ASSETPURCHASE AGREEMENT
Exhibit 10.36
FINAL
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (“Agreement”), dated as of October 23, 2013, is made by and among:
(a) Hospitalist Management Consultants of New York, Inc., a New York corporation (“Buyer”);
(b) InPatient Hospitalist Services of New York, P.C., a New York professional service corporation (“PC Buyer”) (each of Buyer and PC Buyer an “Acquiror” and, together, “Acquirors”);
(c) Park Avenue Health Care Management, LLC, a New York limited liability company (“Management Seller”);
(d) Park Avenue Medical Associates, P.C., a New York professional service corporation (“PC Seller”) (each of Management Seller and PC Seller a “Seller” and, collectively, “Sellers”); and
(e) the individuals listed on Exhibit A (each such individual an “Owner” and, collectively, “Owners”; Owners, the trust listed on Exhibit A (the “Trust”) and Sellers and referred to herein collectively as the “Selling Group”).
This Agreement contemplates a transaction in which Acquirors will purchase certain of the assets of Sellers comprising Sellers’ Business, including the Owners’ Personal Goodwill, in return for cash and other consideration. Terms used in this Agreement that are capitalized or otherwise have special meaning have the definitions given to such terms in Section 8.9 and elsewhere in the Agreement.
NOW THEREFORE, in consideration of the promises and respective covenants and agreements contained herein, and for good and valuable consideration the receipt of which is acknowledged, the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ACQUIRED ASSETS; CLOSING
1.1 Purchase and Sale. Upon and subject to the terms and conditions hereof, Management Seller sells, conveys, transfers and assigns to Buyer, and Buyer purchases and accepts from Management Seller, free and clear of all Liens and effective at 12:01 a.m. Eastern Daylight Time on the Closing Date (as defined in Section 1.9), all right, title and interest in and to all of the assets of such Seller listed on Schedule 1.1 as the “Acquired Assets” (hereinafter, the “Acquired Assets”), but not any of the PC Acquired Assets (as defined in this Section 1.1) or any of the Excluded Assets (as defined in Section 1.2). Upon and subject to the terms and conditions hereof, PC Seller sells, conveys, transfers and assigns to PC Buyer, and PC Buyer purchases and accepts from PC Seller, free and clear of all Liens and effective at 12:01 a.m. Eastern Daylight Time on the Closing Date, all right, title and interest in and to all of the assets of PC Seller listed on Schedule 1.1 as the “PC Acquired Assets” (hereinafter, the “PC Acquired Assets” and, together with the Acquired Assets, the “Purchased Assets”), but not any of the Acquired Assets or any of the Excluded Assets.
1.2 Excluded Assets. The “Excluded Assets” consist of all assets, properties and rights of Sellers are not specifically set forth in Schedule 1.1, including, but not limited to the assets, properties and rights listed on Schedule 1.2, and any of the following: Sellers’ Medicare or Medicaid provider numbers; cash and accounts receivable of Sellers, except for cash and/or receivables related to services to be provided after the Closing; any patient medical records or other protected health information; and original minute books and other corporate and financial records.
1.3 Non-Transferability of Certain Contracts; Assignment of Contracts. Nothing in this Agreement shall be construed as an attempt to assign any contract, agreement, permit, franchise or claim included in the Purchased Assets (each a “Contract”) which is, by its terms or Law non-assignable without the consent of the other party or parties thereto, unless such consent shall have been given or as to which all the remedies for the enforcement thereof enjoyed by Sellers would, as a matter of law, pass to Acquirors as an incident of the assignments provided for by this Agreement. Each Seller shall, both before and after the Closing, upon the specific request of Acquirors, use best efforts to obtain the consent of the other party to the assignment to Acquirors, of any Contract for which such consent is required. In the event (a) a Contract either does not permit or expressly prohibits the assignment by a Seller of its rights and obligations thereunder; or (b) a Seller has not obtained the necessary consents to assignment from all parties to any Contract prior to the Closing Date, Acquirors will fulfill such Contract and shall assume the obligations and liabilities (arising after the Closing Date) of such Contract for and on behalf of such Seller but for the account of Acquirors and, in such event, such Seller shall cooperate with Acquirors in any reasonable arrangements designed to provide for Acquirors all of the revenues and other benefits under such Contracts including the enforcement for the benefit and at the expense of Acquirors of any rights previously enjoyed by such Seller in connection with such Contracts, to the extent permissible under applicable Laws and regulations.
1.4 Purchase Price. The purchase price to be paid by Acquirors for the Purchased Assets (“Purchase Price”) shall consist of:
(a) a payment in Immediately Available Funds at the Closing in the amount of Sixteen Million Six Hundred Thousand Dollars ($16,600,000) (the “Closing Payment”), less the Escrow Deposit (as described in Section 1.8 below) and the Accrued PTO Adjustment (as described in Section 1.10(b) below) (the “Adjusted Closing Payment”);
(b) earnout payments, if any, payable as follows and in accordance with the provisions set forth below:
(i) an earnout payment (“Earnout Payment”), which shall be payable to PC Seller and shall be equal to (i) six and one half (6.5) times the Profit of the Earnout Business (as defined in Exhibit B) during the Earnout Measurement Period (as defined in Exhibit B) for the first Five Million Dollars ($5,000,000) of the Profit of the Earnout Business, plus one (1) times the Profit of the Earnout Business for any Profit of the Earnout Business in excess of Five Million Dollars ($5,000,000), minus (ii) the sum of the Closing Payment, the Year One Compliance Costs (as defined in Section 1.4(d))and
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the Interim Payment (as defined in Section 1.4(e)); which Earnout Payment, if any, will be paid by Acquirors in Immediately Available Funds within one hundred five (105) days of the completion of the Earnout Measurement Period, unless the Earnout Payment is subject to the Earnout Procedures set forth in Section 1.5, in which case the time frames set forth in Section 1.5 will apply. A description of the calculation methodology for the Earnout Payment is set forth in Exhibit B, ; and
(ii) a supplemental earnout payment (“Supplemental Earnout Payment”), which shall be payable to PC Seller and shall be equal to (i) six and one half (6.5) times the Profit of the Earnout Business during the Supplemental Earnout Measurement Period (as defined in Exhibit B) for the first Five Million Dollars ($5,000,000) of the Profit of the Earnout Business, plus one (1) times the Profit of the Earnout Business for any Profit of the Earnout Business in excess of Five Million Dollars ($5,000,000), plus (ii) the Tuck-in Acquisition Payment (as defined in Exhibit B) minus (iii) the sum of the Closing Payment, Earnout Payment, the Year Two Compliance Costs (as defined in Section 1.4(d)), and the Interim Payment (as defined Section 1.4(e)); which Supplemental Earnout Payment, if any, will be paid by Acquirors in Immediately Available Funds within one hundred five (105) days of the completion of the Supplemental Earnout Measurement Period, unless the Supplemental Earnout Payment is subject to the Earnout Procedures set forth in Section 1.5, in which case the time frames set forth in Section 1.5 will apply; and
(c) assumption by Acquirors on the Closing Date of the Assumed Liabilities (as defined in Section 1.10), pursuant to the terms of a Bill of Sale, Assignment and Assumption Agreement in substantially the form agreed to by Acquirors and Selling Group (the “Bill of Sale”);
(d) Compliance Cost Payment. Following the Closing, the Acquirors and their Affiliates will incur compliance costs in excess of Acquirors’ typical compliance costs, as a result of Selling Group’s standard operating procedures and/or as required by the Corporate Integrity Agreement (as defined below). Acquirors’ total compliance costs shall be defined as “Compliance Costs” and compliance costs in excess of Acquirors’ typical compliance costs shall be defined as “Incremental Compliance Costs”. Neither the Compliance Costs nor the Incremental Compliance Costs shall be counted as costs in the calculation of the Earnout Payment or Supplemental Earnout Payment. Notwithstanding the foregoing, the Incremental Compliance Costs from the Closing Date through the end of the Earnout Measurement Period (“Year One Incremental Compliance Costs”) shall be deducted from the Earnout Payment, and Incremental Compliance Costs from the end of the Earnout Measurement Period through the end of the Supplemental Earnout Measurement Period (“Year Two Incremental Compliance Costs”) shall be deducted from the Supplemental Earnout Payment, or from any remaining Escrow Deposit, or from any other outstanding amounts owed to Selling Group under this Agreement. Should the amounts of the Earnout Payments or other outstanding amounts owed to Selling Group be insufficient to cover the value of the Incremental Compliance Costs, Selling Group shall pay any remaining balances owed for the Incremental Compliance Costs to Acquirors in Immediately Available Funds at the time the relevant earnout payment, if any, is due. Acquirors shall provide Selling Group with a statement setting forth Acquirors’ Compliance Costs and Incremental Compliance Costs together with documentation reasonably
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acceptable to Selling Group substantiating such costs (“Compliance Cost Statement”) concurrently with the relevant Earnout Statement. Sellers shall have the option to pay the Year One Incremental Compliance Costs and/or Year Two Incremental Compliance Costs directly to Acquirors in Immediately Available Funds instead of Acquirors deducting such costs from amounts owed to Selling Group under this Agreement. Such direct payment from Selling Group to Acquirors shall be made at the time the Earnout Payment or Supplemental Earnout Payment, if any, is due. The Year One and Year Two Compliance Costs shall be calculated based on the categories of expenses set forth in Attachment 1.4(d) to this Agreement as the costs actually incurred by Acquirors minus (a) for the Earnout Measurement Period an amount equal to $188,667, and (b) for the Supplement Earn Out Period an amount equal to $196,759.
(e) Interim Payment. Within sixty (60) days of the Closing Date, PC Seller shall cause all of those certain Contracts (as set forth Schedule 3.8(b)(24) – (45)), to be either terminated or assigned to PC Buyer. In the event that all of those certain Contracts are assigned to PC Buyer or terminated with such sixty (60) day measuring period, Acquirors shall pay to PC Seller a payment in the amount of One Million Two Hundred Thousand Dollars ($1,200,000) (the “Interim Payment”).
(f) EHR-Related Payments. Any incentive payments related to the Earnout Business that are received by PC Buyer and its Affiliate InPatient Hospitalist Healthcare Services of New York, P.C., for the adoption and/or implementation of an electronic health record (“EHR”) system or program, less the costs and expenses associated with such EHR adoption and/or implementation (regardless of how Acquirors treat such costs for accounting purposes) shall be payable to Selling Group at the time of the Earnout Payment or Supplemental Earnout Payment, as applicable. Any EHR incentive payments or implementation costs or expenses shall not be counted in the calculation of the Earnout Payment or Supplemental Earnout Payment. The types of costs and expenses related to EHR implementation shall be mutually agreed upon by the parties prior to Closing.
1.5 Earnout Procedures.
(a) Acquirors shall provide the PC Seller with a statement (an “Earnout Statement”) setting forth Acquiror’s calculation of the Earnout Payment, if any, and Supplemental Earnout Payment, if any, due PC Seller, within seventy five (75) days after the end of each of the Earnout Measurement Period and the Supplemental Earnout Measurement Period, as applicable, together with reasonably detailed financial information supporting each such calculation. Acquirors agree to promptly provide Seller with any additional detailed financial information Seller requests and that is reasonably related to either the methodology by which the Earnout Payment or the Supplemental Earnout Payment is calculated, including the methodology by which revenue is accrued, or the specific items of revenue and expense that affect each such calculation. Seller shall have the right to engage an accounting expert, at Seller’s sole cost and expense, to advise Seller in the evaluation of the information provided by Acquirors. Continued employment by Owners with PC Buyer is not required for receipt by Seller of any Earnout Payment or Supplemental Earnout Payment, to the extent such payments are otherwise earned and payable. After receipt of the applicable Earnout Statement, PC Seller shall have thirty (30) days to review the applicable Earnout Statement. If, during such thirty (30) day period, PC Seller notifies Acquirors in writing of its objection to the Earnout Statement (the “Objection Notice”), Acquirors and PC Seller agree, within thirty (30) days (or such longer period as the
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parties may agree) following such Objection Notice, to negotiate in good faith for a period of thirty (30) days in an attempt to establish a mutually acceptable Earnout Payment or Supplemental Earnout Payment, as applicable. Any resolution by PC Seller and Acquirors as to any disputed Earnout Payment or Supplemental Earnout Payment shall be set forth in a writing executed by the PC Seller and Acquirors, and shall evidence the final, binding and conclusive resolution of the parties relating to such payment, including the timing of such payment.
