not a "foreign person" as that term is defined in Sections.
1445
of the
Internal Revenue Code of 1986, as amended (the "Code"), and
applicable
regulations.
2.8
Condition and Sufficiency of Assets. The assets of the
Partnership,
including any assets held under leases or
licenses: (i) include all assets used
in the Business; (ii) are in good condition
and repair, ordinary wear and tear
excepted; (iii) have been properly and
regularly maintained in all material
respects; (iv) conform in all material
respects to all applicable Laws relating
to their construction, use, operation and
maintenance; and (v) constitute all
assets used by the Partnership in the
conduct of the Business.
2.9
Accounts Receivable. Set forth in Schedule 2.9 is a complete
and
accurate schedule of the accounts
receivable of the Partnership as of the
Effective Date, for dates of service
commencing on or after __________ ___, 2005
(collectively and together with all
accounts receivable of the Partnership
created after the Effective Date, the
"Accounts Receivable"). The Accounts
Receivable represent or will represent
valid obligations arising from sales
actually made or services actually
performed by the Partnership in the ordinary
course of business. Except to the extent
paid prior to the Closing Date, such
Accounts Receivable are or will be as of
the Closing Date current and
collectible net of the respective reserves
shown on the Latest Balance Sheet
(which reserves are adequate, commercially
reasonable and calculated consistent
with past practices and will not represent
a Material Adverse Effect in the
composition of such Accounts Receivable in
terms of aging). Subject to such
reserves, each of such Accounts Receivable
either has been or, to the Knowledge
of the Seller or Kupfer will be, collected
in full, without any setoff, within
60 days after the day on which it first
becomes due and payable. There is no
contest, claim, defense or right of setoff
under any agreement with any account
debtor of an Account Receivable relating to
the amount or validity of such
Account Receivable, other than returns in
the ordinary course of business and
consistent with past practices of the
Partnership or normal reductions pursuant
to contracts with the Payors (as defined in
Section 2.19) which set forth lower
reimbursement rates than the gross amount
of receivable invoiced.
2.10 No
Violation. Except as set forth in Schedule 2.10, neither the
execution or delivery of the Seller
Documents nor the consummation of the
transactions contemplated thereby,
including without limitation the sale of the
Purchased Interests to the Buyers, will, to
the Knowledge of the Seller or
Kupfer, conflict with or result in the
breach of any term or provision of,
require any consent, approval,
ratification, waiver, notification, license,
permit, order or other authorization
(including any Governmental Authorization
(as defined in Section 2.11))
(collectively, "Consents") or violate or
constitute a default under (or an event
that with notice or the lapse of time or
both would constitute a breach or default),
or result in the creation of any
Lien on the Purchased Interests or the
assets of the Partnership pursuant to, or
relieve any third party of any obligation
to the Partnership or give any third
party the right to terminate or accelerate
any obligation under, any charter
provision, bylaw, provision of the
Partnership Agreement, Partnership Contract
(as defined in Section 2.25(a)), License
(as defined in Section 2.18) or Law to
which the Seller or the Partnership is a
party or by which any assets of the
Partnership or otherwise used in the
Business is in any way bound or obligated.
7
<PAGE>
2.11
Governmental Authorizations. Except as set forth in Schedule 2.11,
to
the Knowledge of the Seller or Kupfer, no
Consent, franchise, grant,
identification or registration number,
easement, variance, exemption or
certificate issued, granted, given or
otherwise made available by or under the
authority of, or registration,
qualification, designation, declaration or filing
with, any nation, state, county, city,
town, village, district or other
jurisdiction of any nature; federal, state,
local, municipal, foreign or other
government; governmental or
quasi-governmental agency, authority, commission,
board or other body of any nature
(including any governmental branch,
department, official or entity and any
court or other tribunal); multi-national
organization or body; or body exercising,
or entitled to exercise, any
administrative, executive, judicial,
legislative, police, regulatory or taxing
authority or power of any nature
(collectively, each a "Governmental Entity"),
or required pursuant to any applicable Laws
(collectively, each a "Governmental
Authorization"), is required on the part of
the Seller or the Partnership in
connection with the sale and purchase of
the Purchased Interests or any of the
other transactions contemplated by this
Agreement.
2.12
Financial Statements. Attached as Schedule 2.12 are true and
complete
copies of (a) the unaudited balance sheet
of the Partnership (collectively, the
"Latest Balance Sheet") as of November 30,
2005 (the "Latest Balance Sheet
Date") and the related unaudited statements
of operations and cash flow of the
Partnership for the nine months then ended;
and (b) the audited balance sheets
of the Partnership as of December 31, 2003
and 2004 and the related audited
statements of operations and cash flow for
the periods then ended (collectively,
the "Financial Statements"). The Financial
Statements present fairly the
financial condition of the Partnership at
the dates specified and the results of
its operations for the periods specified
and have been prepared in accordance
with generally accepted accounting
principles, consistently applied ("GAAP")
except, with respect to the unaudited
Financial Statements, for the absence of
footnote disclosure and for changes
resulting from normal year-end adjustments
for recurring accruals (which will not be
material individually or in the
aggregate). The Financial Statements do not
contain any items of a special or
nonrecurring nature, except as expressly
stated therein. The Financial
Statements have been prepared from the
books and records of the Partnership,
which accurately and fairly reflect the
transactions of, acquisitions and
dispositions of assets by, and incurrence
of Liabilities (as defined in Section
2.13(a)) by the Partnership.
2.13
Absence of Undisclosed Liabilities.
(a) The Partnership has no direct or indirect debts, obligations
or
liabilities of any nature, whether absolute, accrued,
contingent,
liquidated
or otherwise, and whether due or to become due, asserted or
unasserted
(collectively, "Liabilities") except for: (i) Liabilities
reflected
on the Latest Balance Sheet, including any reserves (and, for
this
purpose, a Liability shall be deemed to be included in a reserve
if
it is the
type of Liability for which such reserve was established,
regardless
of whether such Liability is actually included in the reserve,
provided
that the aggregate amount of all Liabilities actually included
or
deemed to
be included in the reserve do not exceed the aggregate amount
of
the
reserve reflected on the Latest Balance Sheet, and provided
further
that if
the aggregate amount of all such Liabilities actually included
or
deemed to
be included in the reserve exceeds the aggregate amount of such
reserve,
this representation and warranty will be deemed breached only
to
the extent
of such excess); (ii) current Liabilities incurred in the
ordinary
course of business and consistent with past practices after the
Latest
Balance Sheet
8
<PAGE>
Date;
(iii) Liabilities incurred in the ordinary course of business
and
consistent
with past practices under the Partnership Contracts and under
other
agreements entered into by the Partnership in the ordinary course
of
business
that are not included within the definition of Partnership
Contracts
set forth in Section 2.25, which Liabilities are not required
by
GAAP to be
reflected in the Latest Balance Sheet; and (iv) Liabilities
disclosed
in the Schedules to this Agreement.
(b) Set forth in Schedule 2.13(b) is a complete and accurate list
of
the
principal balance of all long-term and short-term Liabilities of
the
Partnership (other than trade accounts payable incurred in the
ordinary
course of
business and consistent with past practices) as of the Latest
Balance
Sheet Date, as well as the name of the lender or creditor with
respect to
each such Liability.
(c) For purposes of this Agreement, "ordinary course"
Liabilities
include
only liabilities and obligations incurred in the normal course
of
business
of the Partnership, consistent with past practices and amounts,
and do not
include, without limitation, any Liabilities under an agreement
or
otherwise that result from any breach or default (or event that
with
notice or
lapse of time would constitute a breach or default), tort,
infringement or violation of Law by the Partnership, the Seller or
Kupfer.
2.14
Absence of Certain Changes. Since the Latest Balance Sheet
Date,
except as set forth in Schedule 2.14, there has not
been:
(a) any Material Adverse Effect with respect to the Partnership,
or
with
respect to the manner in which the Partnership conducts the
Business;
(b) any declaration, setting aside or payment of any dividends
or
distributions in respect of any equity interests in the Partnership
or any
redemption, purchase or other acquisition by the Partnership of any
of its
equity
interests, except as contemplated by this Agreement;
(c) any payment or transfer of assets (including without
limitation
any
distribution or any repayment of indebtedness) to or for the
benefit
of any
equityholder of the Partnership, other than compensation and
expense
reimbursements paid in the ordinary course of business and
consistent
with past practice;
(d) any revaluation by the Partnership of any of its assets,
including
the writing down or off of notes or Accounts Receivable and the
writing
down of the value of inventory, other than in the ordinary
course
of
business and consistent with past practice;
(e) any entry by the Partnership into any commitment or
transaction
material
to the Partnership including, without limitation, incurring or
agreeing
to incur capital expenditures or to make payments to customers
(other
than pursuant to agreements listed in Schedule 2.25(a)) in
excess
of $5,000,
individually or in the aggregate;
(f) any increase in indebtedness for borrowed money, or any
issuance
or sale of
any debt securities, or any assumption, guarantee or
endorsement of any Liability of any other Person, or any loan or
advance
to any
other Person;
9
<PAGE>
(g) any breach or default (or event that with notice or lapse
of
time would
constitute a breach or default), termination or threatened
termination under any Partnership Contract binding on the
Partnership or
to which
any asset of the Partnership is subject;
(h) any change by the Partnership in its accounting methods,
principles
or practices;
(i) any increase in the benefits under, or the establishment or
amendment
of, any bonus, insurance, severance, deferred compensation,
pension,
retirement, profit sharing or other employee benefit plan, or
any
increase
in the compensation payable or to become payable to the Seller
or
any
officers or employees of the Partnership, except for annual
merit
increases
in salaries or wages in the ordinary course of business and
consistent
with past practice;
(j) the termination of employment (whether voluntary or
involuntary)
of any
officer or key employee of the Partnership or the termination
of
employment
(whether voluntary of involuntary) of employees of the
Partnership in excess of historical attrition in personnel;
(k) any theft, condemnation or eminent domain proceeding or any
damage, destruction or
casualty loss affecting any asset used in the
Business,
whether or not covered by insurance;
(l) any sale, assignment or transfer of any asset used in the
Business,
except sales of inventory or obsolete equipment in the ordinary
course of
business and consistent with past practice;
(m) any waiver by the Partnership or any equityholder of the
Partnership of any rights related to the Business;
(n) any action other than in the ordinary course of business
and
consistent
with past practice, to pay, discharge, settle or satisfy any
claim or
Liability;
(o) any settlement or compromise of any pending or threatened
suit,
action, or
claim relevant to the transactions contemplated by this
Agreement;
(p) any issuance, sale or disposition, or agreement to issue,
sell
or
dispose, of any equity interest in the Partnership, or any
instrument
or other
agreement convertible or exchangeable for any equity interest
in
the
Partnership;
(q) any authorization, recommendation, proposal or announcement
of
an
intention to adopt a plan of complete or partial liquidation or
dissolution of the Partnership;
(r) any acquisition, or investment in the equity or debt
securities
of any
Person (including in any joint venture or similar arrangement)
by
the
Partnership;
10
<PAGE>
(s) any other transaction, agreement or commitment entered into
or
affecting
the Business or the Partnership, except in the ordinary course
of
business and consistent with past practice; or
(t) any agreement or understanding to do or resulting in any of
the
foregoing.
2.15
Taxes.
(a) The Partnership has filed or caused to be filed on a timely
basis all
Tax returns that are or were required to be filed by it. The
Partnership has timely paid all Taxes that have become due and
payable as
Taxes
imposed on it, pursuant to such Tax returns or otherwise, or
pursuant
to any assessment received by it, except such Taxes, if any, as
are being
contested in good faith and as to which adequate reserves have
been
provided in the Latest Balance Sheet.
(b) The Partnership has not requested or been granted an
extension
of time
for filing any Tax return that has not yet been filed.
(c) The charges, accruals and reserves with respect to Taxes on
the
books of
the Partnership are accurate. To the Knowledge of the Seller or
Kupfer,
there exists no proposed tax assessment against the Partnership
except as
disclosed in the Latest Balance Sheet. All Taxes that the
Partnership is or was required to withhold or collect have been
duly
withheld
or collected and, to the extent required, have been paid to the
proper
Governmental Entity.
(d) All Tax returns filed by the Partnership are true, correct,
and
complete
in all material respects.
(e) There are no outstanding agreements or waivers extending
the
statutory
period of limitation applicable to any claim for, or the period
for the
collection or assessment of, Taxes due from or with respect to
the
Partnership for any taxable period.
(f) No audit, examination or similar proceeding is pending or,
to
the
Knowledge of the Seller or Kupfer, threatened with respect to
the
Partnership or any Tax return filed by the Partnership.