(b) If, at the conclusion of such thirty (30) day review period, any Earnout Payment or Supplemental Earnout Payment, as applicable, remains in dispute, then Acquirors and PC Seller shall engage a mutually agreed upon independent accounting firm with no material relationship with Acquirors or Sellers (the “Neutral Auditor”) to resolve such dispute. Acquirors and PC Seller acknowledge and agree that, if an Earnout Payment or Supplemental Earnout Payment matter is referred to the Neutral Auditor, the matter shall be jointly submitted to the Neutral Auditor in writing, with specific instructions that the Neutral Auditor (i) shall act as an expert in accounting, and not as an arbitrator, to resolve, in accordance with this Section 1.5 only the matters specified in writing as being in dispute; (ii) may not determine any component of the Earnout Payment or Supplemental Earnout Payment, as applicable, in excess of that claimed by PC Seller or less than that claimed by Acquirors; and (iii) shall deliver to Acquirors and PC Seller a written decision as promptly as practicable and in any event within seventy-five (75) days following the submission of the matter to the Neutral Auditor for resolution. The Neutral Auditor shall deliver to Acquirors and PC Seller, as promptly as practicable, a report setting forth its determination(s) regarding the Earnout Payment or Supplemental Earnout Payment, as applicable. Acquirors and PC Seller acknowledge and agree that, if any dispute is submitted to the Neutral Auditor pursuant to this Section 1.5, the component of the Earnout Payment or the Supplemental Earnout Payment, as applicable, determined by the Neutral Auditor shall be final, binding, and conclusive for purposes of this Agreement and within fifteen (15) days after becoming final, binding, and conclusive, shall be paid by Acquirors to PC Seller, or by Sellers to Acquirors, as applicable by wire transfer of Immediately Available Funds to an account designated by the receiving party. Acquirors and PC Seller waive, and shall not assert, any other right or remedy with respect to such component of the Earnout Payment or Supplemental Earnout Payment, as applicable, to the extent determined in accordance with this Section 1.5(b).
(c) Notwithstanding and in addition to the above, for up to ninety (90) days after payment of the Earnout Payment and up to six (6) months after payment of the Supplemental Earnout Payment, Acquiror will promptly provide PC Seller with any additional financial information requested by PC Seller for the purpose of reviewing the accrual of revenue generated other than as a result of fee for service billing for medical services, including but not limited to facility payments and incentive or outcomes based or other similar payments (the “Non Fee-For-Service Revenues”) If PC Seller notifies Acquiror in writing of its objection to the Earnout Statement during the ninety (90) days after the payment of the Earnout Payment, or its objection to the Earnout Statement or the Supplemental Earnout Statement during the six (6) months after payment of the Supplemental Earnout Payment, solely as a result of an objection to the amount of Non Fee-For-Service Revenue in either or both of the Earnout Statement or the Supplemental Earnout Statement (the “Additional Objection Notice”), Acquirors and PC Seller agree, within thirty (30) days (or such longer period as the parties may agree) following such Additional Objection Notice, to negotiate in good faith for a period of thirty (30) days in an
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attempt to establish a mutually acceptable Earnout Payment or Supplemental Earnout Payment, as applicable. Any resolution by PC Seller and Acquiror as to any disputed Earnout Payment or Supplemental Earnout Payment shall be set forth in a writing executed by the PC Seller and Acquiror, and shall evidence the final, binding and conclusive resolution of the parties relating to such payment, including the timing of such payment. If, at the conclusion of such thirty (30) day review period, any Earnout Payment or Supplemental Earnout Payment, as applicable, remains in dispute, then Acquiror and PC Seller shall submit the matter to a Neutral Auditor in accordance with Section 1.5(b) above and Section 1.5(d) below. For purposes of the time frames in this Section 1.5(c), if no Earnout Payment or Supplemental Earnout Payment is made, the applicable time period will commence as of the date by which any payment would have been made if a payment was due.
(d) In connection with any dispute relating to the Earnout Payment or Supplemental Earnout Payment, as applicable, that is referred to the Neutral Auditor pursuant to Section 1.5, Acquirors and PC Seller agree as follows:
(i) Acquirors and PC Seller shall execute any agreement(s) required by the Neutral Auditor to accept their engagement pursuant to this Section 1.5.
(ii) The fees, costs, and expenses shall be paid by the non-prevailing party, which in this context shall be the party whose proposed component of the Earnout Payment or Supplemental Earnout Payment, as applicable, has the greatest difference from any such amount determined by the Neutral Auditor (e.g., if PC Seller contends that the Earnout Payment payable to PC Seller is $3,000,000, and Acquirors contend that it is $2,250,000, and the Neutral Auditor concludes that the amount payable is $2,750,000, then Acquirors would be deemed to be the non-prevailing party). Notwithstanding the foregoing, for purposes of this subsection, if both Acquirors and PC Seller are within five percent (5%) of the amount determined by the Neutral Auditor, then Acquirors and PC Seller shall each bear and pay fifty percent (50%) of the fees and costs of the Neutral Auditor.
(iii) Acquirors and PC Seller agree to engage the Neutral Auditor on a joint basis. All written communication between one party and the Neutral Auditor shall be shared with the other party, and neither Acquirors nor PC Seller shall engage in verbal communications without the other party having the reasonable opportunity to participate.
1.6 IRS Form 8594. Acquirors and Selling Group agree that the asset allocation set forth in their respective Internal Revenue Service Form(s) 8594 shall be consistent with the Form(s) 8594 submitted by the other parties.
1.7 Payment Instructions. Acquirors’ payment of the Purchase Price shall be paid in accordance with written instructions provided by the Selling Group to Acquirors (the “Payment Instructions”). The Payment Instructions shall include, if any, the specific amounts to be paid to any third party. Sellers and Owners shall indemnify and hold harmless Acquirors from any claims, liabilities or obligations, including any Tax withholdings, assessments, payments or penalties, resulting from such Payment Instructions or any allocation or characterization by members of the Selling Group of the Purchase Price or the Purchased Assets for Tax reporting or Tax payment purposes.
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1.8 Escrow. On the Closing Date, pursuant to the escrow agreement in substantially the form agreed to by Acquirors and Selling Group (the “Escrow Agreement”), Acquirors shall deliver to Wells Fargo Bank, National Association (the “Escrow Agent”) a wire transfer in an amount equal to the Escrow Deposit (as defined in Section 8.9), which amount shall be deemed withheld from the Adjusted Closing Payment and shall be deposited with the Escrow Agent for the purpose of securing the indemnification obligations of Sellers in Section 6.2(a) following the Closing. The Escrow Deposit shall be held and disbursed solely for the purposes and in accordance with the terms of the Escrow Agreement. Acquirors, on the one hand, and Sellers, on the other hand, shall bear the cost of the Escrow Agent equally.
1.9 Prorations. The parties agree to prorate between them based upon their respective periods of ownership of the Business, any office rents, utility charges, real or personal property taxes or amounts received for services provided or to be provided under any Revenue Contracts (as defined in Section 8.9) that have been assigned to PC Buyer and other similar expenses relating to the Purchased Assets (except any expenses which are related to the Excluded Assets) which cover both the period prior to and after the Closing to the extent such expenses are paid by one party and benefit the other party (the “Prorations”). To the extent practicable and as applicable, the Prorations shall be based upon square footage, utility meter readings, time periods covered by the payments, and the like, as applicable. The Prorations shall be paid promptly upon receipt of an invoice and reasonable supporting documentation from the party claiming reimbursement.
1.10 Assumed Liabilities.
(a) Upon the terms and subject to the satisfaction of the conditions of this Agreement, and in reliance on the representations, warranties and agreements of Sellers set forth herein, at the Closing, Sellers shall assign, and each of the Acquirors shall assume and agree to perform and discharge only those liabilities set forth on Schedule 1.10, except that Buyer and PC Buyer, as applicable, shall assume: (i) the Liabilities arising prior to the Closing Date to perform services after the Closing pursuant to the Revenue Contracts that have been assigned to PC Buyer, as set forth in Schedule 1.10, and any other contracts being assumed pursuant to this Agreement, but only to the extent each of such Liabilities is incurred after the Closing; and (ii), subject to the Purchase Price adjustment described in paragraph (b) below, Sellers’ liability for unused sick days, personal days, vacation days and any other paid time off (collectively the “Accrued PTO”) with respect to the Transferred Providers, Transferred Management Employees and Administrative Personnel hired by Buyer or PC Buyer but only to the extent set forth in Schedule 1.10, which Schedule shall be completed prior to the Closing, and not paid by Sellers prior to the Closing (together, the “Assumed Liabilities”).
(b) The sum of the Accrued PTO as of the Closing (collectively the “Accrued PTO Adjustment”) shall be deducted from the Purchase Price at the Closing.
1.11 Excluded Liabilities. The Assumed Liabilities shall specifically exclude, and the parties agree that none of the Acquirors hereby assumes or at any time hereafter shall become liable for, any Liabilities of any kind of any member of the Selling Group or any of their Affiliates other than the Assumed Liabilities. Such excluded liabilities include any Liabilities of any kind relating to the Business or its operation prior to the Closing, whether or not such Liabilities arise or are asserted after the Closing (including without limitation any Liability for
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any medical malpractice claims against any Seller, Owner or Provider, any Liability of any Seller related to the provision of items and services to beneficiaries of the Medicare, Medicaid or other health care programs, or to billing for the provision of such items and services to any payor, or in connection with any Employee Benefit Plan (as defined in Section 8.9) or accrued but unpaid benefits (including bonuses for Transferred Providers accrued prior to the Closing), or relating to the H1-B or J-1 visa status of any employee or contractor while under the employ of or contract with any Seller, or to any current or former owner, employee or contractor of any Seller, or with respect to any Tax for any period prior to the Closing, or to Selling Group’s Prior Acts Liabilities (as defined in Section 5.8)) other than the Assumed Liabilities (the “Excluded Liabilities”).
1.12 Transfer Taxes. Each party shall be responsible for and shall each pay on the Closing, or when due, whichever is later, one-half of all transfer taxes incurred, if any, solely by virtue of the transfer by Sellers of the Purchased Assets to Acquirors as contemplated by this Agreement. Each party shall prepare, in accordance with all applicable laws, regulations or other requirements, and each party, as appropriate, shall in a timely manner sign and swear to any return, certificate, questionnaire or affidavit properly prepared as to any matter within such party’s knowledge required in connection with the payment of any such tax.
1.13 Closing. Subject to the conditions set forth in this Agreement, the purchase and sale of the Purchased Assets pursuant to this Agreement (the “Closing”) shall take place, to the extent such Closing cannot take place through the electronic exchange of signatures, at the offices of IPC The Hospitalist Company, Inc., 4605 Lankershim Boulevard, Suite 617, North Hollywood, CA 91602 at 12:00 noon local time, within two (2) business days after the conditions set forth in ARTICLE II have been satisfied, but no later than December 16, 2013, or at such other time, place and date as shall be mutually agreed on in writing by Acquirors and the Selling Group. The date on which the Closing occurs is identified as the “Closing Date” and the Closing shall be deemed to be effective as of 12:01 a.m. Eastern Daylight Time on the Closing Date.
(a) At the Closing, (i) Management Seller shall sell, assign, convey, transfer and deliver to Buyer good and marketable title to all of the Acquired Assets; (B) PC Seller shall sell, assign, convey, transfer and deliver to PC Buyer good and marketable title to all of the PC Acquired Assets; (iii) Sellers shall execute and deliver to Acquirors (A) the Bill of Sale; and (B) the Seller Noncompetition Agreements (as defined in Section 2.1(c)) in favor of an Acquiror executed by each Seller; (iv) Owners shall execute and deliver to Acquirors the Owner Noncompetition Agreements (as defined in Section 2.1(d)) in favor of an Acquiror executed by each Owner; and (v) the Selling Group shall deliver such other assignments, certificates and other instruments and documents as may be required to be delivered by Sellers at or prior to the Closing or as may be reasonably requested by Acquirors.
(b) At the Closing, (i) each of the Acquirors shall accept and purchase the applicable Purchased Assets from Sellers and in consideration therefor shall (A) pay the Closing Payment in Immediately Available Funds; (B) execute and deliver the Bill of Sale; and (C) deliver to Sellers all certificates and other instruments and documents as may be required to be delivered by any of the Acquirors hereunder at or prior to the Closing or as may be reasonably requested by Sellers; and (ii) PC Buyer shall execute and deliver the Seller Noncompetition Agreements to Sellers.
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1.14 Records. After the Closing, Acquirors and their Affiliates and each of their respective authorized agents and representatives (including accountants, consultants, counsel and other advisors) shall have access to all books, ledgers, files, records, manuals, documents and other materials and information relating to the Business as it was conducted prior to the Closing, and the right to review, copy and audit such books, ledgers, files, records, manuals, documents and other materials and information, at Acquirors’ expense during normal business hours upon advance notice, so long as Sellers maintains such items, which shall in no event be less than six (6) years after the Closing or such longer period as Sellers may be required by Law to maintain same.
ARTICLE II
CONDITIONS TO CLOSING
2.1 Conditions to Acquirors’ Obligations. Acquirors’ obligations to consummate the transactions contemplated by this Agreement are subject to, unless waived in writing by Acquirors, satisfaction of the following conditions:
(a) a certificate of the President of each Seller, in form and substance satisfactory to Acquirors, shall be delivered to Acquirors at the Closing certifying that (i) the individual signing such certificate has the authority to bind such Seller; (ii) each of the representations and warranties of the Selling Group set forth in ARTICLE III are true and correct in all respects at and as of the Closing Date; (iii) all agreements, undertakings and obligations to be performed or complied with by the Selling Group as of or prior to the Closing Date, unless waived in writing, have been duly performed or complied with in all respects, to the extent applicable, by each member of the Selling Group in accordance with the terms of this Agreement; and (iv) all of the conditions set forth in Section 2.1 have been satisfied in all respects, unless waived in writing, at or prior to the Closing Date;
(b) a certificate of the Secretary of each Seller, in form and substance reasonably satisfactory to Acquirors, shall be delivered to Acquirors at the Closing certifying that (i) attached thereto are true and correct copies of the resolutions duly and validly adopted by such Seller authorizing the execution and delivery of this Agreement and its Exhibits and Schedules and the consummation of the transactions contemplated hereby and thereby, and (ii) each shareholder or member of such Seller, as applicable, as required by Law and the organizational documents of such Seller, has consented to and authorized the execution and delivery of this Agreement, its Exhibits and Schedules, and the Seller Noncompetition Agreement and the consummation of the transactions contemplated hereby and thereby;
(c) each Seller shall enter into a noncompetition agreement with PC Buyer, in substantially the form of Exhibit D (“Seller Noncompetition Agreement”);
(d) each Owner shall enter into a noncompetition agreement with an Acquiror, in substantially the form of Exhibit E (“Owner Noncompetition Agreement”) (the Owner Noncompetition Agreements and the Seller Noncompetition Agreement shall be collectively referred to as the “Noncompetition Agreements”);
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(e) Providers representing no more than fifteen percent (15%) of the unit volume of the Business, as reasonably determined by Acquirors, shall not have given written or oral notice of termination of their applicable employment agreement, and the remainder of the Providers (i) shall meet the employment criteria of PC Buyer, (ii) shall have the proper H-1B or J-1 visa, as applicable, and active privileges for their current work locations and (iii) shall have been employed by PC Buyer at the Closing provided that PC Buyer takes all reasonably necessary attempts to employ such Providers so that such Providers are employed by PC Buyer as of the Closing and will only fail to employ such Providers for “Cause” (as defined in Section 5.2 herein);
(f) the employment agreements between PC Seller and the Transferred Providers shall have been assigned to PC Buyer, at or prior to the Closing, on terms acceptable to PC Buyer; provided that, in the event that any of the employment agreements between PC Seller and Transferred Providers cannot be assigned or contain terms that are not reasonably acceptable to PC Buyer, then each member of Selling Group shall use its best efforts to assist PC Buyer in obtaining new employment agreements between PC Buyer and the applicable Transferred Providers, on terms reasonably acceptable to PC Buyer;
(g) each Owner shall have executed and delivered to Acquirors, at or prior to the Closing Date, an employment agreement with PC Buyer or Buyer, as applicable, in forms reasonably acceptable to the parties hereto;
(h) no more than twenty percent (20%) of the administrative personnel working for Sellers prior to the Closing and necessary for the conduct of the Business post-Closing as reasonably determined by Acquirors (“Administrative Personnel”) shall have given written or oral notice of termination of their employment or otherwise resigned, and the remainder of the Administrative Personnel shall have been employed by an Acquiror or an Affiliate of Acquirors at the Closing;
(i) Sellers shall have removed any and all Liens, loans and other debts, including any outstanding tax obligations, on or affecting the Purchased Assets and delivered evidence of same to Acquirors in form and substance reasonably satisfactory to Acquirors;
(j) PC Seller shall have provided Acquirors with copies of all Revenue Contracts and/or other health care related agreements (“Healthcare Agreements”) held by PC Seller, each Owner or any Provider relating to PC Seller’s Business and the PC Acquired Assets, that will be assumed by PC Buyer, and each Healthcare Agreement to Selling Group’s Knowledge shall be in full compliance with all Laws or shall have been amended or terminated prior to the Closing.
(k) Management Seller shall have provided Acquirors with copies of all agreements (“Management Agreements”) held by Management Seller or any Owner relating to Management Seller’s Business and the Acquired Assets, and each Management Agreement shall be in full compliance with all Laws or shall have been amended or terminated prior to the Closing;
(l) Sellers shall have terminated any and all agreements held by any Seller related to the Purchased Assets that will not be transferred or assigned to Acquirors, on terms acceptable to Acquirors, at the Closing;
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(m) Sellers shall have obtained all third party consents necessary to transfer the Purchased Assets to Acquirors on terms acceptable to Acquirors, including the consents necessary to assign the Revenue Contracts, the Contracts or Real Property Leases (as defined in Section 3.14) included in the Purchased Assets; provided that PC Seller shall have additional time, as set forth in Section 1.4(e), to obtain third party consents necessary to transfer those certain Contracts defined in Section 1.4(e);
(n) no action, suit or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would (i) prevent consummation of the transactions contemplated by this Agreement; (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation; or (iii) affect adversely the right of Acquirors to own the Purchased Assets and operate the Business and no such injunction, judgment, order, decree, ruling or charge shall be in effect;
(o) all actions to be taken by each Seller and each Owner in connection with the consummation of the transactions contemplated hereby and all certificates, instruments and other documents required to effect the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Acquirors;
(p) each Seller shall provide Acquirors with a copy of a certificate of existence or good standing for such Seller dated within thirty (30) business days prior to the Closing Date for each jurisdiction in which such Seller conducts business;
(q) each Seller shall provide Acquirors with a completed certification of non foreign status pursuant to Section 1.1445 2(b)(2) of the Treasury regulations, duly executed by such Seller;
(r) each Seller and each Owner shall have executed this Agreement, its Exhibits and Schedules, as applicable, and such other agreements contemplated herein to which each Seller and each Owner are a party and delivered such executed documents to Acquirors, as applicable;
(s) Intentionally deleted.
(t) no statute, rule, regulation, ruling, consent, decree, judgment, injunction or order shall be enacted, promulgated, entered or enforced by any court or governmental authority which would prohibit consummation by the parties hereto of the transactions contemplated hereby;
(u) Sellers shall have delivered to Acquirors a certificate of the President of each Seller, in form and substance satisfactory to Acquirors, certifying that all obligations and covenants required by this Agreement to be performed or to be complied with by Sellers on or prior to the Closing Date shall have been duly performed or complied with in all material respects;
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(v) Sellers shall have delivered to Acquirors a certificate of the President of each Seller, in form and substance satisfactory to Acquirors, certifying that no Seller shall have suffered a Material Adverse Effect;
(w) Sellers shall have provided information satisfactory to Acquirors regarding all ongoing interest in or relationships with health care related businesses other than Sellers and their Affiliates, and such interests or relationships shall be deemed acceptable under all Laws, as determined in Acquirors’ sole discretion;
(x) Sellers shall have provided the Office of Inspector General of the U.S. Department of Health and Human Services (the “OIG”) with at least thirty (30) days’ notice of the transactions contemplated by this Agreement in accordance with the Corporate Integrity Agreement dated July 8, 2013 between the OIG, Sellers and Park Avenue Health Care Management, Inc. (“Corporate Integrity Agreement”), and Acquirors shall have received from Sellers a written notification from the OIG that (i) confirms that Sellers’ actions as to notification of the OIG of the transactions contemplated by this Agreement are in compliance with the Corporate Integrity Agreement, as required by the Corporate Integrity Agreement, and (ii) the Corporate Integrity Agreement will apply only to PC Buyer and Buyer on terms acceptable to Acquirors;
(y) Selling Group shall enter into an agreement, on terms reasonably satisfactory to Acquirors, regarding the timing of payments to Brad Markowitz pursuant to this Agreement;
(z) Sellers shall have delivered to Acquirors a certificate of the President of each Seller, in form and substance satisfactory to Acquirors, certifying that Sellers and Park Avenue Health Care Management, Inc. are at Closing, and have at all times been in compliance with the Corporate Integrity Agreement;
(aa) Sellers shall have delivered to Acquirors a certificate of the President of each Seller, in form and substance satisfactory to Acquirors, certifying that Sellers or Sellers’ Affiliates shall have paid in full at or prior to the Closing all amounts owed under or arising from the following: (i) the Corporate Integrity Agreement (other than the costs of complying with the Corporate Integrity Agreement following the Closing), (ii) the Confidential Settlement Agreement and General Release of Claims, dated July 8, 2013 by and between Sellers and their Affiliates and Zachary Wolfson, and (iii) the Stipulation and Order of Settlement and Dismissal by and among the State of New York, Sellers and their Affiliates, and relator Zachary Wolfson;
(bb) Sellers and Acquirors have developed and agreed upon a written plan of implementation and compliance for the Corporate Integrity Agreement following the Closing (the “Corporate Integrity Agreement Compliance Plan”);
(cc) the closing of the transactions contemplated by those certain Asset Purchase Agreements, by and between Hospitalists Management of New Hampshire, Inc., IPC Hospitalists of New England, P.C., Buyer, InPatient Hospitalist Healthcare Services of New York, P.C., IPC Management Consultants of New York, Inc., Park Avenue Medical Associates, LLC, Geriatric Services, PC and the individuals listed on Exhibit A thereto, which are being entered into contemporaneously with the execution of this Agreement, shall occur simultaneously with the Closing; and
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(dd) PC Seller shall provide PC Buyer with copies of active written agreements for professional and/or administrative services with each of the following Facilities: Sephardic Nursing and Rehabilitation Center; Daughters of Jacob Nursing Home; Concourse Rehabilitation and Nursing Center; and Horizon Care Center.
2.2 Conditions to Sellers’ Obligations. Sellers’ obligations to consummate the transactions contemplated by this Agreement are subject to, unless waived in writing by each Seller, satisfaction of the following conditions:
(a) a certificate of the President of each Acquiror, in form and substance reasonably satisfactory to Sellers, shall be delivered to Sellers at the Closing certifying that (i) the individual signing such certificate has the authority to bind such Acquiror; (ii) each of the representations and warranties set forth in ARTICLE IV are true and correct at and as of the Closing Date; (iii) all agreements, undertakings and obligations to be performed or complied with by each Acquiror as of or prior to the Closing Date, unless waived in writing, have been duly performed or complied with by each Acquiror in accordance with the terms of this Agreement; and (iv) all of the conditions set forth in this Section 2.2 have been satisfied at or prior to the Closing Date;
(b) a certificate of the Secretary of each Acquiror, in form and substance reasonably satisfactory to Sellers, shall be delivered to Sellers at the Closing certifying that attached thereto are true and correct copies of the resolutions duly and validly adopted by each Acquiror authorizing the execution and delivery of this Agreement and its Exhibits and Schedules and the consummation of the transactions contemplated hereby and thereby;
(c) Acquirors shall have delivered to Sellers each of the items required to be so delivered, and shall have made the payment required to be made to Sellers, pursuant to Section 1.13(b) at or prior to the Closing Date;
(d) each of the Acquirors shall have executed this Agreement, its Exhibits and Schedules, the Noncompetition Agreements and such other agreements contemplated herein to which such Acquiror is a party and shall have delivered such executed documents to Sellers;
(e) all actions to be taken by Acquirors in connection with the consummation of the transactions contemplated hereby and all certificates, instruments and other documents required to effect the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Sellers;
(f) no action, suit or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling or charge would (i) prevent consummation of the transactions contemplated by this Agreement; or (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, and no such injunction, judgment, order, decree, ruling or charge shall be in effect;
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(g) no statute, rule, regulation, ruling, consent, decree, judgment, injunction or order shall be enacted, promulgated, entered or enforced by any court or governmental authority which would prohibit consummation by the parties hereto of the transactions contemplated hereby;
(h) PC Buyer shall have executed and delivered an Owner Employment Agreement to each Owner;
(i) Acquirors shall have delivered to Sellers a certificate of the President of each Acquiror, in form and substance satisfactory to Sellers, certifying that all obligations and covenants required by this Agreement to be performed or to be complied with by Acquirors on or prior to the Closing Date shall have been duly performed or complied with in all material respects; and
(j) the closing of the transactions contemplated by those certain Asset Purchase Agreements, by and between Hospitalists Management of New Hampshire, Inc., IPC Hospitalists of New England, P.C., Buyer, InPatient Hospitalist Healthcare Services of New York, P.C., IPC Management Consultants of New York, Inc., Park Avenue Medical Associates, LLC, Geriatric Services, PC and the individuals listed on Exhibit A thereto, which are being entered into contemporaneously with the execution of this Agreement, shall occur simultaneously with the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLERS AND OWNERS
In order to induce each of the Acquirors to enter into this Agreement and to purchase the Purchased Assets, each of the Sellers and Owners hereby jointly and severally represents and warrants to each of the Acquirors all of the matters set forth in this ARTICLE III; any exceptions to such representations and warranties shall be set forth in a disclosure schedule specifying in each case to which section of ARTICLE III such exceptions apply (the “Disclosure Schedules”).
3.1 Organization. PC Seller is a professional corporation, duly organized, validly existing and in good standing under the laws of its state of formation and state of operations, and each has all requisite power and authority to own, lease and operate its properties and to carry on its Business as now being conducted. Management Seller is a limited liability company, duly organized, validly existing and in good standing under the laws of its state of formation and state of operations, and each has all requisite power and authority to own, lease and operate its properties and to carry on its Business as now being conducted. Neither the ownership of its properties nor the operation of its Business requires any Seller to be qualified in any jurisdiction other than its state of formation and state of operations. Owners and the Trust hold all of the outstanding ownership interests of each Seller in the amounts set forth on Schedule 3.1, and no other Person has any equity interest or ownership interest whether direct, indirect or derivative, in any Seller.