(g) The Partnership has never made an election to be taxed as
an
association taxable as a corporation for federal income tax
purposes.
(h) "Tax" or "Taxes" means any and all taxes, charges, fees,
levies,
assessments, duties or other amounts payable to any federal, state,
local
or foreign
taxing authority or agency, including, without limitation: (i)
income,
franchise, profits, gross receipts, minimum, alternative
minimum,
estimated,
ad valorem, value added, sales, use, service, real or personal
property,
capital stock, license, payroll, withholding, disability,
employment, social security, workers compensation, unemployment
compensation, utility, severance, excise, stamp, windfall
profits,
transfer
and gains taxes; (ii) customs, duties, imposts, charges, levies
or other
similar assessments of any kind; and (iii) interest, penalties
and
additions to tax imposed with respect thereto.
11
<PAGE>
2.16
Litigation. Except as set forth on Schedule 2.16, there are
currently
no pending or, to the Knowledge of the
Seller or Kupfer, threatened lawsuits,
administrative proceedings, reviews or
formal or informal complaints or
investigations (collectively "Litigation"),
in each case by any individual,
corporation, partnership, Governmental
Entity or other entity (collectively, a
"Person") against or relating to the
Partnership or any equityholder, officer,
employee or agent (in their capacities as
such) of the Partnership or to which
any of the assets of the Partnership is
subject. The Partnership is not subject
to or bound by any currently existing
judgment, order, writ, injunction, decree,
ruling or charge. Neither the Seller nor
Kupfer has any reason to believe that
any such Litigation may be brought or
threatened against the Partnership. The
Seller is not a party to or subject to the
provisions of any judgment, order,
writ, injunction, decree, ruling or charge
of any court or Governmental Entity
prohibiting the execution, delivery or
performance of this Agreement or the
consummation of the transactions
contemplated hereby. There are no malpractice
claims or Liabilities against the
Partnership or the Seller and, to the
Knowledge of the Seller or Kupfer, no facts
exist that might be the basis for a
malpractice claim or Liability against the
Partnership or the Seller.
2.17
Compliance with Laws. The Partnership is currently complying with
and
has at all times complied with each
applicable federal, state, local or foreign
constitution, statute, law, code,
ordinance, decree, order, rule or regulation
of any Governmental Entity and all orders
and decrees of courts, tribunals and
arbitrators (collectively, "Laws"), in all
material respects.
2.18
Licenses. The Partnership owns, possesses or holds from each
appropriate Governmental Entity all
licenses, permits, authorizations,
approvals, quality certifications,
franchises or rights (collectively,
"Licenses") issued by any Governmental
Entity necessary to conduct the Business.
Set forth in Schedule 2.18 is a complete
and accurate list of each such License.
No loss or expiration of any such License
is pending or, to the Knowledge of the
Seller or Kupfer, threatened or reasonably
foreseeable, other than expiration in
accordance with the terms thereof of
Licenses that may be renewed in the
ordinary course of business without
lapsing. Each such License is now and as of
the Closing will be in good standing and
not subject to meritorious challenge.
2.19
Payors. Set forth in Schedule 2.19 is a complete and accurate list
of
each third-party payor or provider that is
doing or has done business with the
Partnership and accounted for 10% or more
of the revenues of the Partnership for
the year ended December 31, 2004 or for the
interim period ending on the Latest
Balance Sheet Date (collectively, the
"Payors"). None of the Payors has
threatened, or notified the Seller or
Kupfer of any intention, to terminate or
materially alter its relationship with the
Partnership, or materially alter the
amount of the business that such Payor is
presently doing with the Partnership,
and none of the Seller, Kupfer or the
Partnership has any information, or is
aware of any facts, indicating that any
Payor intends to do any of the
foregoing, either as a result of the
transactions contemplated by this Agreement
or otherwise. Except as set forth in
Schedule 2.19, there has been no change in
pricing or pricing structure (other than
ordinary course changes consistent with
past practices) with any Payor and there
has been no dispute with a Payor, in
each case since January 1, 2005.
2.20
Medical Staff Matters. Set forth in Schedule 2.20 is a list of
all
providers in good standing on the medical
staff of the Partnership. There are no
pending or, to the Knowledge of the Seller
or Kupfer, threatened disputes with
applicants, staff members or health
professional
12
<PAGE>
affiliates and all appeal periods in
respect of any medical staff member or
applicant against whom an adverse action
has been taken have expired.
2.21
Health Care Legal Matters.
(a) The Partnership has complied, and is in compliance, with
all
applicable
Laws regulating the financing, reimbursement, payment,
acquisition, construction, operation, maintenance or management of
a
health
care practice, facility, provider or payor, including, without
limitation: (i) 42 U.S.C. Sections 1320a-7, 7a and 7b, which are
commonly
referred
to as the "Federal Anti-Kickback Statute"; (ii) 42 U.S.C.
Section
1395nn, which is commonly referred to as the "Stark Statute";
(iii) 31
U.S.C Sections 3729-3733, which is commonly referred to as the
"Federal
False Claims Act"; (iv) Titles XVIII and XIX of the Social
Security
Act, implementing regulations and program manuals; and (v) 42
U.S.C.
Sections 1320d-1320d-8 and 42 C.F.R. Sections 160, 162 and 164,
which is
commonly referred to as "HIPAA" (the foregoing hereinafter
collectively referred to as "Health Care Laws"), applicable to
the
Business.
The Partnership has maintained all records required to be
maintained
in connection with the Medicare and Medicaid programs
established under Titles XVIII and XIX of the Social Security Act,
and
such other
similar federal, state or local reimbursement or governmental
programs,
managed care plans and any other private health care insurance
programs
and employee assistance programs, as well as any future similar
programs,
for which the Partnership is eligible (the foregoing
hereinafter
referred
to collectively as the "Payor Source Programs") as required by
applicable
Health Care Laws.
(b) Without limiting the foregoing, the Partnership has not,
and
neither
the Seller nor Kupfer has (with respect to the Partnership or
the
Business),
and to the Knowledge of the Seller or Kupfer none of the
Non-Selling Limited Partners has (with respect to the Partnership
or the
Business),
engaged in any activities that are prohibited under any Health
Care Laws
or any other federal or state statutes related to false or
fraudulent
claims, the regulations promulgated pursuant to such statutes,
or any
related state or local statutes or regulations, including,
without
limitation, the following:
(i) knowingly and willfully making or causing to be made any
false statement or representation of material fact in any
application for any benefit or payment;
(ii) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in
determining rights to any benefit or payment;
(iii) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right
to
any benefit or payment on its own behalf or on behalf of
another,
with intent to fraudulently secure such benefit or payment; or
(iv) knowingly and willfully soliciting or receiving any
remuneration (including any kickback, bribe or rebate), directly
or
indirectly, overtly or
13
<PAGE>
covertly, in cash or in kind or offering to pay or receive such
remuneration in return for (A) referring an individual for the
furnishing or arranging for the furnishing of any item or
service
for which payment may be made in whole or in part by any Payor
Source Programs; or (B) purchasing, leasing, or ordering or
arranging for or recommending the purchasing, leasing or ordering
of
any good, facility, service or item for which payment may be made
in
whole or in part by a Payor Source Program.
(c) The Partnership has no financial relationships (whether or
not
memorialized in writing) with any physician or any immediate family
member
of any
physician in connection with the Business. For purposes of this
Section
2.21(c), the term "financial relationship" has the meaning set
forth in
the Stark Statute.
(d) The Partnership is certified for participation and
reimbursement
and
qualified as a participating provider under the Payor Source
Programs
set forth
in Schedule 2.21(d). The Partnership has current provider
numbers and
provider agreements for such Payor Source Programs as are set
forth in
Schedule 2.21(d). There are no pending appeals, overpayment
determinations, challenges, audits, litigation, or notices of
intent to
open Payor
Source Programs' claim determinations or other reports required
to be
filed by the Partnership, except for such appeals of individual
claim
denials that occur in the ordinary course of business. None of
the
Seller,
Kupfer or the Partnership has received any notice indicating
that
the
Partnership's qualification as a participating provider may be
terminated
or withdrawn nor do any of them have any reason to believe that
such
qualification may be terminated or withdrawn. The Partnership
has
timely
filed all claims or other reports required to be filed with
respect
to the
purchase of products or services by third-party payors
(including
Payor
Source Programs), and all such claims or reports are complete
and
accurate
in all respects. The Partnership has no Liability to any
third-party payor with respect thereto, except for Liabilities
incurred in
the
ordinary course of business.
(e) With respect to the Business, neither the Seller nor
Kupfer,
nor, to
the Knowledge of the Seller or Kupfer, any officer or employee
of
the
Partnership or any other party to any contract with the
Partnership:
(i) has been convicted of or charged with any violations of
law related to
Medicare, Medicaid, any other Federal Health Care
Program (as defined in 42 U.S.C. Section 1320a-7b(f)), or any
other
Payor Source Program;
(ii) has been convicted of, charged with or investigated for
any violation of law related to fraud, theft, embezzlement,
breach
of fiduciary responsibility, financial misconduct, obstruction of
an
investigation or controlled substances;
(iii) is excluded, suspended or debarred from participation,
or is otherwise ineligible to participate, in any Payor Source
Program or has committed any violation of law which is
reasonably
expected to serve as the basis for any such exclusion,
suspension,
debarment or other ineligibility; or
14
<PAGE>
(iv) has violated or is presently in violation of any Health
Care Laws.
2.22
Environmental Matters.
(a) Except as described in Schedule 2.22: (i) the properties,
operations
and activities of the Partnership are and at all times have
been in
compliance with all applicable Environmental Laws in all
respects;
including
without limitation by having all Licenses required to be
obtained
or filed by the Partnership under any Environmental Law in
connection
with any aspect of the operation of the Business, and the
Partnership is in compliance with the terms and conditions of all
such
Licenses;
(ii) none of the Real Property contains any Hazardous Material
in amounts
exceeding the levels permitted by applicable Environmental Laws
as a
result of the Partnership's operations or activities or, to the
Knowledge of the Seller or
Kupfer, for any other reason; (iii) during the
past five
years, the Partnership has not received any notices, demand
letters or
requests for information from any Governmental Entity or other
Person
indicating that the Partnership may be in violation of, or
liable
under, any
Environmental Law, or relating to any of its current or former
assets;
(iv) except with respect to matters that have been fully
resolved
with no
continuing Liability to the Partnership, no reports have been
filed, or
are required to be filed, by (or relating to) the Partnership
concerning
any release of any Hazardous Material or the threatened or
actual
violation of any Environmental Law; (v) no Person or property
has
been
exposed to Hazardous Material, and no Hazardous Material has
been
disposed
of, released or transported, in violation of any applicable
Environmental Law to or from any Real Property or as a result of
any
activity
of the Partnership; (vi) there have been no environmental
investigations, studies, audits, tests, reviews or other
analyses
regarding
compliance or noncompliance with any Environmental Law
conducted
by or on
behalf of, or which are in the possession of, the Partnership
or
the Seller
relating to the Business or the activities of the Partnership
or any of
the Real Property that have not been delivered to the Buyers
prior to
the Effective Date; (vii) there are no underground storage
tanks
on, in or
under any of the Real Property, and no underground storage
tanks
have been
closed or removed from any of the Real Property; (viii) there
is
no
asbestos present in any of the Real Property in violation of
any
Environmental Law, (ix) neither the Partnership nor any of its
assets is
subject to
any Liabilities relating to any suit, settlement, Law, judgment
or claim
asserted or arising under any Environmental Law; (x) the
Partnership has satisfied and is currently in compliance with
all
financial
responsibility requirements applicable to its operations and
imposed by
any Governmental Entity under any Environmental Laws; and (xi)
there are
no environmental conditions either (A) existing on the
Partnership's property or (B) resulting from the Partnership's
operations
or
activities, whether past or present, that would give rise to
any
on-site or
off-site remediation obligations under any Environmental Laws.
(b)
As used herein, "Environmental Law" means any applicable Laws,
License or
agreement with any Governmental Entity relating in any manner
to
Hazardous Materials, pollution, contamination, or the protection of
the
environment enacted or in effect in any and all jurisdictions in
which the
Partnership owns property or conducts the Business.
15
<PAGE>
(c) As used herein, "Hazardous Material" means any substance
whether
solid,
liquid or gaseous that: (i) is listed, defined, classified or
regulated
as a "Hazardous Material," "hazardous material," hazardous
waste,"
extremely hazardous waste," toxic substance," "sludge,"
"pollutant," "contaminant," or is otherwise listed, defined
classified or
regulated
in similar fashion, such as dangerous, hazardous, or toxic, in
or
pursuant to any Environmental Law; or (ii) is or contains
asbestos,
radon, any
polychlorinated biphenyl, urea formaldehyde foam insulation,
explosive
or radioactive material, crude oil or any fraction thereof, or
motor fuel
or other refined or process petroleum hydrocarbons.