3.2 Authority Relative to this Agreement. Each member of the Selling Group has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by
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each member of the Selling Group and, except as set forth on Schedule 3.2, no other actions on the part of any Person is necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by each member of the Selling Group and constitutes a valid and binding agreement of each such party, enforceable against each such party in accordance with its terms, except as such agreement may be limited by the availability of equitable remedies, or by bankruptcy, insolvency or other Laws affecting the enforcement of creditors’ rights.
3.3 No Violation. Neither the execution and delivery of this Agreement by any member of the Selling Group nor the consummation by any member of the Selling Group of the transactions contemplated hereby will: (i) conflict with or result in any breach of any provision of the Articles of Incorporation, Articles of Formation, Bylaws or Operating Agreement, as applicable, or other governing documents of such entity; (ii) to the Selling Group’s Knowledge, conflict with, result in any breach of any provision of, or constitute a default or permit any Person to terminate, accelerate the performance required by, or accelerate the maturity of, any indebtedness or other obligation relating to any member of the Selling Group or the Purchased Assets under any contract or agreement of any kind to which any of the foregoing is a party or to which it or any of them or any of the Purchased Assets is subject; (iii) to the Selling Group’s Knowledge, violate or conflict with any Law to which any member of the Selling Group or any of the Purchased Assets is subject; or (iv) result in the creation or imposition of any Lien on any property of any member of Selling Group (including the Acquired Assets or the PC Acquired Assets).
3.4 Purchased Assets. The Purchased Assets that are tangible assets (“Tangible Assets”): (i) are in good operating condition and repair, subject to normal wear and maintenance; (ii) to Selling Group’s Knowledge, meet all applicable governmental standards and conform to all applicable Laws relating to their construction, use and operation; and (iii) are useable in the regular and ordinary course of business as operated by Sellers. Sellers own and have good and marketable title to all of the Tangible Assets. All Purchased Assets (including all leasehold interests included in the Purchased Assets) are owned by Sellers free and clear of any Lien. Upon consummation of the transactions contemplated by this Agreement, Acquirors will acquire good and marketable title to the Purchased Assets, including the Tangible Assets, free and clear of all Liens, except for Liens imposed by statute securing the payment of Taxes which are not due as of the Closing Date and are listed in Schedule 3.4.
3.5 Intellectual Property. Schedule 3.5 lists all of the Intellectual Property of Sellers used or held for use in the Business except for commercially available software utilized in the ordinary course of business functions (“Routine Software”). Any such Intellectual Property other than Routine Software used by Sellers or which Sellers have given others the right to use pursuant to a license, sublicense or agreement is specifically identified in Schedule 3.5, and Sellers have delivered complete and accurate copies of each such license, sublicense or agreement to Acquirors. The other Intellectual Property owned by Sellers is free and clear of all Liens. To the Selling Group’s Knowledge, the use of Intellectual Property in the Business does not infringe the intellectual property rights of any Person under any Laws, and no claims have been made by any Person that Sellers do not own or have the right to use any Intellectual Property or that the use of any Intellectual Property by Sellers in the conduct and operation of the Business infringes the intellectual property rights of any third party. Except as set forth in
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Schedule 3.5, no Seller has authorized the use of its Intellectual Property by any third party. No Seller is in default and, to Selling Group’s Knowledge, no third party is in default, under any license, sublicense or agreement by which it holds, or has given to others the right to use, any Intellectual Property.
3.6 Employees/Contractors. An accurate and complete list of all employees and independent contractors of each Seller (including candidates with extended offers) and related information is set forth in Schedule 3.6, including current annual salary or hourly rate of pay, title, position, classification, bonus paid in 2012 and 2013, accrued vacation or paid time off, amount of any severance payable to such employee, if any, in the event of such employee’s termination without cause, date of hire, current status as either active or on leave, and location of employment. Except as listed in Schedule 3.6, all of PC Seller’s employed or contracted Providers have active privileges for their current work location and the proper H1-B or J-1 visas, as applicable. No Seller has made any written or oral promise to any employee or independent contractor regarding a guarantee of employment with any Acquiror, any increase in his or her annual fees, compensation, benefits or any severance or similar payments in connection with such employee’s, independent contractor’s or candidate’s employment or engagement or continued employment or engagement with any Acquiror. Except as listed in Schedule 3.6, no employee, independent contractor or candidate of a Seller terminated through the Closing Date is entitled to any severance payments, termination allowance or similar payments as a result of such termination that will continue beyond the Closing Date. Management Seller does not employ or contract with any persons to engage in or provide medical services. Owners and all Providers employed by or contracted with PC Seller who will be employed by PC Buyer as of the Closing Date meet the following criteria:
(a) For all Providers, except as listed in Schedule 3.6, (i) to Selling Group’s Knowledge, each Provider (A) is actively enrolled in the Medicare and Medicaid programs and all Medicare and Medicaid billings for such Provider have been properly submitted under the Provider’s UPIN number(s) with PC Seller; (B) is not currently excluded, debarred or otherwise ineligible to participate in federal health care programs (as defined at 42 U.S.C. § 1320a-7b(f)), (C) has never been convicted of a criminal offense related to the provision of health care items or services but has not yet been excluded, debarred or otherwise declared ineligible to participate in federal health care programs; and (ii) to Selling Group’s Knowledge, there are no circumstances which may result in the exclusion of PC Seller or any Provider from participation in any federal health care program;
(b) For each Provider who is a physician, such Provider, to Selling Group’s Knowledge, (i) is in compliance with all applicable Laws related to the practice of medicine, including those promulgated by the New York State Board of Medicine; and (ii) has a valid Drug Enforcement Agency registration number;
(c) For each Provider who is a psychologist, such Provider, to Selling Group’s Knowledge, (i) is in compliance with all applicable Laws related to the practice of psychology, including those promulgated by the New York State Education Department and all other applicable New York state authorities, and all applicable Medicare regulations;
(d) For each Provider who is a clinical social worker, such Provider, to Selling Group’s Knowledge, is in compliance with all applicable Laws related to the practice of clinical social work, including those promulgated by the New York State Education Department and all other applicable New York state authorities, and all applicable Medicare regulations;
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(e) For each Provider who is a nurse practitioner, such nurse practitioner, to Selling Group’s Knowledge, (i) is in compliance with all applicable Laws related to nursing practice, including those promulgated by the New York State Board of Nursing; and (ii) in compliance with the Medicare regulations, is certified as a nurse practitioner by a national certifying body that is recognized as such by the Medicare program; and
(f) For each Provider who is a physician assistant, such physician assistant is, to Selling Group’s Knowledge, (i) in compliance with all applicable Laws related to the scope of practice of a physician assistant, including those promulgated by the New York State Board of Medicine; (ii) is in compliance with the Medicare regulations; and (iii) has a valid Drug Enforcement Agency registration number.
3.7 ERISA; Benefit Plans.
(a) Schedule 3.7(a) of the Disclosure Schedules contains a complete and accurate list of all Employee Benefit Plans of each Seller, both active and terminated.
(b) Each Employee Benefit Plan (and each related trust, insurance contract or fund) has been maintained, funded and administered in compliance in all material respects with the terms of such plan and the applicable requirements of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), the Internal Revenue Code, as amended (the “Code”), and other applicable Laws.
(c) All required reports and descriptions (including Form 5500 annual reports, summary annual reports and summary plan descriptions, as applicable) have been timely filed or distributed with respect to each Employee Benefit Plan in accordance with the requirements of the Code, ERISA and applicable Law.
(d) With respect to each Employee Benefit Plan, all required or recommended (in accordance with past practices) contributions, and payments (including all employer contributions and employee salary reduction contributions) that are due have been paid and all contributions for any period ending on or before the Closing Date that are not yet due have been paid or have been accrued in accordance with the past custom and practice of Sellers. All premiums or other payments for all periods ending on or before the Closing Date have been paid with respect to each Employee Benefit Plan.
(e) Each Employee Benefit Plan that is intended to meet the requirements of a “qualified plan” under Code § 401(a) has received a favorable determination letter from the Internal Revenue Service to the effect that such Employee Benefit Plan is so qualified, and nothing has occurred since the date of such determination that could adversely affect the qualification of such Employee Benefit Plan.
(f) Sellers has delivered to Acquirors correct and complete copies of the plan documents and summary plan descriptions, the most recent determination letter received from the Internal Revenue Service, the three (3) most recent Form 5500 annual reports as filed, and all related trust agreements, insurance contracts and other funding agreements that implement each Employee Benefit Plan.
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(g) No Seller nor any ERISA Affiliate (as defined in ERISA) maintains, sponsors, contributes to or has any Liability or potential Liability with respect to any employee benefit plan that is subject to ERISA §302 or Code §412 or any Multiemployer Plan (as defined in ERISA §3(37), or otherwise has any Liability or potential Liability under Title IV of ERISA. No Seller has any Liability or potential Liability under ERISA or the Code solely by reason of being treated as a single employer under Code §414 with any trade, business or entity other than Sellers.
(h) No Seller has any Liability or potential Liability with respect to any Employee Welfare Benefit Plan (as defined in ERISA §3(1)) providing medical, health or life insurance or other welfare-type benefits for any individual (other than in accordance with COBRA). Each Seller and each ERISA Affiliate are in compliance in all material respects with the requirements of COBRA.
(i) There have been no Prohibited Transactions (as defined under ERISA § 406 and Code § 4975) with respect to any Employee Benefit Plan, and no Fiduciary (as defined in ERISA §3(21)) has any Liability for breach of fiduciary duty or any other failure to act or comply in connection with the administration or investment of the assets of any Employee Benefit Plan. No action, suit, proceeding, hearing, audit or investigation with respect to the administration or the investment of the assets of any Employee Benefit Plan (other than routine claims for benefits) is pending or, to the Seller Group’s Knowledge, threatened. To the Seller Group’s Knowledge, there is no basis for any such action, suit, proceeding, hearing or investigation.
(j) No Seller has ever been party to any arrangement that is or was a “nonqualified deferred compensation plan” within the meaning of Code § 409A. Any Employee Benefit Plan that is deemed to constitute a nonqualified deferred compensation plan subject to Code § 409A has been operated between January 1, 2005 and December 31, 2008 in good faith compliance with Code § 409A and the applicable notices and proposed regulations thereunder and since January 1, 2009 has been operated in accordance with, and is in documentary compliance with, the final regulations under Code § 409A. No Seller has any obligation to indemnify, hold harmless or gross-up any individual with respect to any penalty tax or interest under Code § 409A.
(k) Schedule 3.7(k) lists all Persons who perform services for Sellers and are designated by Sellers as “independent contractors.” Except as set forth on Schedule 3.7(k), all Persons classified by Sellers as independent contractors satisfy and have at all times satisfied the requirements of applicable law to be so classified, each Seller has fully and accurately reported their compensation on IRS Forms 1099 when required to do so, and no Seller has any obligations to provide benefits with respect to such persons under any Employee Benefit Plan or otherwise.
(l) Neither the execution and delivery of this Agreement or other related agreements, nor the consummation of the transactions contemplated hereby or thereby will (either alone or in conjunction with any other event, such as termination of employment) (i) result in any payment (including, without limitation, severance, unemployment compensation,
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parachute or otherwise) becoming due to any current or former director, officer or employee of any Seller under any Employer Benefit Plan or otherwise; (ii) significantly increase any benefits otherwise payable under any Employer Benefit Plan; or (iii) result in any acceleration of the time of payment or vesting of any benefits.
3.8 Contracts and Arrangements. Schedule 3.8 sets forth all of the contracts to which any member of the Selling Group is a party relating to the Business or the Purchased Assets. Except as set forth on Schedule 3.8, there are no oral agreements to which any member of the Selling Group is a party relating to the Business or the Purchased Assets. Complete and accurate copies of all written contracts and related amendments to which any member of the Selling Group is a party relating to the Business or the Purchased Assets have been provided to Acquirors prior to the Closing. Such contracts include:
(a) employment and/or independent contractor agreements with each employee, independent contractor and/or candidate of any Seller;
(b) any agreement under which any Seller receives, or is entitled to receive in the future, a payment from the other party to the agreement;
(c) any agreements with third party payors;
(d) any agreement (or group of related agreements), either oral or written, under which any Seller has created, incurred, assumed or guaranteed any indebtedness for borrowed money, or any capitalized lease obligation, or any arrangement under which any member of the Selling Group or a third party has imposed a Lien on any of the Purchased Assets;
(e) any agreement or arrangement, whether oral or written, under which any Seller has loaned money to any Person or borrowed money from any Person;
(f) any equipment, space or premise leases;
(g) any agreement concerning confidentiality or noncompetition or providing for any sort of post-termination payment;
(h) any agreement, whether oral or written, under which any Seller has advanced or loaned any amount to any of its directors, officers, employees, members, independent contractors, shareholders or Owners, or borrowed any amount from any of its directors, officers, employees, members, independent contractors or Affiliates;
(i) any agreement which is proposed to be transferred pursuant to this Agreement and will require consent to assign by any third party;
(j) any agreement with any Affiliate of any individual or entity in the Selling Group;
(k) any agreement related to Intellectual Property of any individual or entity in the Selling Group;
(l) any Healthcare Agreements or other agreements with healthcare entities;
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(m) any profit sharing, stock option, stock purchase, stock appreciation, phantom stock, deferred compensation, severance or other plan or arrangement for the benefit of any Seller’s current or former directors, officers, employees, members, independent contractors or Owners; and
(n) any agreement of any Seller that is necessary or useful for the effective and efficient operation of the Business and the Purchased Assets.