2.23
Employee Matters. Set forth in Schedule 2.23 is a complete and
accurate list of all current employees of
the Partnership, including date of
employment, current title and compensation,
and date and amount of last increase
in compensation. There are no written or
oral employment agreements between the
Partnership and any of its employees. All
of the Partnership's employees are
employees at will and may be terminated by
the Partnership, without prior
notice, for any reason or for no reason. In
relation to its employees, both
present and former, the Partnership has:
(a) complied with all obligations
imposed on it by all Laws relevant to the
relations between it and its employees
or any disclosed trade union; (b)
maintained adequate and suitable records
regarding the service of each of its
employees; and (c) withheld all income tax
required by the Code or by applicable state
and local Laws, and payments due for
social security contributions (including
the employer's contributions) and any
other amount required to be withheld under
any federal, state or local Laws,
from salaries, wages and bonuses paid by
the Partnership, complied with all
withholding requirements and maintained
proper records in respect of the
foregoing. The Partnership has no
collective bargaining, union or labor
agreements, contracts or other arrangements
with any group of employees, labor
union or employee representative and there
is no organization effort currently
being made or, to the Knowledge of the
Seller or Kupfer, threatened by or on
behalf of any labor union with respect to
employees of the Partnership. The
Partnership has not experienced, and, to
the Knowledge of the Seller or Kupfer,
there is no basis for, any strike, labor
trouble, work stoppage, slow down or
other interference with or impairment of
the Business.
2.24
Employee Benefit Plans.
(a) The Partnership has no "Employee Benefit Plans." The term
"Employee
Benefit Plans" means (a) any "employee benefit plan" or "plan"
within the
meaning of Section 3(3) of the Employee Retirement Income
Security
Act of 1974, as amended ("ERISA"), and (b) all plans or
policies
providing
for "fringe benefits" (including but not limited to vacation,
paid
holidays, personal leave, employee discounts, educational benefits
or
similar
programs), and each other bonus, incentive compensation,
deferred
compensation, profit sharing, stock, severance, retirement, health,
life,
disability, group insurance, employment, stock option, stock
purchase,
stock
appreciation right, performance share, supplemental
unemployment,
layoff, consulting, or any
other similar plan, agreement, policy or
understanding (whether written or oral, qualified or
nonqualified,
currently
effective or terminated), and any trust, escrow or other
agreement
related thereto, which (i) is, or has been within the past five
years,
established, maintained or contributed to by the Partnership or
any
other
corporation or trade or business under common control with the
Partnership (an "ERISA Affiliate") as determined under Section
414(b),
(c), (m)
or (o) of the Code, or with respect to which the
16
<PAGE>
Partnership has or may have any Liability; or (ii) provides
benefits, or
describes
policies or procedures of the Partnership or any of its
Affiliates
applicable, to any present or former officer, employee or
dependent
thereof of the Partnership, regardless of whether funded. The
term
"Employee Benefit Plans" also includes any written or oral
representations made to any present or former officer or employee
of the
Partnership by the Partnership or its Affiliates promising or
guaranteeing
any
employer payment or funding for the continuation of medical,
dental,
life or
disability coverage for any period of time beyond the end of
the
current
plan year (except to the extent of coverage required under Code
Section
4980B) or a similar provision of state law.
(b) Neither the Seller nor the Partnership is party to any
"multiple
employer
plan" or "multi-employer plan" (as described or defined in
ERISA
or the
Code).
(c) Neither the Partnership, the Seller nor any ERISA Affiliate
has
any formal
plan or commitment, whether legally binding or not, to create
any
Employee Benefit Plan that would affect any present or former
officer
or
employee of the Partnership, or any dependent or beneficiary
thereof.
(d) There is no Employee Benefit Plan that is maintained or
contributed to
by the Partnership, the Seller or any ERISA Affiliate with
respect to
which the Partnership has or may have any Liability that is or
was
subject to Part 3 of Title I of ERISA or Title IV of ERISA.
(e) The Buyers will not assume any Employee Benefit Plans of
the
Partnership or take on any Liability relating to any Employee
Benefit
Plans of
the Partnership.
(f) The Partnership does not provide, nor is it obligated to
provide,
benefits, including without limitation death, health, medical,
or
hospitalization benefits (whether or not insured), with respect to
current
or former
officers or employees of the Partnership, or their dependents
or
beneficiaries, beyond their retirement or other termination of
employment
other than
(i) coverage mandated by applicable Law; (ii) death benefits or
retirement
benefits under any "employee pension benefit plan," as that
term is
defined in Section 3(2) of ERISA; or (iii) deferred
compensation
benefits
accrued as liabilities on the books of the Partnership.
(g) No Liability under Title IV of ERISA or Section 412 of the
Code
has been
incurred (directly or indirectly) by the Partnership or any
ERISA
Affiliate
that has not been satisfied in full.
(h) Neither the Partnership nor any ERISA Affiliate maintains or
has
ever
participated in a multiple employer welfare arrangement as
described
in Section
3(40)(A) of ERISA for which the Partnership may become liable
under
ERISA.
(i) No Lien has been filed by any Person and no Lien exists by
operation
of Law or otherwise on the assets of the Partnership relating
to, or as
a result of, the operation or maintenance of any Employee
Benefit
Plan, and neither the Seller nor
17
<PAGE>
Kupfer has
any Knowledge of the existence of facts or circumstances that
would
result in the imposition of such Lien.
(j) Neither the execution and delivery of this Agreement nor
the
consummation of the transactions contemplated hereby will (i)
result in
any
payment becoming due to any officer or employee of the Partnership;
or
(ii)
result, separately or in the aggregate, in an "excess parachute
payment"
within the meaning of Section 280G of the Code.
2.25
Partnership Contracts.
(a) Schedule 2.25(a) sets forth a complete and accurate list of
each
agreement
(whether written or oral and including all amendments thereto)
relating
to the Business or to which the Partnership is a party or a
beneficiary or by which the Partnership or any of its assets is
bound
(collectively, the "Partnership Contracts"), including without
limitation
the
following: (i) all payor and provider contracts with any of the
Payors;
(ii) management or similar or related agreements; (iii)
agreements
pursuant
to which the Partnership sells or distributes any services or
products;
(iv) real property leases; (v) capital or operating leases or
conditional sales agreements relating to vehicles, equipment or
other
assets of
the Partnership; (vi) agreements evidencing, securing or
otherwise
relating to any indebtedness for borrowed money for which the
Partnership is liable; (vii) agreements pursuant to which the
Partnership
is
entitled or obligated to acquire any assets from a third Person;
(viii)
insurance
policies; (ix) employment, consulting, noncompetition,
separation, collective bargaining, union or labor agreements or
arrangements; and (x) agreements with or for the benefit of any
equityholder, manager, director, officer or employee of the
Partnership or
any
Affiliate or immediate family member thereof.
(b) The Seller has delivered to the Buyers a copy of each
written
Partnership Contract and a detailed written summary of each
oral
Partnership Contract. Except as described in Schedule 2.25(b), (i)
each
Partnership Contract is valid, binding and in full force and effect
and
enforceable in accordance with its terms, except as such
enforceability
may be
limited by applicable bankruptcy, insolvency, fraudulent
conveyance
or similar
laws affecting the enforcement of creditors' rights generally
and
subject to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity); (ii)
the
Partnership has performed all of its obligations that have become
due
under any
Partnership Contract to which it is a party, and there exists
no
breach or
default (or event that with notice or lapse of time would
constitute
a breach or default) on the part of the Partnership or any
other
Person under any Partnership Contract; (iii) there has been no
termination or notice of default or, to the Knowledge of the Seller
or
Kupfer,
any threatened termination under any Partnership Contract; and
(iv) to
the Knowledge of the Seller or Kupfer, no party to a
Partnership
Contract
intends to alter its relationship with the Partnership as a
result of
or in connection with the acquisition contemplated by this
Agreement.
(c) Except as set forth in Schedule 2.25(c), none of the
Partnership
Contracts
will require Consent from the Partnership's counterparty or
will
result in
a breach, termination, termination right or change in any right
or
obligation thereunder as a result
18
<PAGE>
of the
consummation of the transactions contemplated by this
Agreement.
With
respect to the Partnership Contracts identified in Schedule
2.25(c),
the Buyers
will have the right to participate in any communication with
such
counterparties in connection with obtaining the required
approval.
(d) Neither any of the Partnership Contracts nor any other
agreements, understandings or proposed transactions to which the
Seller,
Kupfer or
the Partnership is a party will cause a Material Adverse Effect
on the
Partnership's business or on the Seller's or Kupfer's ability
to
perform
their obligations under this Agreement.
2.26
Intellectual Property. The Partnership does not own, or have
any
license or use rights with respect to, any
registered and unregistered
trademarks, service marks or trade names
(except to the extent any of the
fictitious business names listed in
Schedule 2.1 may be considered to be trade
names), or registered copyrights or
patents, or applications for or licenses (to
or from the Partnership) with respect to
any of the foregoing, or any computer
software or software licenses (other than
commercial "shrink-wrap" software and
software licenses), in each case that are
used in connection with the Business.
2.27
Competing Interests. Except as set forth in Schedule 2.27,
neither
the Seller nor the Partnership, nor, to the
Knowledge of the Seller or Kupfer,
any equityholder, director, general
partner, officer, employee or agent of the
Partnership, any Affiliate of the Seller or
the Partnership or any immediate
family member of Kupfer: (a) owns, directly
or indirectly, an interest in any
Person that is a competitor, customer or
supplier of the Partnership or that
otherwise has business dealings with the
Partnership; or (b) is a party to, or
otherwise has any direct or indirect
interest opposed to the Partnership under,
any Partnership Contract or other business
relationship or arrangement (other
than investments in publicly traded equity
securities constituting less than 1%
of the outstanding securities of that
class).
2.28 No
Conflict of Interest. The Partnership is not indebted, directly
or
indirectly, to the Seller, Kupfer, any
family member of Kupfer, any Affiliate of
any of the foregoing or any of the
Partnership's equityholders, officers or
employees, in any amount whatsoever other
than in connection with expenses or
advances of expenses incurred in the
ordinary course of business and consistent
with past practices. None of the Seller,
Kupfer, any family member of Kupfer,
any Affiliate of any of the foregoing or
any of the Partnership's equityholders,
officers or employees is indebted, directly
or indirectly, to the Partnership,
nor does any of the foregoing have any
direct or indirect ownership interest in
any entity with which the Partnership has a
business relationship. The
Partnership is not a guarantor or
indemnitor of any indebtedness of any other
Person.
2.29
Illegal Payments. Neither the Partnership nor any
equityholders,
general partners, officers, employees or
agents, or any Affiliate or immediate
family member of any of the foregoing, has:
(a) used any funds of the
Partnership for contributions, gifts or
entertainment in violation of applicable
Law, or for other purposes, including
relating to political activity, in
violation of applicable Law; or (b) made
any payment for the account or benefit,
or using funds, of the Partnership in
violation of applicable Law to foreign or
domestic government officials or employees
or to foreign or domestic political
parties or campaigns or violated any
provision of the Foreign Corrupt Practices
Act of 1977, as amended.
19
<PAGE>
2.30
Insurance. The Partnership has maintained and now maintains
insurance
on the Business and all of its assets of a
type customarily insured, covering
property damage and loss of income by fire
or other casualty, as well as
adequate insurance protection against all
Liabilities, claims and risks against
which it is customary to insure, including,
without limitation, professional
liability insurance. Set forth in Schedule
2.30 is a complete and accurate list
of all policies, bonds and other forms of
insurance currently owned or held by
or on behalf of or providing insurance
coverage to the Partnership, the Business
or the assets of the Partnership, and its
officers, employees or agents, along
with a description of all claims and their
current status made under any such
policy. All such policies are issued by
insurers of recognized responsibility
and insure the Partnership, the Business
and the assets of the Partnership
against such losses and risks, and in such
amounts, as are customary in the case
of companies of established reputation
engaged in the same or similar businesses
and similarly situated. All such policies
are in full force and effect, and the
Partnership has not done or omitted to do
or suffered anything to be done which
has or might render such policies void or
voidable or that would cause or allow
any claims under any such policies to be
denied. The Partnership has not
received a notice of default under any such
policy or received written notice of
any pending or threatened termination or
cancellation, coverage limitation or
reduction, or material premium increase
with respect to any such policy. To the
Knowledge of the Seller or Kupfer, there
are no circumstances likely to give
rise to any claim under any such policies.
Neither the Seller nor Kupfer has
received any communications that would
cause the Seller or Kupfer to believe
that the Partnership will not be able to
continue to maintain such insurance
policies with the same coverage for
substantially the same premium amount.
2.31
Accredited Investor; Disclosure Materials. The Seller is an
"accredited investor" as such term is
defined in Rule 501(a) promulgated under
the 1933 Act, who by reason of its business
and financial experience has such
knowledge, sophistication and experience in
business and financial matters as to
be capable of evaluating the merits and
risks of, and could be reasonably
assumed to have the capacity to protect its
own interests in connection with, an
investment in the Series A GP Shares, the
Series A LP Shares and the Series B
Shares (collectively, the "Newco Shares")
and, having had access to or having
been furnished with all such information as
it has considered necessary, has
concluded that it is able to bear those
risks. The Seller acknowledges that (a)
it has not received, and will not receive,
any prospectus, placement memorandum
or any similar disclosure materials with
respect to the Newco Shares; (b) it has
had access to or been furnished with copies
of the most recent Annual Report on
Form 10-K and each subsequent Quarterly
Report on Form 10-Q and Current Report
on Form 8-K, in each case filed by VSCE
with the Securities and Exchange
Commission; (c) such information is the
only disclosure information that is
available or that has been or will be
provided by the Buyers in connection with
the transactions contemplated by this
Agreement; (d) such information is
sufficient for the Seller to be capable of
evaluating the merits and risks of an
investment in the Newco Shares; and (e) the
Seller has reviewed such information
and has concluded that it is able to bear
those risks.
2.32
Investment Intent. The Seller is acquiring the Newco Shares for
its
own account and not with a view to or for
sale in connection with any
distribution of any of the Newco Shares
within the meaning of Section 2(11) of
the 1933 Act.
20
<PAGE>
2.33
Restricted Securities. The Seller understands that the Newco
Shares
constitute "restricted securities" within
the meaning of Rule 144 promulgated
under the 1933 Act and may not be sold,
pledged or otherwise disposed of unless
they are subsequently registered under the
1933 Act and applicable state
securities laws or unless an exemption from
registration is available. The
Seller understands that the Newco Shares,
and any securities issued in respect
thereof or exchange therefor, may bear one
or more of the following restrictive
legends substantially in the form provided
below:
(a) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED
UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH TRANSFER MAY BE EFFECTED WITHOUT
AN
EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
IN A FORM
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED
UNDER THE SECURITIES ACT OF 1933"; and
(b) any legend required by the securities laws of any state to
the
extent
such laws are applicable to the shares represented by the
certificate so legended.
2.34 Full
Disclosure. No representation or warranty of the Seller
contained in this Agreement, and nothing
set forth herein or in the exhibits
attached hereto, or in any document
furnished or to be furnished to the Buyers
at the Closing, or in any other information
or materials delivered by the Seller
or the Partnership to the Buyers (when read
together), contains any untrue
statement of a material fact or omits to
state a material fact necessary in
order to make the statements contained
herein or therein not misleading in light
of the circumstances under which they were
made. The Seller and Kupfer have
disclosed to the Buyers all facts and
information material to the proposed
purchase of the Purchased Interests that
are known to such parties.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYERS
The
Buyers, jointly and severally, represent and warrant to the
Seller
that the statements contained in this
Article III (as supplemented by the
Schedules referenced herein, if any) are
true and correct as of the Effective
Date.
3.1
Organization. Each of the Buyers is a corporation duly
organized,
validly existing and in good standing under
the laws of the State of Nevada.
3.2
Authority. Each of the Buyers has all requisite power and
authority,
corporate or otherwise, to execute, deliver
and perform under this Agreement and
the other agreements, certificates and
instruments to be executed by the Buyers
in connection with or pursuant to this
Agreement (collectively, the "Buyer
Documents"). The execution, delivery and
performance by each Buyer of each Buyer
Document to which it is a party has been
duly authorized by all necessary
action, corporate or otherwise, on the part
of such Buyer. This Agreement has
been, and at the Closing the other Buyer
Documents will be, duly executed and
delivered by each Buyer (to the
21
<PAGE>
extent each is a party thereto). This
Agreement is, and, upon execution and
delivery by the Buyers at the Closing, each
of the other Buyer Documents will
be, a legal, valid and binding agreement of
each Buyer (to the extent each is a
party thereto), enforceable against such
Buyer in accordance with its terms,
except as such enforceability may be
limited by applicable bankruptcy,
insolvency, fraudulent conveyance or
similar laws affecting the enforcement of
creditors' rights generally and subject to
general principles of equity
(regardless of whether enforcement is
sought in a proceeding at law or in
equity).
3.3 No
Violation. The execution, delivery and performance of the Buyer
Documents by the Buyers will not conflict
with or result in the breach of any
term or provision of, or violate or
constitute a default under any charter
provision or bylaw or under any material
agreement, order or Law to which any
Buyer is a party or by which any Buyer is
in any way bound or obligated.
3.4
Governmental Authorizations. Except to the extent required in
connection with any of the Governmental
Authorizations required on the part of
the Seller or the Partnership as described
in Schedule 2.11, or as required by
any applicable securities Laws, no
Governmental Authorization is required on the
part of any Buyer in connection with the
transactions contemplated by this
Agreement.
3.5
Litigation. There are no pending or, to the Knowledge of the
Buyers,
threatened, lawsuits, administrative
proceedings, arbitrations, reviews or
formal or informal complaints or
investigations by any Person that in any manner
challenges or seeks to prevent, enjoin,
alter or materially delay any of the
transactions contemplated by this
Agreement.
3.6 No
Brokers. No Buyer has dealt with any broker or consultant with
respect to the purchase and sale of the
Purchased Interests, or with any other
Person who may claim a commission or
finder's fee arising out of this Agreement
or any of the transactions contemplated
hereby, except that the Buyers have paid
a consulting fee of $25,000 to Donald
Cook.
3.7
Accredited Investor. Each of the Buyers is an "accredited investor"
as
such term is defined in Rule 501(a)
promulgated under the 1933 Act, who by
reason of its business and financial
experience has such knowledge,
sophistication and experience in business
and financial matters as to be capable
of evaluating the merits and risks of, and
could be reasonably assumed to have
the capacity to protect its own interests
in connection with, an investment in
the Purchased Interests and, having had
access to or having been furnished with
all such information as it has considered
necessary, has concluded that it is
able to bear those risks.
3.8
Investment Intent. GenPar is acquiring the GP Interest for its
own
account and not with a view to or for sale
in connection with any distribution
of the GP Interest within the meaning of
Section 2(11) of the 1933 Act. Newco is
acquiring the LP Interest for its own
account and not with a view to or for sale
in connection with any distribution of the
LP Interest or any portion thereof
within the meaning of Section 2(11) of the
1933 Act.
3.9
Restricted Securities. The Buyers understand that the Purchased
Interests constitute "restricted
securities" within the meaning of Rule 144
promulgated under the 1933 Act and may not
be sold, pledged or otherwise
disposed of unless they are subsequently
registered
22
<PAGE>
under the 1933 Act and applicable state
securities laws or unless an exemption
from registration is available.
3.10 Full
Disclosure. No representation or warranty of the Buyers
contained in this Agreement, and nothing
set forth herein or in the exhibits
attached hereto, or in any document
furnished or to be furnished to the Seller
at the Closing, or in any other information
or materials delivered by the Buyers
to the Seller (when read together),
contains any untrue statement of a material
fact or omits to state a material fact
necessary in order to make the statements
contained herein or therein not misleading
in light of the circumstances under
which they were made.
ARTICLE IV
COVENANTS AND AGREEMENTS
4.1
Conduct of Business. Prior to the Closing, unless the Buyers
otherwise
consent in writing, the Seller will cause
the Partnership to:
(a) operate in the ordinary course of business and consistent
with
past
practices and use its commercially reasonable efforts to preserve
the
goodwill
of the Partnership and of its officers, employees, customers,
suppliers,
Governmental Bodies and others having business dealings with
the
Partnership;
(b) use its commercially reasonable efforts to preserve intact
the
business
organization of the Partnership, to keep available the services
of the
Partnership's present officers and key employees, consultants,
advisors
and managers and to maintain satisfactory relationships with
Payors,
agents, insurers, reinsurers, suppliers and other Persons
having
business
relationships with the Partnership;
(c) except as specifically contemplated by this Agreement, not
engage in
any transaction outside the ordinary course of business,
including
without limitation by making any expenditure, investment,
commitment
or distribution of assets to any of its partners or entering
into any
agreement or arrangement of any kind;
(d) maintain a level of collectible receivables acceptable to
the
Buyers in
their sole and absolute discretion;
(e) maintain cash on hand as of the Closing Date equal to at
least
$100,000
plus the Retained Expenses (as defined below) (the "Required
Capital");
the Buyers acknowledge and agree that the Seller may cause the
Partnership to distribute its cash on hand in excess of the
Required
Capital to
the Partnership's equityholders immediately prior to the
transfer
of the Purchased Interests to the Buyers as contemplated by
this
Agreement;
the "Retained Expenses" means an amount sufficient to satisfy
all
Liabilities incurred or accrued by the Partnership prior to the
Closing
Date that are (i) normal recurring expenses, incurred in the
ordinary
course of business and consistent with past practices, which
accrued
more than 30 days prior to the Closing Date; or (ii) any other
Liabilities which relate to services provided to the Partnership,
products
purchases
by the
23
<PAGE>
Partnership or any other obligation which was not incurred in the
ordinary
course of
business and consistent with past practices prior to the
Closing
Date;
(f) satisfy all of its Liabilities other than trade accounts
payable
incurred
in the ordinary course of business and consistent with past
practices
prior to the Closing, including, without limitation, the
Liabilities set forth in Schedule 2.13(b).
(g) maintain all insurance policies and all Licenses that are
required
for the Partnership to carry on the Business;
(h) maintain all Partnership Contracts in the usual, regular
and
ordinary
manner and consistent with past practices;
(i) not approve or make any change in the list in Schedule 2.20
of
providers
in good standing on the medical staff of the Partnership, as
listed;
(j) maintain books of account and records in the usual, regular
and
ordinary
manner and consistent with past practices;
(k) not acquire by merger, consolidation or acquisition of stock
or
assets any
Person or make any investment in any other Person either by
purchase
of stock or securities, contributions to capital, property
transfer
or purchase of any amount of property or assets (other than
supplies
in the ordinary course of business and consistent with past
practice);
(l) not amend the Partnership Agreement or alter through
merger,
liquidation, reorganization, restructuring or in any other fashion
the
Partnership's structure or ownership;
(m) not authorize or make any new expenditure not permitted
under
the
current budget provided to the Buyers prior to the Effective
Date,
including
without limitation any capital lease or non-ordinary course
lease,
except in the ordinary course of business up to the amounts
contemplated by such budget;
(n) not make any tax election, settle or compromise any Tax
Liability
or consent to the extension of time for the assessment or
collection
of any Tax;
(o) not enter into any exclusive arrangements with suppliers or
customers,
unless such arrangements are terminable by the Partnership upon
no more
than 30 days' notice, or incur or agree to incur any payments
to
customers
(other than pursuant to agreements listed in Schedule 2.25(a))
in excess
of $5,000;
(p) not enter into any noncompetition or most favored nation
agreement
that binds the Partnership;
(q) not enter into any collective bargaining agreement; and
24
<PAGE>
(r) not take or willfully omit to take any action that would
result
in a
breach (as of the Closing) of the representations and warranties
set
forth in
Section 2.14.
Notwithstanding the foregoing, the
Partnership will be permitted prior to the
Closing to make distributions to its
partners of amounts estimated to be owed by
such partners for federal and state income
Taxes relating to the income of the
Partnership through the Closing Date.
4.2 Access
and Information. Prior to the Closing, the Seller and Kupfer
will cause the Partnership to permit the
Buyers and its representatives to have
reasonable access to the Partnership's
equityholders, officers, employees,
agents, assets and properties and, prior to
and after the Closing, all relevant
books, records and documents of or relating
to the Business and the assets of
the Partnership during normal business
hours and will furnish to the Buyers such
information, financial records and other
documents relating to the Partnership,
the Business and the assets of the
Partnership as the Buyers may reasonably
request. The Seller and Kupfer will cause
the Partnership to permit the Buyers
and their representatives reasonable access
to the Partnership's accountants,
auditors, customers and suppliers for
consultation or verification of any
information obtained by the Buyers and will
use, and will cause the Partnership
to use, commercially reasonable best
efforts to cause such Persons to cooperate
with the Buyers and their representatives
in such consultations and in verifying
such information. The Seller and Kupfer
will have the right to participate in
any contact with such Persons.