Except as provided in Schedule 3.8, with respect to each such agreement: (x) the agreement, with respect to each member of the Selling Group, is legal, valid, binding, enforceable, free and clear of any Lien, and in full force and effect on identical terms as set forth in the copies provided to Acquirors, following the consummation of the transactions contemplated hereby; (y) no member of the Selling Group nor, to the Selling Group’s Knowledge, the other party(ies) thereto, is in breach or default, and no event has occurred, or will occur as a result of the transactions contemplated hereby, which with notice or lapse of time would constitute a breach or default, or permit termination, modification or acceleration, under the agreement; and (z) no member of the Selling Group, nor, to the Selling Group’s Knowledge, the other party(ies) thereto, have repudiated any provision of the agreement.
3.9 Legal Proceedings, Etc. Except as provided in Schedule 3.9 of the Disclosure Schedule, there is no claim, suit, action, proceeding, arbitration, mediation or other dispute pending or, to Selling Group’s Knowledge, threatened affecting the Business of any Seller or against any member of the Selling Group or affecting any of the Purchased Assets, or which could reasonably be expected to affect the enforceability of any provisions in this Agreement before any court, governmental or regulatory authority or body, or any arbitral body. Neither any member of the Selling Group nor the Purchased Assets is subject to any outstanding order, investigation, writ, injunction or decree affecting the Business of any Seller or any of the Purchased Assets.
3.10 Compliance with Laws. Except as set forth in Schedule 3.10, each of the individuals and entities in the Selling Group is, and has conducted the Business of Sellers, in compliance with all applicable Laws, including all applicable Laws respecting Medicare and Medicaid, 42 U.S.C. § 1320a-7b(b) (the “Anti-Kickback Statute”), 42 U.S.C. § 1395nn (the “Stark Law”), 42 U.S.C. § 1320a-7a(a)(5) (the “Beneficiary Inducement Law”) the Health Insurance Portability and Accountability Act as amended by the Health Information Technology for Economic and Clinical Health (“HITECH Act”) and the privacy and security standards set forth at 45 C.F.R. Parts 160 and 164 (collectively “HIPAA”), employment (including the appropriate classification of employees and independent contractors), employment practices, terms and conditions of employment and wages and hours (including severance and termination), civil rights, Taxes and filing requirements of any kind, and no member of the Selling Group has received any notice of noncompliance with or violation of any applicable Law. No member of the Selling Group is (nor is aware that it is) currently under investigation by any governmental agency or organization (or any entity with legal authority to conduct an investigation on behalf of same) regarding compliance with the statutes and regulations governing the provision of items and services to beneficiaries of any federal or state healthcare program, or by any commercial third-party payor in connection with the provision of healthcare items and services to patients who are covered by such third-party payor.
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3.11 Licenses and Permits. Schedule 3.11 of the Disclosure Schedule lists all material governmental or other permits, licenses, approvals, certificates of inspection, filings, franchises and other authorizations that are issued to, held or used by any Seller, or for which any Seller has applied, in connection with the current operation of the Business, and any limitations thereto. Each Seller has all material governmental or other permits, licenses, approvals, certificates of inspection, filings, franchises and other authorizations that are necessary to own and operate the Purchased Assets and to conduct its Business as it is presently being conducted and no Seller has received notice alleging that any other governmental or other permits, licenses, approvals, certificates of inspection, filings, franchises and other authorizations are required. Each member of the Selling Group owns and will transfer to Acquirors at the Closing all licenses and permits to the extent transferrable required for Acquirors’ lawful use of the Purchased Assets, except to the extent that the transfer of any license and permit violates any Law or the terms of such license or permit and which are identified in Schedule 3.11. Each Seller shall reasonably cooperate with Acquirors to facilitate Acquirors’ obtaining all necessary permits and licenses in connection with the operation of the Business effective as of the Closing Date.
3.12 Taxes. Except as set forth in Schedule 3.12:
(a) Each member of the Selling Group has filed (or had filed on their behalf) all Tax Returns that they were required to file under applicable laws and regulations. All such Tax Returns were correct and complete in all respects and were prepared in compliance with all applicable laws and regulations. All Taxes due and owing by (or with respect to the operations of) any member of the Selling Group (whether or not shown on any Tax Return) have been paid. Adequate amounts for unpaid Taxes of any member of the Selling Group have been reserved and set aside for payment of such Taxes. No member of the Selling Group is the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by an authority in a jurisdiction where any member of the Selling Group did not file Tax Returns that any member of the Selling Group is or may be subject to taxation by that jurisdiction. There are no Liens for Taxes (other than Taxes not yet due and payable) upon any of Purchased Assets.
(b) Each Seller has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, shareholder, member or other third party.
(c) To Selling Group’s Knowledge, no foreign, federal, state or local Tax audits or administrative or judicial Tax proceedings are pending or being conducted with respect to any member of the Selling Group or any consolidated, combined or unitary group of which any Seller is or was a member. No Seller nor any consolidated, combined or unitary group of which it was a member has received from any foreign, federal, state or local taxing authority (including jurisdictions where any Seller or any consolidated, combined or unitary group of which it is a member has not filed Tax Returns) any (i) notice indicating an intent to open an audit or other review; (ii) request for information related to Tax matters; or (iii) notice of deficiency or proposed adjustment for any amount of Tax proposed, asserted or assessed by any taxing authority against any Seller or any consolidated, combined or unitary group of which it is a member.
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(d) No Seller nor any consolidated, combined or unitary group of which a Seller is a member has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.
(e) No Seller is a party to any agreement, contract, arrangement or plan that has resulted or could result, separately or in the aggregate, in the payment of any “excess parachute payment” within the meaning of Code § 280G (or any corresponding provision of state, local or foreign Tax law). No Seller has been a United States real property holding corporation within the meaning of Code § 897(c)(2) during the applicable period specified in Code § 897(c)(1)(A)(ii). Each Seller and any consolidated, combined or unitary group of which it is a member has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code § 6662. No Seller is a party to or bound by any Tax allocation or sharing agreement. No Seller has been a member of an Affiliated Group (as defined in the Code) filing a consolidated federal income Tax Return and no Seller has any Liability for the Taxes of any other Person, whether as a result of being a member of an Affiliated Group, a transferee, successor, by contract, or otherwise.
(f) No Seller will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any:
(i) change in method of accounting for a taxable period ending on or prior to the Closing Date;
(ii) “closing agreement” as described in Code § 7121 (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date;
(iii) intercompany transaction or excess loss account described in Treasury Regulations under Code § 1502 (or any corresponding or similar provision of state, local or foreign income Tax law);
(iv) installment sale or open transaction disposition made on or prior to the Closing Date; or
(v) prepaid amount received on or prior to the Closing Date.
(g) No Seller has distributed stock of another Person or has had its stock distributed by another Person in a transaction that was purported or intended to be governed in whole or in part by Code § 355 or Code § 361.
(h) No Seller nor any consolidated, combined or unitary group of which a Seller is a member has engaged in any “listed transaction” as defined in the Treasury Regulations promulgated under Section 6011 of the Code.
3.13 Financial Information. Each Seller’s financial information provided by the Selling Group to Acquirors is true, accurate, complete and consistent with past practices of the
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each member of the Selling Group, consistently applied. In 2012, Sellers’ Business generated approximately Seventeen Thousand Eight Hundred Fifty Seven Thousand Five Hundred Fifty Nine Dollars ($17,857,559) in annualized revenues (excluding any electronic health record incentive payments) and approximately Two Hundred Forty Two Thousand Nine Hundred Ten (242,910) annualized patient encounters (including patient encounters billed under the tax i.d. numbers of Amsterdam Nursing Home Corporation (1992) and Sephardic Nursing and Rehabilitation Center).
3.14 Leased Real Property. The only real estate used in the operation of the Business (other than access to Facilities free of charge to perform clinical services) are the real properties listed in Schedule 3.14 hereto, which are collectively referred to herein as the “Leased Real Property.” All of such Leased Real Property is leased by a Seller pursuant to contracts described in Schedule 3.14 hereto, a true and correct copy of each having been previously delivered to Acquirors (the parties from whom the Leased Real Property is leased are referred to herein as the “Landlords”), and which have not been amended, modified or assigned (the “Real Property Leases”). With respect to the Leased Real Property:
(a) To Selling Group’s Knowledge, the buildings, plants, improvements, structures and fixtures on the Leased Real Property: (i) have been properly maintained; (ii) are in good operating condition and repair, normal wear and tear excepted; (iii) are in accordance with all applicable Laws applicable to a Seller or the Leased Real Property, provided that any such noncompliance would not have a Material Adverse Effect; and (iv) while in a Seller’s possession, the Leased Real Property has not been subject to any flooding, water damage or seepage;
(b) except as set forth on Schedule 3.14 hereto, there are no leases, subleases, licenses, concessions or other agreements (whether written or oral) to which any Seller is a party, that grant to any person the right to use or occupy any portion of the Leased Real Property;
(c) except as set forth on Schedule 3.14 hereto, there are no Persons (other than Sellers) in possession of the Leased Real Property;
(d) the Leased Real Property is supplied with utilities and other services necessary for the conduct of the Business of Sellers and the operation of the Facilities; and
(e) the Real Property Leases are being fully performed and are in full force and effect and are enforceable in accordance with their terms and, to the Selling Group’s Knowledge, the Landlords are not in breach or default, or alleged to be in breach or default with respect thereto, and no conditions exist or events have occurred which with the giving of notice or the passage of time or both could give rise to a breach or default thereunder by any Seller.
3.15 Environmental.
(a) To Selling Group’s Knowledge, each Seller has complied and is currently in compliance with all Environmental Laws, and each Seller possesses all environmental licenses and permits necessary to operate the Business in compliance with Environmental Law (“Licenses”) and has filed all notices or applications required by such Licenses.
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(b) No Seller has been subject to, or received any written notice of, any private, administrative or judicial action, or notice of any intended private, administrative or judicial action relating to the presence or alleged presence of hazardous materials in, under or upon any real property currently or formerly owned, leased or used by (i) any Seller or any of its predecessors; or (ii) any Person that has, at any time, transported, treated or disposed of hazardous materials on behalf of any Seller or any of its predecessors; and (iii) there are no pending or, to the Selling Group’s Knowledge, threatened actions or proceedings (or notices of potential actions or proceedings) from any governmental authority or any other person regarding any matter relating to any Environmental Law.
(c) To the Selling Group’s Knowledge, there are no present and have been no past events, conditions, circumstances, activities, practices, incidents or actions that might be expected to interfere with or prevent continued compliance with any Environmental Law, give rise to any legal obligation or liability or otherwise form the basis of any claim, action, suit, proceeding, hearing or investigation against or involving any Seller or any real property presently or previously owned or used by any Seller or any of its predecessors or any off-site disposal or treatment site used by any Seller or any of its predecessors under any Environmental Law or related common law theories.
3.16 Broker Fees. There are no broker’s or finder’s fees or obligations due to any persons engaged by any member of the Selling Group or any of their Affiliates, employees, representatives or agents, in connection with the transactions contemplated by this Agreement except which shall be borne by Sellers and paid at the Closing.
3.17 Interim Conduct of Business. Since June 19, 2013, through the date hereof, each Seller and each Owner have caused the operations of each Seller to be carried on in the normal course of business, diligently and lawfully, and in substantially the same manner as they previously were carried out. Since June 19, 2013, no Seller has suffered the existence or allowed the creation of any Liens of any nature on such Seller’s property or assets, except in the ordinary course of business or as set forth in Schedule 3.17. No Seller has (a) engaged in any activities or transactions which are outside the ordinary course of business of such Seller as conducted prior to and as of June 19, 2013, which would result in a Material Adverse Effect to the Business; or (b) altered or taken any action to alter, such Seller’s relationships with its suppliers, employees, independent contractors or any other relationships related to the Business, or, with respect to PC Seller, its Facilities, patients, referral sources or third party payors which would result in a Material Adverse Effect to the Business.
3.18 Undisclosed Material Liabilities. As of the date of this Agreement, there are no Liabilities of any Seller of a nature required to be reflected on a balance sheet prepared in accordance with cash basis accounting other than liabilities reflected in the Financial Statements, or which would not have a Material Adverse Effect.
3.19 Certain Payments
(a) Except as set forth in Schedule 3.19, and with respect to the conduct and operation of the Business of Sellers, no member of the Selling Group nor, to the Selling Group’s Knowledge, any partner, manager, officer, agent or employee of any Seller or any other person associated with or acting for or on behalf of any Seller, has directly or indirectly (i) made any
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contribution, gift, bribe, rebate, payoff, influence payment, kickback or other payment to any person, private or public, regardless of form, whether in money, property or services (A) to obtain favorable treatment in securing business; (B) to pay for favorable treatment for business secured; (C) to obtain special concessions or for special concessions already obtained for or with respect to any Seller; or (D) which is in violation of any legal requirements; (ii) established or maintained any fund or asset that has not been recorded in the books and records of Sellers; or (iii) been a party to, or the beneficiary of, any agreement, contract, understanding or business venture (whether oral or in writing) with any person or entity which violates the Anti-Kickback Statute or the Stark Law, any other state, federal or local law governing the referral of patients, any regulation promulgated pursuant to any of the foregoing, or any court or administrative order to any of the foregoing.
(b) Except as set forth in Schedule 3.19, (i) all claims submitted by any Seller for reimbursement to third party payors (including, but not limited to, governmental payors) are true, complete and accurate; (ii) no claims for recoupment of any moneys paid to any Seller have been asserted or are outstanding from third party payors, which would have a Material Adverse Effect on the Business; (iii) the billing practices of each Seller are in compliance with all applicable Laws and consistent with industry standards; (iv) no billing audits or audits by Recovery Audit Contractors, Program Integrity Contractors, or Zone Program Integrity Contractors have occurred within three (3) years prior to the date hereof nor are any such audits currently ongoing, noticed to any Seller or, to the Selling Group’s Knowledge, threatened, which would have a Material Adverse Effect on the Business; (v) no inquiries or complaints regarding quality of medical services rendered by PC Seller have been received by PC Seller which would have a Material Adverse Effect on the Business; and (vi) all overpayments have been timely repaid by each Seller in accordance with Section 1128J(d) of the Social Security Act and other applicable Law.
3.20 Designated Health Services. If PC Seller has provided any “designated health services” as such term is defined in the Stark Law, PC Seller has at all times operated as a “group practice” as defined in 42 C.F.R. § 411.352 and has provided such designated health services in accordance with the “in-office ancillary services” exception set forth at 42 C.F.R. § 411.352 or other applicable provisions of the Stark Law.
3.21 Medical Director Agreements. All Contracts of PC Seller for medical director services (or other similar administrative services), and all other Contracts with any provider or supplier of healthcare items, supplies or services (each a “Health Care Entity”) have been performed in accordance with the requirements of the Stark Law, the Anti-Kickback Statute and other applicable Laws, and no Owner or, to Selling Group’s Knowledge, Provider employee of PC Seller, acting within the course or scope of his or her employment, or any member of the Selling Group has been a party to a direct or indirect financial relationship or has offered, paid, solicited or received, directly or indirectly, any remuneration from a Health Care Entity except in strict compliance with applicable requirements of the Stark Law and the Anti-Kickback Statute.
3.22 Not Misleading. To Selling Group’s Knowledge, the representations and warranties contained in this ARTICLE III do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in ARTICLE III not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIRORS
In order to induce the Selling Group to enter into this Agreement and to sell the Purchased Assets, each of the Acquirors represents and warrants to the Selling Group all of the matters set forth in this ARTICLE IV; any exceptions to such representations and warranties shall be set forth in a Disclosure Schedules specifying in each case to which section of ARTICLE IV such exceptions apply.
4.1 Organization of Acquirors. Buyer is a corporation duly organized, validly existing and in good standing under the Laws of its state of formation and state of operations and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. PC Buyer is a professional medical corporation duly organized, validly existing and in good standing under the Laws of its state of formation and state of operations and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted.
4.2 Authority Relative to this Agreement. Each of the Acquirors has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by each Acquiror, and no other proceedings on the part of Acquirors are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Acquirors and constitutes a valid and binding agreement of each Acquiror, enforceable against Acquirors in accordance with its terms, except as such agreement may be limited by the availability of equitable remedies or by bankruptcy, insolvency or other Laws affecting the enforcement of creditors’ rights.
4.3 No Violation. Neither the execution and delivery of this Agreement by Acquirors nor the consummation of the transactions contemplated hereby will (i) conflict with or result in any breach of any provision of the Articles of Incorporation, Bylaws or other similar governing documents of Acquirors; (ii) to Acquirors’ Knowledge, conflict with, result in any material breach of any provision of, or constitute a default or permit any Person to terminate, accelerate the performance required by, or accelerate the maturity of, any indebtedness or other obligation relating to any of Acquirors under any contract or agreement of any kind to which any of the foregoing is a party or to which any Acquiror is subject; or (iii) to Acquirors’ Knowledge, violate or conflict with any Law to which any Acquiror or any of its properties is subject.
4.4 Legal Proceedings, Etc. There is no claim, suit, action, proceeding, arbitration, mediation or other dispute pending or, to Acquirors’ Knowledge, threatened, which could reasonably be expected to affect the enforceability of any provision in this Agreement before any court, governmental authority or any arbitral body.
4.5 Broker Fees. The Selling Group shall not be responsible for any broker’s or finder’s fees or obligations due to any persons engaged by Acquirors, or any of their affiliates, employees, representatives or agents in connection with the transactions contemplated by this Agreement.
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ARTICLE V
COVENANTS OF THE PARTIES
5.1 Further Assurances. Subject to the terms and conditions of this Agreement, each of the parties agrees to use its commercially reasonable efforts at its own expense (unless otherwise provided in this Agreement) to take, or cause to be taken, all action and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable Laws to consummate and make effective the transactions contemplated by this Agreement. For at least six (6) months following the Closing, each Seller and each Owner shall, during normal business hours, cooperate with Acquirors and assist Acquirors as reasonably requested by Acquirors in the transition of the Business to Acquirors on an as-needed basis, including answering questions, facilitating the employment of those of Sellers’ employees and/or independent contractors which Acquirors choose to employ subsequent to Closing, facilitating prompt collections of its accounts receivable, introducing Acquirors to the medical community and Sellers’ suppliers and service providers, and such other actions as Acquirors may reasonably request. For at least six (6) months following the Closing, if further action is necessary or desirable to carry out the purposes of this Agreement, each of the parties, as applicable, shall take all commercially reasonable action as may reasonably be requested by the other party.
5.2 Employment.
(a) At or prior to the Closing, each Seller shall serve notice of assignment of employment agreement (provided that the terms of such employment agreements and assignments are reasonably acceptable to Buyer and/or PC Buyer) to Buyer or PC Buyer, as applicable, to its Providers, employees and/or independent contractors who will work for Buyer, PC Buyer or their Affiliate after the Closing, and a notice of termination to its employees and/or independent contractors who will not work for Buyer, PC Buyer or their Affiliate after the Closing, and each Seller shall be responsible for any obligations or payments to such Providers, employers and/or independent contractors related to or arising from their employment or service prior to the Closing.
(b) At or prior to the Closing, each Seller and Owner shall use their best efforts to assist Buyer, PC Buyer, or an Affiliate of an Acquiror, as applicable, in entering into new employment agreements with certain of Sellers’ Providers, employees and/or independent contractors who will work for Buyer, PC Buyer, or an Affiliate of an Acquiror after the Closing, and each Seller shall be responsible for any obligation or payments to such Providers, employees, and/or independent contractors related to or arising from their employment or service prior to the Closing.
(c) PC Buyer shall not refuse without Cause to accept the assignment of an employment agreement or enter into an employment agreement with any of PC Seller’s Providers who are willing to accept employment by PC Buyer on terms reasonably acceptable to PC Buyer. For purposes of this Section 5.2 and Section 2.1(e), “Cause” shall be defined as the following:
(i) The Provider has failed to meet all the requirements of the New State Board of Medicine, New York State Board of Nursing, New York State Department of Education, or any other appropriate New York state authority, as applicable;
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(ii) The Provider has a restricted license to practice his/her profession, or has been sanctioned or placed on probation by a New York state authority;
(iii) The Provider has been sanctioned by or is in a Corrective Action Plan with Medicare, Medicaid, or any other governmental healthcare program;
(iv) The Provider is currently indicted or has been convicted of, or pleaded guilty or no contest to, a felony or crime involving moral turpitude;
(v) Any substantiated reason or cause which adversely affects the ability of the Provider to perform service on behalf of PC Buyer to a substantial degree, including without limitation, alcohol, drug or substance abuse, conduct endangering the health or safety of patients, or mental incompetence or deficiency;
(vi) For nurse practitioner Providers, the Provider is not actively certified through a recognized national board; or
(vii) The Provider has failed to meet the routine screening, verification of work history, or criminal background check requirements of PC Buyer’s pre-employment risk review process.
(d) Acquirors agree that effective upon the Closing, (i) PC Buyer shall accept assignment, on terms acceptable to PC Buyer, of the employment agreements or make commercially reasonably efforts to enter into new employment agreements, as applicable, with PC Seller’s employed or contracted Providers meeting the employment criteria of PC Buyer in accordance with this Agreement (so that no lapse shall occur between the Closing Date and the effective date of the contract with PC Buyer) (the “Transferred Providers”) and (ii) Buyer shall accept assignment, on terms acceptable to Buyer, of the employment agreements with Management Seller’s employed or contracted employees meeting the employment criteria of Buyer in accordance with this Agreement (so that no lapse shall occur between the Closing Date and the effective date of the contract with Buyer) (the “Transferred Management Employees”). Effective as of the first day of the month following the Closing, Acquirors shall establish or make available, through itself or an Affiliate, to all of the Transferred Providers and Transferred Management Employees, employee benefit plans (collectively “Acquirors’ Employee Plans”), in accordance with and subject to such Acquirors’ Employee Plans and the policies and procedures of Acquirors or their Affiliates. For purposes of eligibility to participate and vesting in the Acquirors’ Employee Plans provided by Acquirors to such Transferred Providers and Transferred Management Employees (other than Acquirors’ Employee Stock Purchase Plan), but not benefit accrual, Acquirors shall provide that the Transferred Providers and Transferred Management Employees will be credited with their years of service with Sellers and any predecessors thereof. Subject to the terms of the relevant Employee Benefit Plan, the eligibility of any Transferred Providers and Transferred Management Employees to participate in any welfare benefit plan or program of Acquirors or their Affiliates shall not be subject to any exclusions for any pre-existing conditions or length of hire restrictions if such individual has met the participation requirements of similar benefit plans and programs of Sellers. In addition, an Acquiror or an Affiliate of Acquirors shall enter into employment relationships with Administrative Personnel whom Acquirors deem necessary to operate the Business post-Closing and who meet the employment criteria of Acquirors.
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(e) Sellers shall be liable for all employee or contractor accrued compensation or bonus payments, payments that may be required to be made under any termination, severance or similar plan, policy, arrangement or Employee Benefit Plans of any Seller, or the termination of the employment of any officer or employee or independent contractor of any Seller, as a result of the transactions contemplated herein. PC Seller shall be responsible for the payment of any Provider stay-related, transition, or signing bonuses, severance payments, or bonus guarantees in excess of the Provider’s current salary with PC Seller, or any other incentives related specifically to the transactions contemplated by this Agreement. Any such bonus or incentive payment shall require the prior written notice to Acquirors. All such bonus and incentive payments are set forth in Schedule 5.2(e).
(f) This Section 5.2 shall be binding upon and inure solely to the benefit of each of the parties, and nothing in this Section 5.2, express or implied, shall confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Section 5.2. Nothing contained herein, express or implied, shall be construed to establish, amend or modify any benefit plan, program, agreement or arrangement. The parties acknowledge and agree that the terms set forth in this Section 5.2 shall not create any right in any Transferred Providers and Transferred Management Employees or any other Person to any continued employment with Acquirors or its Affiliates or compensation, benefits or other terms and conditions of employment any nature or kind whatsoever.
5.3 Use of Purchased Assets. From and after the Closing, Sellers shall not use, and acknowledge that they will have no right or license to use, the Purchased Assets in any manner; provided, however, Sellers may continue to use the names “Park Avenue Medical Associates, P.C.” and “Park Avenue Health Care Management, LLC” in connection with the collection of Sellers’ accounts receivable, as set forth on Schedule 1.1. Notwithstanding the foregoing, each Seller shall, at its own expense and within thirty (30) days after Closing, cause the names “Park Avenue Medical Associates, P.C.” and “Park Avenue Health Care Management, LLC” to be deleted from all signs, stationery, websites, advertising and other embodiments pertaining to the Business of such Seller, and each Seller shall have removed any reference to the Business or the Purchased Assets from any and all websites and marketing materials and all websites of Sellers shall have been redirected to a website designated in writing (which may be via electronic transmission) by Acquirors. In no event shall any Seller use the names “Park Avenue Medical Associates, P.C.” or “Park Avenue Health Care Management, LLC” or any other name in a manner adverse to Acquirors or their Affiliates.