4.3
Supplemental Disclosure. Prior to the Closing but as soon as
practicable after the discovery thereof,
the Seller and Kupfer will supplement
or amend each of the Schedules hereto with
respect to any matter that arises or
is discovered after the Effective Date
that, if existing or Known by the Seller
or Kupfer on the Effective Date, would have
been required to be set forth or
listed in the Schedules hereto.
4.4
Assistance with Licenses and Filings. The Seller and Kupfer
will
assist the Buyers in obtaining any
Licenses, or any consents to assignment or
change in control related thereto, that the
Buyers will require in connection
with the continued operation of the
Business after the Closing.
4.5
Substitution Guarantor. GenPar will use its commercially
reasonable
efforts to assist the Seller and Kupfer in
removing themselves from any personal
guarantees made by them with respect to the
leases identified in Schedule 4.5,
including, without limitation, by becoming
a substitution guarantor with respect
thereto.
4.6
Fulfillment of Conditions by the Sellers. The Seller and Kupfer
will
take all reasonable steps within their
power to cause to be fulfilled the
conditions precedent to the Buyers'
obligations to consummate the transactions
contemplated hereby that are dependent on
the actions of the Seller or Kupfer.
4.7
Fulfillment of Conditions by the Buyers. The Buyers will take
all
reasonable steps within their power to
cause to be fulfilled the conditions
precedent to the obligations of the Seller
and Kupfer to consummate the
transactions contemplated hereby that are
dependent on the actions of the
Buyers.
25
<PAGE>
4.8
Distributions in Excess of Required Capital. Notwithstanding
the
approval of any distribution of cash
allowed under Section 4.1(e), the Seller
shall remit to the Partnership the amount
of any Liability or expense included
in the definition of Retained Expenses that
is paid by the Partnership after the
Closing Date. The parties acknowledge and
agree that the amount of any Liability
or expense included in the definition of
Retained Expenses subsequently paid by
the Partnership shall result in a reduction
in the amount distributed to the
Seller as a distribution under the
Partnership Agreement. If a distribution from
the Partnership is not made to the Seller
within 90 days from and after the date
the Partnership pays any Liability or
expense included in the definition of
Retained Expenses, the Seller shall remit
the sum of any such Liability or
expense paid by the Partnership directly to
the Partnership. The Sellers and
Kupfer are jointly and severally liable for
any amounts due to the Partnership
under this Section 4.8.
4.9
Consent to Transfers. The Seller consents to (a) the sale,
purchase
and transfer of the Purchased Interests as
contemplated by this Agreement; (b)
the admission of GenPar as successor
general partner of the Partnership with
respect to the GP Interest; and (c) the
admission of Newco as a limited partner
of the Partnership with respect to the LP
Interest.
4.10
Publicity. The Buyers, the Seller and Kupfer will cooperate with
each
other in the development and distribution
of all news releases and other public
disclosures relating to the transactions
contemplated hereby. Neither the Seller
nor Kupfer, nor any Buyer, will issue or
make, or allow to have issued or made,
any press release or public announcement
concerning the transactions
contemplated hereby without giving the
other party a reasonable opportunity to
comment on such release or announcement in
advance, consistent with applicable
Law and stock market requirements.
Notwithstanding the foregoing, nothing
contained herein will prohibit VSCE from
making any disclosure required pursuant
to applicable securities Laws.
4.11
Audit. Within five business days after the Effective Date, the
Seller
and Kupfer will, at the Seller's sole
expense, engage a nationally-known
independent certified public accounting
firm reasonably acceptable to the Buyers
and the Seller to prepare the audited
financial statements contemplated by
Section 2.12(b), which will be prepared in
accordance with GAAP. Within 45 days
after the Closing, the Buyers will
reimburse the Seller for the reasonable
actual costs incurred by the Seller for
such engagement; provided, however, that
the Buyers will not be obligated to make
any such reimbursement payment if this
Agreement is terminated by the Buyers
pursuant to Section 7.1(a)(ii), (iii) or
(iv) prior to the Closing; further
provided, that such reimbursement will only
be for costs associated with the engagement
for the preparation of the audited
financial statements, and not any costs
associated with the preparation of the
Partnership's internal financial statements
required prior to such engagement.
4.12
Transaction Costs. The Buyers will pay all transaction costs
and
expenses (including legal, accounting and
other professional fees) that they
incur in connection with the negotiation,
execution and performance of this
Agreement and the transactions contemplated
hereby. Except as provided in
Section 4.11, the Seller and Kupfer will
pay all transaction costs and expenses
(including legal, accounting and other
professional fees) that they incur or
that are incurred by the Partnership in
connection with the negotiation,
execution and performance of this Agreement
and the transactions contemplated
hereby.
26
<PAGE>
4.13
No-Shop Provisions. The Seller hereby covenants and agrees that
(a)
it will not, and will not permit any of its
Affiliates (including the
Partnership) to, initiate, solicit or
encourage (including by way of furnishing
information or assistance), or take any
other action to facilitate, any
inquiries or the making of any proposal
relating to, or that may reasonably be
expected to lead to, any Competing
Transaction (as defined below), or enter into
discussions or negotiate with any Person in
furtherance of such inquiries or to
obtain a Competing Transaction, or endorse
or agree to endorse any Competing
Transaction, or authorize or permit any of
the officers or employees of the
Partnership or any investment banker,
financial advisor, attorney, accountant or
other representative retained by the Seller
or Kupfer, or any of their
Affiliates (including the Partnership) to
take any such action; and (b) the
Seller will promptly notify the Buyers of
all relevant terms of any such
inquiries and proposals received by it or
any of its Affiliates (including the
Partnership) or by any such officer,
employee, investment banker, financial
advisor, attorney, accountant or other
representative relating to any of such
matters, and if such inquiry or proposal is
in writing, the Seller will promptly
deliver or cause to be delivered to the
Buyers a copy of such inquiry or
proposal. For purposes of this Agreement,
"Competing Transaction" means any of
the following (other than the transactions
contemplated by this Agreement)
involving the Partnership: (i) any merger,
consolidation, share exchange,
business combination or similar
transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other
disposition of the assets of the Partnership
(other than sales of inventory in the
ordinary course of business and consistent
with past practice); or (iii) any offer,
sale or other transfer of any equity
interest in the Partnership.
4.14
Nondisclosure. The Seller acknowledges and agrees that all
customer,
prospect and marketing lists, sales data,
pricing, product information,
Intellectual Property and other
confidential information of the Partnership
(collectively, "Confidential Information")
are valuable assets constituting part
of the assets of the Partnership and,
following the Closing, will be owned by
the Buyers (through the Partnership),
except to the extent any such customer,
prospect or marketing list, Intellectual
Property or Confidential Information is
also used by the Seller or its Affiliates
in connection with their respective
businesses, which businesses do not compete
with the Business, in which case
such customer, prospect or marketing lists,
Intellectual Property or
Confidential Information will be jointly
owned by the Buyers and the Seller or
its applicable Affiliate; provided,
however, that the following shall in any
event be owned exclusively by the Buyers
(through the Partnership): (a) sales
data, pricing and product information with
respect to the Partnership's
products, (b) Intellectual Property
identified in Schedule 2.27, and (c) any
other Intellectual Property or Confidential
Information used in the Business
prior to the Effective Date. The Seller
agrees, and agrees to use reasonable
efforts to cause its representatives, to
treat the Confidential Information,
together with any other confidential
information furnished to it by the Buyers,
as confidential and not to make use of such
information for its own purposes or
for the benefit of any other Person (other
than the Partnership prior to the
Closing or the Buyers after the
Closing).
4.15
Certain Tax Matters.
(a) The Partnership will terminate on the Closing Date pursuant
to
Section
708(b)(1)(B) of the Code. Consequently, the Partnership will
close
its books
as of the Closing Date and will allocate its "profits" and
"losses"
for the period from January 1, 2006 through, and including, the
Closing
Date to the Seller and the Non-Selling Limited
27
<PAGE>
Partners.
The Buyers will not be allocated any "profits" or "losses" of
the
Partnership for any period ending on or prior to the Closing
Date.
(b) The Partnership will timely prepare and file its final
federal
income tax
information return for the taxable year ending on the Closing
Date. The
Buyers will have the right to review and approve such return
prior to
its being filed with the Internal Revenue Service.
(c) The Buyers, the Partnership, and the Seller will cooperate,
as
and to the
extent reasonably requested by the other party, in connection
with the
filing of Tax Returns pursuant to this Section 4.15 and any
audit,
litigation or other proceeding with respect to Taxes, and the
Buyers and
the Seller shall each be entitled at their own expense to
participate in any such audit, litigation or other proceeding to
the
extent
that such party would be liable for any additional Taxes owing.
Such
cooperation shall include, upon the other party's request, the
provision
of records and information which are reasonably relevant to any
such
audit, litigation or other proceeding and making employees
reasonably
available
on a mutually convenient basis to provide additional
information
and
explanation as may be reasonably requested of any material
provided
hereunder.
The Buyers will cause the Partnership to retain relevant books
and
records concerning Tax matters of the Partnership and relating to
any
Tax
periods prior to or including the Closing Date until the expiration
of
the
applicable statutes of limitation and shall abide by all record
retention
agreements entered into with any taxing authority.
4.16
Employees and Employee Benefits. Nothing contained in this
Agreement
or any of the documents contemplated hereby
will affect the status of any of the
Partnership's employees or any of the
Employee Benefit Plans identified in
Schedule 2.24. From and after the Closing
Date, the Partnership (or any legal
successors) will have sole and absolute
discretion over the promotion,
retention, termination and other terms and
conditions of the employment of the
employees of the Partnership.
4.17
Treatment of Partnership Assets After Closing. After the
Closing,
unless Kupfer otherwise consents in
writing, such consent not to be unreasonably
withheld or delayed, the Buyers will take
all steps within their power to
prevent the Partnership from permitting any
Lien with respect to any asset used
in the Business, including, without
limitation, any account receivable, License
or improvement on any of the Real
Property.
4.18
Mutual Walk-Away. Beginning on the first Mandatory Redemption
Date
(as defined in the Series B Certificate of
Designation), if (a) the closing bid
price for the common stock, par value $0.01
per share, of VSCE (the "Parent
Common Stock"), for a period of five
consecutive trading days, is less than the
closing bid price for the Parent Common
Stock on the Effective Date; and (b) all
dividend and mandatory redemption payments
due and payable on or after such
Mandatory Redemption Date pursuant to the
terms of the Series B Certificate of
Designation have not been made (to the
extent allowed pursuant to all applicable
Laws), then the Seller will have the right,
at its sole option, to repurchase
the Purchased Interests from the Buyers in
exchange for the return of all Newco
Shares then outstanding.
28
<PAGE>
ARTICLE V
CLOSING CONDITIONS
5.1
Conditions to Obligations of the Buyers. The obligations of the
Buyers
under this Agreement are subject to the
satisfaction at or prior to the Closing
of the following conditions, but compliance
with any such conditions may be
waived by the Buyers in writing:
(a) All representations and warranties of the Seller and Kupfer
contained
in this Agreement are true and correct in all respects at and
as
of the
Closing, without regard to any supplemental disclosure provided
pursuant
to Section 4.3, with the same effect as though such
representations and warranties were made at and as of the Closing
(rather
than as of
the Effective Date as provided in the first paragraph of
Article
II).
(b) The Seller and Kupfer have performed and complied in all
respects
with all the covenants and agreements required by this
Agreement
to be
performed or complied with by them at or prior to the Closing.
(c) All necessary Consents listed in Schedule 2.25(c) or
required
under any
applicable Laws have been obtained and will be effective as of
the
Closing, and all necessary contractual or governmental notices
have
been
given.
(d) The Buyers have approved of the calculation of the amount to
be
distributed under Section 4.1(e).
(e) As of the
Closing Date, there is no pending or threatened
litigation
by any Person seeking to enjoin any aspect of the operation of
the
Business or the consummation of the transactions contemplated by
this
Agreement,
or otherwise affecting the Partnership.
(f) As of the Closing Date, there has not occurred any Material
Adverse
Effect with respect to the Partnership since the Latest Balance
Sheet
Date.
(g) The Buyers have received evidence satisfactory to the Buyers
in
their sole
and absolute discretion of the release of the Partnership from
any
obligation concerning (including any guarantee of) any Liability
of
the Seller
or Kupfer and any indebtedness of the Partnership not reflected
in the
Latest Balance Sheet or incurred since the Latest Balance Sheet
Date in
the ordinary course of business and consistent with past
practice.
(h) The Seller has delivered to the Buyers executed UCC
Termination
Statements
or other releases satisfactory to the Buyers in their sole and
absolute
discretion to evidence the release of any Liens on the assets
of
the
Partnership or on the Purchased Interests.