5.4 Further Proceeds. Each Seller shall pay, upon receipt, to Acquirors any payments such Seller may receive from third parties in respect of the operation of any Acquired Assets subsequent to the Closing and any payments against accounts receivable of Acquirors arising subsequent to the Closing or in connection with any services to be provided subsequent to the Closing which come into possession of such Seller. PC Seller shall pay, upon receipt, to PC Buyer any payments PC Seller may receive from third parties in respect of the operation of any PC Acquired Assets subsequent to the Closing Date and any payments against accounts receivable of PC Buyer arising subsequent to the Closing Date which come into the possession of PC Seller. Acquirors shall pay, upon receipt, to each Seller, as applicable, any payments Acquirors may receive from third parties in respect of the operation of any other Purchased Assets prior to the Closing Date and any payments against accounts receivable of any Seller arising prior to the Closing Date (other than advances arising prior to the Closing Date in connection with services to be provided subsequent to the Closing Date).
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5.5 Audit; Access To Financial Information. Subsequent to the Closing, each member of the Selling Group shall take or cause to be taken all action reasonably necessary upon notice during normal business hours at Acquirors’ sole cost and expense to allow Acquirors’ accountants, employees and other representatives access to Sellers’ facilities, books, records and personnel in order that Acquirors may have full opportunity to make such inquiry as is necessary for the conduct and completion of a certified audit of Sellers’ financial position, results of operation and cash flows (“Financial Statements”) by the public accounting firm of Ernst & Young. Each member of the Selling Group agrees and acknowledges that Acquirors have the right to include the Financial Statements in any filings or disclosures requested or required by any financial institution, stock market or exchange, contract or by Law (collectively “Filings”) and agree to execute any consents required in connection with any such Filings.
5.6 Notice of Developments. Prior to the Closing, each party to this Agreement shall give prompt written notice to each other parties of any act or omission causing a material breach of any of its representations and warranties in ARTICLE III or ARTICLE IV, as applicable. No disclosure by any such party pursuant to this Section 5.6, however, shall be deemed to amend or supplement any disclosure the purpose of which is to limit the scope of or to prevent or cure any misrepresentation or breach of warranty, covenant or any provision of this Agreement.
5.7 Public Announcements. Prior to the Closing, no party will issue or make any, press release or report to the public with respect to this Agreement or the detailed financial transactions contemplated hereby without the prior consent of the other parties; provided, however, that Acquirors shall be permitted to issue one press release prior to Closing, provided Selling Group consents to such press release, such consent not to be unreasonably withheld or delayed. If any party is unable to obtain the approval of its public press release, report or statement from the other parties and such report, statement or release is, in the opinion of legal counsel to such party, required by Law in order to discharge such party’s disclosure obligations, then such party may make or issue the legally required report, statement or release on prior notice and shall promptly furnish the other party with a copy thereof.
5.8 Prior Acts Coverage. Prior to the Closing, PC Seller shall use best efforts to obtain the malpractice polices and loss run reports for the Transferred Providers, including those insured by “slotted” policies. After review by Acquirors of the policies and reports submitted by PC Seller, PC Buyer shall have the right to require, after consultation with Selling Group, the Transferred Provider in question to (a) change insurance carriers (if not insured by an admitted carrier in the State of New York), (b) obtain prior acts coverage to the extent that the Transferred Provider in question does not have coverage for a period of time at least as long as the statute of limitations for medical malpractice in the State of New York for an adult patient, or (c) obtain increased medical malpractice coverage with limits up to One Million Three Hundred Thousand Dollars ($1,300,000) per occurrence and Three Million Nine Hundred Thousand Dollars ($3,900,000) in the annual aggregate, as applicable. In the event Acquirors determine in good faith that either of the foregoing options is not commercially reasonable, Acquirors shall have the right, upon consultation with Selling Group, to terminate the employment of the Transferred Provider in question. The foregoing obligations of Selling Group and the costs associated with actions taken under subsections (a), (b), and (c) herein, shall hereinafter be defined as “Selling
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Group’s Prior Acts Liabilities”. To the extent permitted by such individual based policy(ies), each Provider shall appoint PC Buyer, or an employee of PC Buyer or an Affiliate of PC Buyer, as his or her program administrator.
5.9 Noncompetition and Nonsolicitation Provisions. Each Seller agrees, as permitted by applicable law, that it will transfer, convey, assign and deliver to Acquirors all of the rights to enforce any remaining term of the noncompetition and nonsolicitation provisions of any agreement with any Provider, employee or independent contractor who does not enter into an employment agreement with or whose employment agreement is not assigned to Buyer, PC Buyer or their Affiliate at the Closing to the extent transferable.
5.10 COBRA. On and after the Closing Date, each Seller shall be responsible for (a) complying with all notice requirements of COBRA, and (b) providing COBRA continuation coverage to all “M&A qualified beneficiaries,” as that term is defined by Treasury Regulations § 54.4980B-9, Q&A-4, with respect to the transactions contemplated by this Agreement for at least the maximum period that continuation coverage may be available to the M&A qualified beneficiaries (including any second qualifying events experienced by the M&A qualified beneficiaries) under COBRA.
5.11 Kickbacks and Referrals.
(a) Notwithstanding anything that may be explicitly or implicitly suggested to the contrary in this Agreement, the parties shall not do any act prohibited by Section 1128B(b) of the Social Security Act. Without limiting the generality of the foregoing, neither any Seller nor any Owner shall have any duty whatsoever to refer any individual, or arrange for any individual to be referred, or recommend that any individual be referred, to PC Buyer for the furnishing or arranging for the furnishing of any item or service that may be paid for, in whole or in part, by a Governmental Payment (as defined below). No part of the consideration under this Agreement is in any way intended or offered to produce or accomplish any transaction or relationship that is prohibited by state or federal law and such an intention is vigorously disclaimed by all parties. For purposes hereof, a “Governmental Payment” shall mean any payment, in whole or in part, that is made under Title XVIII of the Social Security Act (commonly known as Medicare) or under a State health care program under the Social Security Act (including Medicaid (Title XIX) and Titles V and XX).
(b) The parties shall comply with the Stark Law and its implementing regulations. As long as either any Seller or any Owner is considered to have a “financial relationship” (as defined in 42 U.S.C. § 1395nn) with PC Buyer, then neither any Seller nor any Owner shall make any referral to PC Buyer for the furnishing of “designated health services” (as defined in 42 U.S.C. § 1395nn) for which payment otherwise could be made under Title XVIII of the Social Security Act (Medicare) or, to the extent applicable as described in 42 U.S.C. § 1396, Title XIX of the Social Security Act (Medicaid), unless an applicable exception is met.
(c) In the event that any Seller or any Owner obtains an ownership interest or equity interest in an Acquiror or any of its Affiliates or any entity that an Acquiror or any of its Affiliates has a direct or indirect financial interest in and is in a position to refer any “designated health services” (as defined in 42 U.S.C. § 1395nn) from an entity in which any Seller or any Owner (or a member of his or her immediate family) has a financial interest to such entity, such
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referral shall not be made without the prior disclosure to and approval of Acquirors. The ownership of a publicly traded security or mutual fund (as defined in 42 U.S.C. § 1395nn(c)) shall not be deemed an ownership or financial interest if such ownership qualifies for an exception under the Anti-Kickback Statute and/or the Stark Law. No payment shall be made to any Seller or any Owner that is intended to induce or that shall require the recommendation or referral of any patient, directly or indirectly, to any entity owned by any Acquiror or any Affiliate of an Acquiror and further, is determined in any manner that takes into account the volume or value of business generated between the parties.
5.12 Operation of the Business until Closing. From the date of this Agreement through the Closing Date, each Seller agrees to operate the Business in the normal course of business diligently, in compliance with all applicable Laws, and in substantially the same manner as the Business has been carried out through the date of this Agreement. From the date of this Agreement through the Closing Date, each Seller shall not sell or allow the creation of any Liens on the Purchased Assets, except as set forth in Schedule 3.17. Each Seller shall not (a) engage in any activities or transactions which are outside the ordinary course of business of such Seller as conducted prior to and as of the date of this Agreement; (b) alter or take any action to alter its relationships with its suppliers, employees, independent contractors, Facilities, patients, referral sources or third party payors in such a way as to have a Material Adverse Effect, (c) amend its organizational documents; (d) issue any additional equity securities or grant any option, warrant or right to acquire any equity securities or issue any security convertible into or exchangeable for such securities or alter in any way any of its outstanding equity securities or make any change in outstanding equity securities or its capitalization, whether by reason of a reclassification, recapitalization, stock split or combination, exchange or readjustment of shares, dividend or otherwise; (e) fail to keep in full force and effect insurance policies comparable in amount and scope to coverage maintained as of the date hereof; (f) take any other willful and knowing action that would result in a material breach of any representations and warranties made by any Seller or any Owner in this Agreement; (g) settle, release or forgive any claim or litigation or waive any right thereto; (h) enter into any transaction material to the Business, except in the ordinary course of business consistent with past practice; (h) increase the compensation or fringe benefits (including, but not limited to, vacation or paid time off entitlement) of any present or former director, officer, employee, individual consultant or independent contractor of any Seller, (i) grant any severance, bonus, change of control or termination payment to any present or former director, officer, employee, individual consultant or independent contractor of any Seller, (j) establish, adopt, enter into, amend or terminate any Employee Benefit Plan or any plan, agreement, program, policy, trust, fund or other arrangement that would be a Employee Benefit Plan if it were in existence as of the date of this Agreement, (k) grant any equity or equity-based awards, (l) forgive or discharge in whole or in part any outstanding loans or advances to any present or former director, officer, employee, individual consultant or independent contractor of any Seller, or (m) agree, whether in writing or otherwise, to do any of the foregoing set forth in clauses (a) through (m).
5.13 No Solicitation of Alternate Transaction. Between the date of this Agreement and the Closing Date, Sellers shall not, and shall ensure that, their respective directors, members, officers, partners, employees, independent contractors, consultants, counsel, accountants, investment advisors and other representatives and agents shall not, directly or indirectly, solicit offers from, negotiate with, provide any nonpublic information to, enter into any agreement with,
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or in any manner encourage, accept or consider any proposal of, any third party relating to the acquisition of any Seller, any of their assets (except in the ordinary course of business) or Business, in whole or in part, whether through a tender offer (including a self-tender offer), exchange offer, merger, consolidation, sale of substantial assets or of a significant amount of assets, sale of securities, acquisition of any of a Seller’s securities, liquidation, dissolution or similar transaction involving any Seller (each, a “Prohibited Transaction”). Sellers shall promptly inform Acquirors of any such inquiry, the name of the third party making such inquiry and the terms of any proposal. In the event any Seller enters into a Prohibited Transaction, such Seller shall reimburse Acquirors for all of its costs and expenses related to the transactions contemplated by this Agreement, without limiting the other rights of Acquirors under any Law.
5.14 Corporate Integrity Agreement Implementation; Dismissal/Settlement of State Claims. Sellers shall cooperate fully with Acquirors in implementing and complying with the Corporate Integrity Agreement pursuant to the Corporate Integrity Agreement Compliance Plan and in carrying out any ongoing obligations under Confidential Settlement Agreement and General Release of Claims, dated July 8, 2013 by and between Sellers and their Affiliates and Zachary Wolfson, and the Stipulation and Order of Settlement and Dismissal by and among the State of New York, Sellers and their Affiliates, and relator Zachary Wolfson.
5.15 Post-Closing Operations of Acquirors. Selling Group acknowledges that, after the Closing, the Purchased Assets will be the sole and exclusive property of Acquirors. However, inasmuch as certain decisions that will be made by Acquirors can have a direct and material effect on the Earnout Payment and Supplemental Earnout Payment, Acquirors agree to use their commercially reasonable efforts not to take actions that would materially and negatively affect the Earnout Payment and Supplemental Earnout Payment and will not make any such decisions unless in their reasonable best judgment, after meaningful consultation with Sellers, such decisions are necessary in the context of the overall business objectives of the Acquirors and their Affiliates. Further, after the Closing, Acquirors agree to make best efforts to implement an electronic health records (“EHR”) system or program in the Business and shall not unreasonably delay such implementation; provided, however, that Selling Group acknowledges and agrees that Acquirors shall not be liable to Selling Group for failure to implement or any delay in implementation of an EHR system or program, or to any liability related to the earning of any federal incentive payments related to the implementation of such EHR system.
5.16 Custodian of Records. From and after Closing, PC Seller shall remain as custodian of medical records of PC Seller, including all medical records related to the Business prior to the Closing. PC Buyer shall not assume any responsibility, and shall not be liable, to any third party related to Seller’s medical records or protected health information. PC Buyer may examine, and at its expense, make copies of medical records as necessary in connection with the provision of medical services after the Closing. PC Seller shall provide PC Buyer with reasonable access to such medical records during normal business hours, upon reasonable advance notice, to examine and make copies of the medical records, as necessary, to conduct the Business after Closing. PC Seller’s medical records, including all medical records related to the Business prior to Closing, shall be Excluded Assets (as defined in Section 1.2).