(i) The Seller has delivered to the Buyers the audited
financial
statements
contemplated by Section 2.12(b), prepared in accordance with
GAAP.
(j) GenPar, Newco, the Seller and each of the Non-Selling
Limited
Partners
will have entered into an Amended and Restated Agreement of
Limited
Partnership of Point
29
<PAGE>
Loma
Surgical Center, L.P., dated as of the Effective Date, by and
among
GenPar, as
the general partner, and Newco, the Seller and each of the
Non-Selling Limited
Partners, as limited partners, in form and substance
mutually
satisfactory to GenPar, Newco and the Seller (the "Partnership
Agreement").
(k) Kupfer will have caused Elite to execute and deliver to SCMI
any
documents that
are necessary to transfer to SCMI good title to the Elite
Assets,
including, without limitation, the Bill of Sale.
(l) The Seller will have executed and delivered to the Buyers
the
Registration Rights Agreement, substantially in the form of Exhibit
D
attached
hereto (the "Registration Rights Agreement").
(m) The Seller will have executed and delivered to Newco the
Assignment
of GP Interest, substantially in the form of Exhibit E attached
hereto
(the "Assignment of GP Interest").
(n) The Seller will have executed and delivered to GenPar the
Assignment
of LP Interest, substantially in the form of Exhibit F attached
hereto
(the "Assignment of LP Interest").
(o) The Seller will have caused the Partnership to execute and
deliver to
SCMI the Management Services Agreement, substantially in the
form of
Exhibit G attached hereto (the "Management Services
Agreement").
(p) The Seller will have caused the Partnership to execute and
deliver,
and each of Elite and Clinicis, Inc. will have executed and
delivered,
to SCMI the Termination of Management Agreements, substantially
in the
form of Exhibit H attached hereto (the "Termination
Agreement").
(q) The Seller will have executed and delivered to the Buyers
the
Release,
substantially in the form of Exhibit I attached hereto.
(r) The Seller and Kupfer will have delivered to the Buyers a
closing certificate,
substantially in the form of Exhibit J attached
hereto.
(s) The Seller will have delivered to the Buyers a certificate
of
the
secretary of the Seller, substantially in the form of Exhibit K
attached
hereto.
(t) The Seller and Kupfer will have delivered to the Buyers a
legal
opinion of
counsel to the Seller and Kupfer, substantially in the form of
Exhibit L
attached hereto.
(u) The Seller and Kupfer will have used their best efforts to
provide to
the Buyers an estoppel certificate from the lessor of the Real
Property,
substantially in the form of Exhibit M attached hereto.
5.2
Conditions to Obligations of the Seller and Kupfer. The obligations
of
the Seller and Kupfer under this Agreement
are subject to the satisfaction at or
prior to the Closing of the
30
<PAGE>
following conditions, but compliance with
any such conditions may be waived by
the Seller in writing:
(a) All representations and warranties of the Buyers contained
in
this
Agreement are true and correct in all respects at and as of the
Closing
with the same effect as though such representations and
warranties
were made
at and as of the Closing (rather than as of the Effective Date
as
provided in the first paragraph of Article III).
(b) Each of the Buyers has performed and complied in all
respects
with all
the covenants and agreements required by this Agreement to be
performed
or complied with by it at or prior to the Closing.
(c) All necessary Consents under any applicable Laws have been
obtained
and all necessary governmental notices have been given.
(d) VSCE will have executed and delivered to the Seller the
Registration Rights Agreement.
(e) Newco will have executed and delivered to the Seller the
Assignment
of GP Interest.
(f) GenPar will have executed and delivered to the Seller the
Assignment
of LP Interest.
(g) SCMI will have executed and delivered to the Seller the
Management
Services Agreement.
(h) The Buyers will have delivered to the Seller a closing
certificate substantially in the form of Exhibit N attached
hereto.
(i) The Buyers will have delivered to the Seller and Kupfer a
certificate of the secretary of each of the Buyers, substantially
in the
form of
Exhibit O attached hereto.
ARTICLE VI
INDEMNIFICATION
6.1
Indemnification of the Buyers. Notwithstanding any investigation
by
the Buyers or its representatives or any
supplemental disclosure under Section
4.3, the Seller and Kupfer will, jointly
and severally, indemnify and hold the
Buyers, their Affiliates and their
respective directors, officers, employees and
agents (collectively, the "Buyer Parties")
harmless from any and all
Liabilities, obligations, claims,
contingencies, damages, costs and expenses,
including all court costs, litigation
expenses and reasonable attorneys' fees
(collectively, "Losses"), that any Buyer
Party may suffer or incur as a result
of or relating to:
(a) the breach of any representation or warranty made by the
Seller
or Kupfer
in this Agreement or pursuant hereto or any allegation by a
third
party that, if true, would constitute such a breach (and, for
the
purposes
of determining under this Section 6.1(a)
31
<PAGE>
whether
there is a breach of any representation or warranty and the
amount
of any
Losses arising therefrom:
(i) a representation or warranty shall be considered breached
if such representation or warranty was not true and correct
when
given, without regard to any supplemental disclosure provided
pursuant to Section 4.3 and without regard to whether the
condition
to close set forth in Section 5.1(a) is satisfied;
(ii) a representation or warranty shall be considered breached
if (A) such representation or warranty was true and correct
when
given, without regard to any supplemental disclosure provided
pursuant to Section 4.3 and without regard to whether the
condition
to close set forth in Section 5.1(a) is satisfied; (B) such
representation or warranty becomes untrue at or prior to
Closing;
and (C) the Sellers fail to make necessary supplemental
disclosure
regarding such representation or warranty pursuant to Section 4.3
at
or prior to Closing;
(iii) a representation or warranty shall be considered
breached if (A) such representation or warranty was true and
correct
when given, without regard to any supplemental disclosure
provided
pursuant to Section 4.3; (B) such representation or warranty
becomes
untrue at or prior to Closing; (C) the Sellers make
supplemental
disclosure regarding such representation or warranty pursuant
to
Section 4.3 at or prior to Closing; and (D) the condition to
close
set forth in Section 5.1(a) is satisfied without being waived by
the
Buyers;
(iv) a representation or warranty shall not be considered
breached if (A) such representation or warranty was true and
correct
when given, without regard to any supplemental disclosure
provided
pursuant to Section 4.3; (B) such representation or warranty
becomes
untrue at or prior to Closing; (C) the Sellers make
supplemental
disclosure regarding such representation or warranty pursuant
to
Section 4.3 at or prior to Closing; and (D) the condition to
close
set forth in Section 5.1(a) is not satisfied, but the Buyers
expressly waive such condition or otherwise proceed with the
Closing;
(v) the Seller and Kupfer will be deemed to make all of their
representations and warranties herein on behalf of their
affiliated
legal predecessors in the ownership and operation of the
Business,
and "Losses" shall include any Losses suffered or incurred as a
result of any act or omission by any such legal predecessors);
(b) the breach of any covenant or agreement made by the Seller
or
Kupfer in
this Agreement or pursuant hereto or any allegation by a third
party
that, if true, would constitute such a breach, except that,
following
the Closing, the Seller and Kupfer will have no liability for
any breach
of any covenant set forth in Sections 4.3 or 4.6 even if such
breach
occurs prior to the Closing; or
(c) the items listed in Schedule 6.1(c).
32
<PAGE>
For purposes of indemnification pursuant to
this Section 6.1, all materiality
and Knowledge qualifiers will be excluded
from and given no effect in each
representation and warranty set forth in
Article II and each covenant and
agreement set forth in Article IV.
6.2
Indemnification of the Sellers. The Buyers will indemnify and hold
the
Seller, its Affiliates, directors,
officers, employees and agents and Kupfer
(collectively, the "Seller Parties")
harmless from any and all Losses that any
Seller Party may suffer or incur as a
result of or relating to:
(a) the breach of any representation or warranty made by the
Buyers
in this
Agreement or pursuant hereto or any allegation by a third party
that, if
true, would constitute such a breach (and, for the purposes of
determining under this Section 6.2(a) whether there is a breach of
any
representation or warranty and the amount of any Losses therefrom,
the
Buyers
will be deemed to make all of their representations and
warranties
herein on
behalf of their affiliated legal predecessors, and "Losses"
shall
include any Losses suffered or incurred as a result of any act
or
omission
by any such legal predecessors);
(b) the breach of any covenant or agreement made by the Buyers
in
this
Agreement or pursuant hereto or any allegation by a third party
that,
if true,
would constitute such a breach; or
(c) any violation by Newco of any applicable securities Laws as
a
result of
the issuance or transfer of the Newco Shares pursuant to this
Agreement.
6.3
Survival.
(a) The representations and warranties of the Seller and Kupfer
made
in or
pursuant to this Agreement and the closing certificate attached
hereto as
Exhibit H will survive the execution and delivery of this
Agreement
and the consummation of the transactions contemplated hereby
until the
24-month anniversary of the Closing; provided, that: (i) the
representations and warranties set forth in Sections 2.2
(Authority), 2.4
(Capitalization), 2.5 (Title to Securities), 2.19 (Payors), 2.20
(Medical
Staff
Matters), and 2.21 (Health Care Legal Matters) will survive
indefinitely; (ii) any claim for indemnification pursuant to
Section
6.1(a)
will survive until such claim is finally resolved if the Buyers
notify the
Sellers of such claim in reasonable detail prior to the date on
which such
representation or warranty would otherwise expire hereunder;
and (iii)
the representations and warranties set forth in Section 2.15
(Taxes)
will survive until 60 days after expiration of the applicable
statute of
limitation with respect thereto. Without limiting the
foregoing,
no claim for indemnification pursuant to Section 6.1(a) based
on the
breach or alleged breach of a representation or warranty may be
asserted
by the Buyers after the date on which such representation or
warranty
expires hereunder.
(b) The representations and warranties of the Buyers made in or
pursuant
to this Agreement will survive the execution and delivery of
this
Agreement
and the consummation of the transactions contemplated hereby
until the
24-month anniversary of the Closing; provided, that: (i) the
representations and warranties set forth in Section 3.2 (Authority)
will
survive
indefinitely; and (ii) any claim for indemnification pursuant
to
33
<PAGE>
Section
6.2(a) will survive until such claim is finally resolved if the
Seller or
Kupfer notifies the Buyers of such claim in reasonable detail
prior to
the date on which such representation or warranty would
otherwise
expire
hereunder. Without limiting the foregoing, no claim for
indemnification pursuant to Section 6.2(a) based on the breach or
alleged
breach of
a representation or warranty may be asserted by the Seller or
Kupfer
after the date on which such representation or warranty expires
hereunder.
(c) The covenants and agreements of the Buyers, the Seller and
Kupfer
made in or pursuant to this Agreement will survive the
execution
and
delivery of this Agreement and the consummation of the
transactions
contemplated hereby indefinitely; provided, however, that (i)
the
provisions of Section 4.13
(No-Shop Provisions) will survive only until
the
earlier of the Closing Date or termination of this Agreement
pursuant
to Section
7.1; and (ii) the provisions of Sections 4.19 (Treatment of
Partnership Assets After Closing) and 4.20 (Mutual Walk-Away) will
survive
only until
the earlier of (A) the first exercise by the Seller (or any
successor
in interest) of any of its exchange rights with respect to any
of the
Newco Shares; or (B) the first date on which all of the Newco
Shares
have been redeemed by Newco.
6.4
Notice. Any party entitled to receive indemnification under
this
Article VI (the "Indemnified Party") agrees
to give prompt written notice to the
party or parties required to provide such
indemnification (the "Indemnifying
Parties") upon the occurrence of any
indemnifiable Loss or the assertion of any
claim or the commencement of any action or
proceeding in respect of which such a
Loss may reasonably be expected to occur (a
"Claim"), but the Indemnified
Party's failure to give such notice in a
timely manner will not affect the
obligations of the Indemnifying Party under
this Article VI except to the extent
that the Indemnifying Party is materially
prejudiced thereby, subject to the
applicable survival provisions of Section
6.3. Such written notice will include
a reference to the event or events forming
the basis of such Loss or Claim and
the amount involved, unless such amount is
uncertain or contingent, in which
event the Indemnified Party will give a
later written notice when the amount
becomes fixed.
6.5
Defense of Claims.
(a) The Indemnifying Party may elect to assume and control the
defense of
any Claim, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of expenses
related
thereto,
if: (i) the Claim does not seek to impose any Liability on the
Indemnified Party other than money damages; and (ii) the Claim does
not
relate to
the Indemnified Party's relationship with any customer or
employee.
(b) If the conditions of Section 6.5(a) are satisfied and the
Indemnifying Party elects to assume and control the defense of a
Claim,
then: (i)
the Indemnifying Party will not be liable for any settlement of
such Claim
effected without its consent, which consent shall be in the
Indemnifying Party's sole and absolute discretion if the
Indemnifying
Party is
solely liable for all Losses in connection with such Claim, and
which
consent shall not be unreasonably withheld if both the
Indemnifying
Party and
the Indemnified Party are liable for Losses in connection with
such
Claim; (ii) the Indemnifying Party
34
<PAGE>
may settle
such Claim without the consent of the Indemnified Party if the
Indemnifying Party acknowledges its obligation to indemnify the
Indemnified Party for any Losses resulting from such Claim, and
the
Indemnified Party shall not unreasonably withhold its consent if
both the
Indemnifying Party and the Indemnified Party are liable for Losses
in
connection
with such claim; and (iii) the Indemnified Party may employ
separate
counsel and participate in the defense thereof, provided that
the
Indemnified Party will be responsible for the fees and expenses of
such
counsel
unless: (A) the Indemnifying Party has failed to adequately
assume
and
actively conduct the defense of such Claim or to employ counsel
with
respect
thereto; or (B) in the reasonable opinion of the Indemnified
Party, a
conflict of interest exists between the interests of the
Indemnified Party and the Indemnifying Party that requires
representation
by
separate counsel, in which case the fees and expenses of such
separate
counsel
will be paid by the Indemnifying Party.
(c) If the Indemnifying Party does not assume the control and
defense of
any Claim, the Indemnified Party may assume the exclusive right
to defend,
compromise or settle such Claim; provided (i) the Indemnifying
Party will
not be bound by any determination of a Claim so defended or any
compromise
or settlement effected without its consent (which may not be
unreasonably withheld) and (ii) the Indemnifying Party may employ
separate
counsel
and participate in the defense thereof, but the Indemnifying
Party
will be
responsible for the fees and expenses of such counsel.
(d) The Indemnifying Party or the Indemnified Party, as the case
may
be, shall
at all times use reasonable efforts to keep the Indemnified
Party or
the Indemnifying Party, as the case may be, reasonably apprised
of the
status of the defense of any Claim the defense of which it is
maintaining under this Section 6.5, and each shall reasonably
cooperate in
good faith
with the other with respect to the defense of any Claim.
6.6
Determination of Losses. The amount of any Loss subject to
indemnification under Section 6.1 or
Section 6.2 shall be calculated net of (i)
any Tax Benefit actually realized (or the
present value of any Tax Benefit to be
realized) by the Indemnified Party on
account of such Loss and (ii) any
insurance proceeds actually received by the
Indemnified Party on account of such
Loss. If the Indemnified Party receives a
Tax Benefit after an indemnification
payment is made to it, then, to the extent
such payment did not take into
account such Tax Benefit, the Indemnified
Party shall promptly pay to the Person
or Persons that made such indemnification
payment the amount of such Tax Benefit
at such time or times as and to the extent
that such Tax Benefit is actually
realized by the Indemnified Party. For
purposes hereof, "Tax Benefit" shall mean
any refund of Taxes paid or reduction in
the amount of Taxes which otherwise
would have been paid, in each case computed
at the highest marginal tax rates
actually applicable to the recipient of
such benefit, and any dispute as to the
amount of a Tax Benefit, the present value
thereof, or whether it is to be
realized shall be resolved by binding
arbitration by a nationally recognized
public accounting firm reasonably
acceptable to each party. The Indemnified
Party shall use reasonable efforts to
recover under any insurance policy
covering any Loss, if reasonably requested
by the Indemnifying Party and
provided that the Indemnifying Party pays
all costs and expenses of the same,
including instituting litigation or
otherwise pursuing any dispute in respect of
any such insurance recovery, if reasonably
requested by the Indemnifying Party
and provided that the Indemnifying Party
pays all costs and expenses of the
same; provided, that no Indemnified Party
shall be required to obtain or
maintain any insurance for this
35
<PAGE>
purpose and provided, further, that for
purposes of this Section 6.6, any
insurance proceeds actually received by the
Indemnified Party will be deemed
reduced by any premium increase that
results from such Loss during the
three-year period following the claim and
costs incurred by the Indemnified
Party with respect to the collection of
such insurance proceeds. In the event
that an insurance recovery is actually
received by any Indemnified Party with
respect to any Loss for which any such
Person has been indemnified hereunder,
then a refund equal to the aggregate amount
of such recovery (as adjusted
pursuant to this Section 6.6) shall be made
promptly to the Person or Persons
that provided such indemnity payments to
such Indemnitee; provided, that any
such Person or Persons who receives a
refund shall promptly reimburse the
Indemnified Party for the amount of any
reduction in the insurance recovery
occasioned by premium increases or
collection costs during the three-year period
following the claim, as contemplated in
this Section 6.6, that arise after any
such refund. No Indemnifying Party may
delay the payment of any amount owing in
respect of any Claim for indemnification
pursuant to this Article VI due to the
pendency of any Tax Benefit or insurance
recovery, nor may any Indemnifying
Party offset against any amount owing in
respect of any Claim any pending Tax
Benefit or insurance recovery.
ARTICLE VII
MISCELLANEOUS
7.1
Termination.
(a) This Agreement and the transactions contemplated hereby may
be
terminated
and abandoned at any time prior to the Closing Date: (i) by
mutual written
consent of the Buyers and the Seller; (ii) by either the
Buyers, on
the one hand, or the Seller, on the other hand, if a condition
to
performance by the terminating party hereunder has not been
satisfied
or waived
prior to January 31, 2006; (iii) by the Buyers, upon any
failure
or
inability of the Seller or Kupfer to perform or comply with any of
the
covenants
or agreements to be performed or complied with by them, if such
failure or
inability has not been satisfied or waived prior to January 31,
2006; (iv)
by the Buyers, upon any breach by the Seller or Kupfer of any
of the
representations or warranties contained in Article II or
otherwise
made
pursuant to this Agreement; or (v) by either the Buyers, on the
one
hand, or
the Seller, on the other hand, at any time and for any reason
other than
those provided in subsections (i) through (iv) of this Section
7.1(a) or
for no reason at all, provided, however, that in the event of
any
termination pursuant to this subsection (v), notwithstanding
anything
to the
contrary provided in Section 4.12, the terminating party will
reimburse
the non-terminating party for all legal fees incurred incurred
by the
non-terminating party through the date of or directly as a
result
of such
termination in connection with the negotiation, execution and
performance of this Agreement and the transactions contemplated
hereby.
(b) Notwithstanding the provisions of Section 7.1(a), (i) the
Buyers
may not
terminate this Agreement if the Closing has not occurred
because
of the
Buyers' willful failure to perform or observe any of its
covenants
or
agreements set forth herein or if any Buyer is, at such time, in
breach
of this
Agreement; and (ii) the Seller may not terminate this Agreement
if
the
Closing has not occurred because of the willful failure of the
Seller
or
36
<PAGE>
Kupfer to
perform or observe any of the covenants or agreements set forth
herein or
if the Seller or Kupfer is, at such time, in breach of this
Agreement.
(c) If this Agreement is terminated pursuant to Section 7.1(a),
all
further
obligations of the parties hereunder will terminate and no
party
will have
any liability or obligation (for reimbursement of expenses or
otherwise)
to any other party, except that the Buyers, on the one hand,
and the
Seller and Kupfer, on the other hand, will remain liable to the
other for
any breach of this Agreement by such parties occurring prior to
such
termination and all legal remedies of the other parties in respect
of
any such
breach will survive such termination unimpaired.
7.2
Notices. All notices and other communications under this
Agreement
must be in writing and will be deemed given
(a) when delivered personally; (b)
on the fifth business day after being
mailed by certified mail, return receipt
requested; (c) the next business day after
delivery to a recognized overnight
courier; or (d) upon transmission and
confirmation of receipt by a facsimile
operator if sent by facsimile, to the
parties at the following addresses or
facsimile numbers (or to such other address
or facsimile number as such party
may have specified by notice given to the
other party pursuant to this
provision):
with copies (which will not constitute
if to the Buyers:
notice) to:
c/o Vsource, Inc.
Hughes & Luce, L.L.P.
7855 Ivanhoe Avenue,
Suite 200 1717 Main
Street, Suite 2800
La Jolla, California
92037
Dallas, Texas 75201
Attention: General
Counsel
Attention: I. Bobby Majumder
Telecopy: (858)
456-4878
Telecopy: (214) 939-5849
with copies (which will not constitute
if to the Seller or
Kupfer:
notice) to:
c/o Surgical Ventures,
Inc.
Getz & Associates
P.O. Box 9330
13025 Danielson St., Suite 107
Rancho Santa Fe,
California 92067
Poway, CA 92064
Attention: David M.
Kupfer, M.D.
Attention: Pauline H. G. Getz
Telecopy: (858)
847-0610
Telecopy: (858) 486-2702
Any such notice or other communication will
be deemed to have been given and
received (whether actually received or not)
on the day it is personally
delivered or delivered by courier or
overnight delivery service or sent by
telecopy or, if mailed, when actually
received.
7.3
Attorneys' Fees and Costs. If attorneys' fees or other costs
are
incurred to secure performance of any
obligations hereunder, or to establish
damages for the breach thereof or to obtain
any other appropriate relief, or to
defend against any of the foregoing
actions, the prevailing party will be
entitled to recover reasonable attorneys'
fees and costs incurred in connection
therewith.
7.4
Brokers. Each party to this Agreement represents to the other
party
that it has not incurred and will not incur
any liability for brokers' or
finders' fees or agents' commissions in
37
<PAGE>
connection with this Agreement or the
transactions contemplated hereby, except
as expressly provided herein.
7.5
Severability. The invalidity or unenforceability of any provision
of
this Agreement will not affect the validity
or enforceability of any other
provision of this Agreement, each of which
will remain in full force and effect,
so long as the economic or legal substance
of the transactions contemplated by
this Agreement is not affected in a manner
materially adverse to any party.
7.6
Counterparts. This Agreement may be executed in one or more
counterparts (including by facsimile or
portable document format (.pdf)) for the
convenience of the parties hereto, each of
which will be deemed an original, but
all of which together will constitute one
and the same instrument.
7.7
Interpretation. The article and section headings contained in
this
Agreement are solely for the purpose of
reference, are not part of the agreement
of the parties and will not in any way
affect the meaning or interpretation of
this Agreement.
7.8
Assignment. Neither this Agreement nor any of the rights, interests
or
obligations hereunder may be assigned or
delegated by the Seller, Kupfer or the
Buyers without the prior written consent of
the other parties and any purported
assignment or delegation in violation
thereof will be null and void; except that
(i) Newco may assign its rights and
obligations under this Agreement to any of
the direct or indirect subsidiaries of
VSCE, or any successor to its business;
and (ii) GenPar may assign its rights and
obligations under this Agreement to
any of the direct or indirect subsidiaries
of VSCE, or any successor to its
business. This Agreement is not intended to
confer any rights or benefits on any
Person other than the parties hereto,
except to the extent specifically provided
in Article VI.
7.9 Entire
Agreement, Amendment. This Agreement and the related documents
contained as Exhibits and Schedules hereto
or expressly contemplated hereby
contain the entire understanding of the
parties relating to the subject matter
hereof and supersede all prior written or
oral and all contemporaneous oral
agreements and understandings relating to
the subject matter hereof. All
statements of the Seller or Kupfer
contained in any Schedule, certificate or
other Seller Document required under this
Agreement to be delivered in
connection with the transactions
contemplated hereby will constitute
representations and warranties of the
Seller and Kupfer under this Agreement.
The Exhibits, Schedules and recitals to
this Agreement are hereby incorporated
by reference into and made a part of this
Agreement for all purposes. This
Agreement may be amended, supplemented or
modified, and any provision hereof may
be waived, only by written instrument
making specific reference to this
Agreement signed by the party against whom
enforcement is sought.
7.10
Specific Performance, Remedies Not Exclusive. The parties
hereby
acknowledge and agree that the failure of
any party to perform its agreements
and covenants hereunder, including its
failure to take all required actions on
its part necessary to consummate the
transactions contemplated hereby, will
cause irreparable injury to the other
parties for which damages, even if
available, will not be an adequate remedy.
Accordingly, each party hereby
consents to the issuance of injunctive
relief by any court of competent
jurisdiction to compel performance of such
party's obligations and to the
granting by any court of the remedy of
38
<PAGE>
specific performance of its obligations
hereunder. Unless otherwise expressly
stated in this Agreement, no right or
remedy described or provided in this
Agreement or otherwise conferred upon or
reserved to any party is intended to be
exclusive or to preclude a party from
pursuing other rights and remedies to the
extent available under this Agreement, at
law or in equity, and the same will be
distinct, separate and cumulative and may
be exercised from time to time as
often as occasion may arise or as such
party may deem expedient.
7.11
GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
AND
INTERPRETED IN ACCORDANCE WITH THE
SUBSTANTIVE LAWS OF THE STATE OF DELAWARE,
WITHOUT GIVING EFFECT TO ANY CONFLICTS OF
LAW RULE OR PRINCIPLE THAT MIGHT
RESULT IN THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION.
7.12
Drafting. The language in all parts of this Agreement will be
interpreted, in all cases, according to its
fair meaning and not for or against
any party hereto. Each party acknowledges
that it and its legal counsel have
reviewed and revised this Agreement and
that the normal rule of construction to
the effect that any ambiguities are to be
resolved against the drafting party
will not be employed in the interpretation
of this Agreement.
7.13
Usage. Whenever the plural form of a word is used in this
Agreement,
it will include the singular form of that
word. Whenever the singular form of a
word is used in this Agreement, it will
include the plural form of that word.
The term "or" will not be interpreted as
excluding any of the items described.
The term "include" or any derivative of
such term does not mean that the items
following such term are the only types of
such items.
7.14
Certain Definitions. For purposes of this Agreement:
(a) the term "Affiliate" means, with respect to a specified
Person,
any other
Person or member of a group of Persons acting together that,
directly
or indirectly, through one or more intermediaries, controls, is
controlled
by or is under common control with, the specified Person.
(b) the term "control"
(including the terms "controlling,"
"controlled by" and "under common control with") means the
possession,
direct or
indirect, of the power to direct or cause the direction of the
management
and policies of a Person, whether through the ownership of
voting
securities, by contract or otherwise.
(c) the terms "Knowledge" and "known" and words of similar
import
mean:
(i) the Seller will be deemed to have "Knowledge" of a
particular matter, and the particular matter will be deemed to
be
"known" by the Seller, if Kupfer, Steven Martinez or Monica
Crellin
has actual knowledge of such matter or would reasonably be
expected
to have knowledge of such matter following reasonable inquiry of
the
appropriate employees and agents of the Seller and the
Partnership;
and Kupfer will be deemed to have "Knowledge" of a particular
matter, and the particular matter will be deemed to be "known"
by
Kupfer, if the Seller has such "Knowledge" or is so deemed to
"know."
39
<PAGE>
(ii) each of the Buyers will be deemed to have "Knowledge" of
a particular matter, and the particular matter will be deemed to
be
"known" by such Buyer, if any director, officer or any
supervisory
level employee of such Buyer has actual knowledge of such matter
or
would reasonably be expected to have knowledge of such matter
following reasonable inquiry of the appropriate employees and
agents
of such Buyer; and all Buyers will be deemed to have "Knowledge"
of
a particular matter, and the particular matter will be deemed to
be
"known" by all the Buyers, if any Buyer has such "Knowledge" or
is
so deemed to "know."
(d) the term "Material Adverse Effect" means any adverse change
or
effect
that, individually or when taken together with all other such
changes or
effects, would be materially adverse to the business,
operations
or results thereof, condition (financial or otherwise), assets
or
Liabilities (contingent or otherwise) of the referenced Person.
(e) the term "Permitted Liens" means (i) statutory liens for
current
Taxes or
other current governmental changes not yet due and payable or
the
amount or
validity of which is being contested in good faith by
appropriate proceedings and for which appropriate reserves
(reflected in
the Latest
Balance Sheet) have been established in accordance with GAAP;
(ii)
mechanics', carriers' and similar statutory liens arising or
incurred
in the
ordinary course of business and relating to current amounts
that
are not
due and payable, that are not, individually and in the
aggregate,
significant in amount or effect or that are being contested in good
faith
by
appropriate proceedings and for which appropriate reserves
(reflected
in the
Latest Balance Sheet) have been established in accordance with
GAAP;
(iii) zoning, entitlement, building and other land use
regulations
imposed by
Governmental Bodies having jurisdiction over the Real Property
that are
not violated by the current use and operation of the Real
Property
by the Partnership; (iv) covenants, conditions, restrictions,
easements
and other similar matters that appear in the applicable real
estate records affecting
title to the Real Property or that do not,
individually or in the aggregate, impair in any material respect
the
ownership,
occupancy, use, or insurability of the Real Property as
currently
owned, used and operated by the Partnership; (v) matters which
are
disclosed in an accurate, professionally prepared survey of
each
parcel of
Real Property that has been delivered to the Buyers prior to
the
Effective
Date; and (vi) purchase money liens and liens securing rental
payments
under capital lease arrangements, each of which is disclosed in
Schedule
2.7(b).
(f) In addition, the following terms are defined in the
indicated
section of
this Agreement:
<TABLE>
<CAPTION>
DEFINED TERM
SECTION
------------
--------
<S>
<C>
1933 Act
2.4(b)
Accounts Receivable
2.9
Affiliate
7.14(a)
Agreement
Preamble
Assignment of GP Interest
5.1(m)
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM
SECTION
------------
--------
<S>
<C>
Assignment of LP Interest
5.1(n)
Bill of Sale
1.4(g)
Business
Recitals
Buyer(s)
Preamble
Buyer Documents
3.2
Buyer Parties
6.1
Claim
6.4
Closing
1.2
Closing Date
1.2
Code
2.7(c)
Competing Transaction
4.13
Confidential Information
4.14
Consent(s)
2.10
Control
7.14(b)
Effective Date
Preamble
Elite
Recitals
Elite Assets
1.4(g)
Employee Benefit Plans
2.24(a)
Environmental Law
2.22(b)
ERISA
2.24(a)
ERISA Affiliate
2.24(a)
Financial Statements
2.12
GAAP
2.12
GenPar
Preamble
Governmental Authorization
2.11
Governmental Entity
2.11
GP Interest
Recitals
GP Purchase Price
1.3(a)
Hazardous Material
2.22(c)
Health Care Laws
2.21(a)
Indemnified Party
6.4
Indemnifying Parties
6.4
Knowledge
7.14(c)
Kupfer
Preamble
Latest Balance Sheet
2.12
Latest Balance Sheet Date
2.12
Laws
2.17
Liabilities
2.13(a)
License(s)
2.18
Lien
2.5
Litigation
2.16
Losses
6.1
LP Interest
Recitals
LP Purchase Price
1.3(b)
Management Services Agreement
5.1(o)
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
DEFINED TERM
SECTION
------------
--------
<S>
<C>
Material Adverse Effect
7.14(d)
Newco
Preamble
Newco Shares
2.31
Non-Selling Limited Partners
Recitals
Parent Common Stock
4.20
Partnership
Recitals
Partnership Agreement
5.1(j)
Partnership Contracts
2.25(a)
Payor Source Programs
2.21(a)
Payors
2.19
Permitted Lien
7.14(e)
Person
2.16
Purchased Interests
Recitals
Real Property
2.7(c)
Registration Rights Agreement
5.1(l)
Required Capital
4.1(e)
Retained Expenses
4.1(e)
SCMI
Recitals
Seller Documents
2.2
Seller Parties
6.2
Seller
Preamble
Series A GP Shares
1.3(d)
Series A LP Shares
1.3(e)
Series A Preferred Stock
1.3(c)
Series B Certificate of Designation
1.3(f)
Series B Preferred Stock
1.3(f)
Series B Shares
1.3(g)
Tax Benefit
6.6
Tax(es)
2.15(h)
Termination Agreement
5.1(p)
VSCE
1.2
</TABLE>
42
<PAGE>
IN WITNESS
WHEREOF, the parties hereto have executed this Agreement as of
the Effective Date.
THE BUYERS:
POINT LOMA GENPAR, INC.
By:
_____________________________
Name: David
Hirschhorn
Title: President and CEO
POINT LOMA ACQUISITION, INC.
By:
_____________________________
Name: David
Hirschhorn
Title: President and CEO
THE SELLER:
SURGICAL VENTURES, INC.
By:
_____________________________
Name: David M. Kupfer,
M.D.
Title: President
KUPFER:
____________________________________
David M. Kupfer, M.D.
[Signature Page to Partnership Interest Purchase Agreement]
<PAGE>
Exhibits
A Form
of Certificate of Designation of Series A Preferred Stock
B Form
of Certificate of Designation of Series B Preferred Stock
C Form
of Bill of Sale
D Form
of Registration Rights Agreement
E Form
of Assignment of GP Interest
F Form
of Assignment of LP Interest
G Form
of Management Services Agreement
H Form
of Termination Agreement
I Form
of Release
J Form
of Closing Certificate of the Seller and Kupfer
K Form
of Secretary's Certificate of the Seller
L Form
of Opinion of Counsel to the Seller and Kupfer
M Form
of Estoppel Certificate
N Form
of Closing Certificate of the Buyers
O Form
of Secretary's Certificate of the Buyers
Schedules
2.1
Fictitious Business Names
2.4
Capitalization
2.7(a) Assets
2.7(b) Liens on
Assets
2.9
Accounts Receivable
2.10
Breach, Default, Conflicts; Consents; Notices
2.11
Governmental Authorizations
2.12
Financial Statements
2.13(b) Liabilities
2.14
Absence of Certain Changes
2.16
Litigation
2.18
Licenses
2.19
Payors
2.20
Providers in Good Standing on the Medical Staff
2.21(d) Payor Source
Programs
2.22
Environmental Matters
2.23
Employee Matters
2.25(a) Partnership
Contracts
2.25(b) Status of Partnership
Contracts
2.25(c) Required Consents
2.27
Competing Interests
2.30
Insurance
4.5
Leases with Personal Guarantees
6.1(c)
Indemnification
<PAGE>
EXHIBIT A
FORM OF CERTIFICATE OF DESIGNATION
OF
SERIES A EXCHANGEABLE PREFERRED STOCK
OF
POINT LOMA
ACQUISITION, INC.
__________ ___, 2006
The
undersigned officer of Point Loma Acquisition, Inc. (the
"Company"), a
corporation organized and existing under
the General Corporation Law of the
State of Nevada (the "NGCL"),
DOES HEREBY CERTIFY
that, pursuant to authority conferred upon
the Board of Directors of the Company
(the "Board") by the Articles of
Incorporation of the Company, and pursuant to
the provisions of Section 78.1955 of the
NGCL, the Board, by unanimous written
consent filed in the Company's minute book,
has adopted the following resolution
providing for the issuance of a new series
of shares of Series A Exchangeable
Preferred Stock:
RESOLVED,
that pursuant to the authority vested in the Board in
accordance
with the provisions of the Articles of
Incorporation of the Company, a series of
Preferred Stock of the Company is hereby
created, such series of Preferred Stock
to be designated Series A Exchangeable
Preferred Stock, par value $0.01 per
share, and to possess the following rights,
preferences, privileges, powers and
restrictions:
Section 1.
Designation and Number. The shares of such series will be
designated as Series A Exchangeable
Preferred Stock, par value $0.01 per share
(the "Series A Preferred Stock"), and the
number of shares constituting the
Series A Preferred Stock will be 31,875,
with an issue price per share of $10.00
(the "Issue Price Per Share"), for an
aggregate original issue price of
$318,750.00 (collectively, the "Original
Issue Price").
Section 2.
Rank. The Series A Preferred Stock will rank: (a) prior to all
of the Company's common stock, $0.01 par
value per share (the "Company Common
Stock"); (b) prior to any class or series
of capital stock of the Company
hereafter created not specifically ranking
by its terms on parity with any
Preferred Stock of whatever subdivision
(together with the Common Stock, "Junior
Securities"); and (c) on parity with the
Company's Series B Exchangeable
Redeemable Preferred Stock, par value $0.01
per share (the "Series B Preferred
Stock"), and any class or series of capital
stock of the Company hereafter
created specifically ranking by its terms
on parity with the Series A Preferred
Stock and the Series B Preferred Stock
(collectively with the Series B Preferred
Stock, "Parity Securities"), in each case
as to distributions of assets upon any
liquidation, dissolution or winding up of
the Company, whether voluntary or
involuntary (each, a "Liquidation
Event").
CERTIFICATE OF DESIGNATION OF SERIES A
EXCHANGEABLE
PREFERRED STOCK OF POINT LOMA ACQUISITION,
INC.
Page 1
<PAGE>
Section 3.
Dividends. The Series A Preferred Stock will not bear any
dividends.
Section 4.
Redemption Provisions.
(a) Optional Redemption By the Company. Subject to the provisions
of
this Section 4, the Company may, at its
sole option and in its sole and absolute
discretion, by resolution of the Board at
any time after the date of issuance,
and at a redemption price per share equal
to 115% of the Issue Price P