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ARTICLE VI
SURVIVAL; INDEMNIFICATION
6.1 Survival. All representations and warranties of Acquirors and each of the entities and individuals in the Selling Group contained in this Agreement shall survive the Closing and shall remain in full force and effect for the longer of any applicable statute of limitations or a period of two (2) years after the Closing; provided, however, that the representations and warranties set forth in Sections 3.1 (Organization), 3.2 (Authority Relative to this Agreement), 3.3 (No Violation), 3.4 (Purchased Assets), 3.7 (ERISA; Benefit Plans), 3.10 (Compliance with Laws), 3.12 (Taxes), 3.16 (Broker Fees), 3.19 (Certain Payments), 3.20 (Designated Health Services), 4.1 (Organization of Acquirors), 4.2 (Authority Relative to this Agreement), 4.3 (No Violation) and 4.5 (Broker Fees) (collectively, the “Fundamental Representations”) shall survive the Closing and shall remain in full force and effect until the expiration of the applicable statute of limitations. Notwithstanding any right of any party to investigate fully the affairs of another party, and notwithstanding any knowledge of facts determined or determinable by any party pursuant to such investigation or right of investigation, each party has the right to rely fully upon the representations, warranties, covenants, agreements of any other party contained in this Agreement or in any certificate or other document delivered pursuant to or in connection with the transactions contemplated by this Agreement. Covenants of Acquirors and each of the entities and individuals in the Selling Group that contemplate or may involve actions to be taken or obligations in effect after the Closing shall survive the Closing in accordance with their terms, or if no term is specified, for two (2) years following the Closing. Any claims for indemnification under this Section 6.1 must be made, if at all, within the applicable survival period set forth in this Section 6.1.
6.2 Indemnification. From and after the Closing, the parties to this Agreement shall indemnify each other as set forth below.
(a) Each Seller and each Owner shall, jointly and severally, indemnify, defend and hold harmless each of the Acquirors and each of Acquirors’ respective shareholders, officers, directors, employees, agents and affiliates (the “Acquiror Indemnitees”), from and against any and all losses, damages, Liabilities and claims (“Losses”) arising out of, based upon, or resulting from any or all of (i) the Excluded Assets; (ii) the Excluded Liabilities; (iii) any action, claim or proceeding, whether brought or threatened, by any future, current or former equity owner of any Seller or beneficiary of any Owner or any relative or Affiliate of any such future, current or former equity owner of any Seller or beneficiary of any Owner; (iv) any Liability, other than the Assumed Liabilities, of any member of the Selling Group (including any Liability of any Acquiror under any bulk transfer law, any common law or other legal doctrine of de facto merger or successor liability, or otherwise by operation of Law) and any Liability for Taxes of any member of the Selling Group; (v) any inaccuracy as of the Closing, or at any time thereafter during the applicable survival period as specified in Section 6.1, of any representation or warranty of any Seller which is contained in this Agreement or any document contemplated to be delivered in connection with or pursuant to this Agreement, including the Noncompetition Agreements; (vi) any Liability of any Seller in connection with ERISA or Employee Benefit Plans; (vii) other than the Assumed Liabilities, any Liability of any Seller related to employees or independent contractors of such Seller, including workers’ compensation claims, severance payments, claims related to ownership, or compensation accrued prior to the Closing; (viii) any
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breach or nonfulfillment by any member of the Selling Group of any of its, his, her or their covenants, agreements or other obligations contained in or made pursuant to this Agreement or any agreement contemplated to be delivered in connection with or pursuant to this Agreement, including the Noncompetition Agreements; (ix) any Liability of any member of the Selling Group for a brokerage fee, commission or finder’s fee in connection with the transaction contemplated by this Agreement resulting from a breach of Section 3.16 hereof; (x) any Liability arising from the collection of the accounts receivables of any Seller; (xi) any Liability arising from or relating to any Seller’s or any Owner’s participation in a governmental or other healthcare program which is or may be asserted before or after the Closing including but not limited to audits, investigations, reviews, overpayments, damages, fines, penalties, costs of investigations, necessary audits and any prospective compliance obligations imposed on any Acquiror including any claims of successor liability resulting from any Seller’s or any Owner’s operation of the Business prior to the Closing; (xii) any Liability arising from or relating to any Liens, loans or other forms of indebtedness of any member of the Selling Group; (xiii) any Liability arising from or relating to the negotiation or execution of the Corporate Integrity Agreement, or any Liability arising from or relating to the Corporate Integrity Agreement prior to the Closing, including the implementation thereof prior to the Closing; (xiv) any Liability arising from or relating to Confidential Settlement Agreement and General Release of Claims, dated July 8, 2013 by and between Sellers and their Affiliates and Zachary Wolfson; (xv) any Liability arising from or relating to the Stipulation and Order of Settlement and Dismissal by and among the State of New York, Sellers and their Affiliates, and relator Zachary Wolfson; (xvi) any Liability arising from or relating to any negotiations or discussions between and among any Seller and/or any Owner and potential target entities for acquisition, unless such action was conducted directly by Acquirors, including any discussions or negotiation prior to the Closing between any Seller and/or any Owner and RG Psychological Services, P.C.; (xvii) any Liability arising from or relating to the operation of the Business prior to the Closing, including any malpractice claims arising from or related to professional services rendered prior to the Closing, (xvii) any Liability arising from or relating to Selling Group’s Prior Acts Liabilities and (xviii) any Liability arising from or relating to the allocation and distribution of the Purchase Price among the Selling Group. Sellers and Owners shall reimburse Acquirors for any and all fees, costs and expenses of any kind related to any Losses (including any and all Legal Expenses (as defined below)) and, for purposes hereof, such fees, costs and expenses shall be deemed to be Losses. “Legal Expenses” of a person shall mean any and all fees, costs and expenses of any kind reasonably incurred by such person, including reasonable legal fees incurred in defending against any threatened or asserted claim.
(b) Acquirors shall, jointly and severally, indemnify, defend and hold harmless each individual and entity in the Selling Group and each such individual and entity’s respective members, officers, directors, employees, agents and affiliates from and against any and all Losses arising out of, based upon or resulting from (i) any inaccuracy as of the Closing, or at any time thereafter during the applicable survival period as specified in Section 6.1, of any representation or warranty of any Acquiror which is contained in this Agreement or any document delivered in connection with or pursuant to this Agreement, including the Noncompetition Agreements; (ii) any breach or nonfulfillment by any Acquirors of any of its covenants, agreements or other obligations contained in or made pursuant to this Agreement; (iii) any Liability arising after the Closing in connection with the use or operation of the Purchased Assets after the Closing, or other conduct of the Business, by Acquirors subsequent to
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the Closing; and (iv) any Assumed Liability. Acquirors shall reimburse Sellers for any and all fees, costs and expenses of any kind related to any Losses (including, without limitation, any and all Legal Expenses) and, for purposes hereof, such fees, costs and expenses shall be deemed to be Losses.
(c) Promptly after receipt by any Person entitled to indemnification under this Section 6.2 (an “Indemnified Party”) of notice of the commencement of any action by a third party in respect of which the Indemnified Party will seek indemnification hereunder, or knowledge of an Indemnified Party of any basis for a claim for indemnification hereunder not involving a third party claim (and in no event more than sixty (60) days after receipt of such notice or the discovery of facts giving rise to such knowledge), the Indemnified Party shall notify each Person that is obligated to provide such indemnification (an “Indemnifying Party”) thereof in writing; provided, however, that any failure to so notify the Indemnifying Party shall not relieve it from any Liability that it may have to the Indemnified Party other than to the extent the Indemnifying Party is prejudiced thereby. With respect to a claim for indemnification involving an action brought by a third party and as to which the Indemnifying Party has acknowledged in writing its responsibility to provide indemnification pursuant to this Section 6.2, the Indemnifying Party shall be entitled to control the defense of such action with counsel reasonably satisfactory to the Indemnified Party; provided, however, that the Indemnifying Party shall actively and diligently pursue such defense on behalf of Indemnified Party, the Indemnified Party shall be entitled to participate in the defense of such claim and to employ its own counsel at its own expense to assist in the handling of such claim. The Indemnifying Party shall obtain the prior written approval of the Indemnified Party before entering into any settlement of such claim or ceasing to defend against such claim (with such approval not to be unreasonably withheld); and no Indemnifying Party shall consent to the entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by each claimant or plaintiff to each Indemnified Party of a release from all Liability in respect of such claim. If the Indemnifying Party does not assume control of defense of such action as provided in this Section 6.2, the Indemnified Party shall have the right to defend such action in such manner as it may deem appropriate at the cost and expense of the Indemnifying Party, and the Indemnifying Party will reimburse the Indemnified Party therefor in accordance with this Section 6.2.
(d) In the event the Indemnified Party should have a claim against the Indemnifying Party hereunder which does not involve a claim or demand being asserted against or sought to be collected by a third party, the Indemnified Party shall with reasonable promptness send a notice of such claim the Indemnifying Party. If the Indemnifying Party does not notify the Indemnified Party within thirty (30) days after receipt of the notice that that the Indemnifying Party disputes such claim, the amount of such claim shall be conclusively deemed a liability of the Indemnifying Party hereunder. If the Indemnifying Party does notify the Indemnified Party in writing that it disputes such claim within such thirty (30) day period, the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party on the terms and subject to the provisions of this Agreement.
(e) In the event that the Indemnifying Party shall be obligated to indemnify the Indemnified Party pursuant to this Section 6.2, the Indemnifying Party shall, upon payment of such indemnity in full, be subrogated to all rights of the Indemnified Party with respect to the claims to which such indemnification relates.
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6.3 Limitation on Liability.
(a) Basket. The obligation of Sellers and Owners to indemnify the Acquiror Indemnitees under Section 6.2(a)(v) will only arise once the aggregate of such Losses incurred by the party seeking indemnification exceeds One Hundred Fifty Thousand Dollars ($150,000) (the “Basket Amount”). If the Basket Amount is met, the Indemnifying Party shall thereafter indemnify against and compensate and reimburse for the amount of Losses in excess of the initial Fifty Thousand Dollars ($50,000) incurred by the party seeking indemnification.
(b) Cap. The aggregate liability or obligation of Sellers and Owners to indemnify the Acquiror Indemnitees under Section 6.2(a)(v) shall not, in the aggregate, exceed Five Million Dollars ($5,000,000) (the “Cap”).
(c) Notwithstanding the foregoing, in no event shall Section 6.3(a) or Section 6.3(b) apply to any Losses suffered or incurred by Acquirors as a result, directly or indirectly, of any of the following: (i) any breach of the Fundamental Representations; (ii) Sellers’ willful and/or intentional misrepresentation or fraud; or (iii) any Excluded Liability.
6.4 Effect of Investigation; Waiver. An Indemnified Party’s right to indemnification or other remedies based upon the representations, warranties, covenants and agreements of the Indemnifying Party will not be affected by any investigation or knowledge of the Indemnified Party or any waiver by the Indemnified Party of any condition based on the accuracy of any representation or warranty or compliance with any covenant or agreement. Such representations and warranties and covenants and agreements shall not be affected or deemed waived by reason of the fact that the Indemnified Party knew or should have known that any representation or warranty might be inaccurate or that the Indemnifying Party failed to comply with any agreement or covenant. Any investigation by such party shall be for its own protection only and shall not affect or impair any right or remedy hereunder.
6.5 Set-Off Right. An indemnification claim to recover Losses by set off from amounts otherwise payable by Acquirors pursuant to this Agreement shall be subject to the provisions of this Section 6.5. The Indemnified Party shall provide written notice to the Sellers, specifying in reasonable detail the basis for a claim of set-off. Sellers shall have thirty (30) days from delivery of notice to respond to such notice (the “Response Period”). If Sellers consent in writing to the set-off or fail to respond during the Response Period, the applicable Acquiror may set off any amount to which such Acquiror may be entitled under this ARTICLE VI against amounts otherwise payable by such Acquiror pursuant to this Agreement and shall remit such amount to the Indemnified Party. If Sellers provide written notice to the Indemnified Party disputing the proposed set-off, the parties shall attempt in good faith to resolve the dispute related to the set-off. Neither the exercise of, nor the failure to exercise, such right of set off will constitute an election of remedies nor limit in any manner the enforcement of any other available remedies. The exercise of the right of set-off by Acquirors in accordance with this Section 6.5 will not constitute a breach of this Agreement or any other agreement or instrument contemplated by this Agreement. In the event the parties fail to agree on the proposed set-off, either party shall have the right to submit the dispute to arbitration pursuant to Section 8.15 herein.
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ARTICLE VII
TERMINATION AND ABANDONMENT
7.1 Termination. This Agreement may be terminated and the transactions contemplated herein may be abandoned at any time prior to the Closing only:
(a) by mutual consent of Acquirors, on the one hand, and Sellers, on the other hand;
(b) by Sellers if any of the conditions specified in Section 2.2 hereof have not been met or waived by Sellers at such time as such condition can no longer be satisfied;
(c) by Acquirors, if any of the conditions specified in Section 2.1 hereof has not been met or waived by Acquirors at such time as such condition can no longer be satisfied;
(d) by (i) Acquirors, if Sellers shall fail to perform in any material respect, their respective agreements contained herein required to be performed prior to Closing, or materially breach (that is, a breach which would be subject to indemnification under ARTICLE VI) any of their representations, warranties or covenants contained herein, in each case in writing, without liability to the terminating parties on account of such termination (provided the terminating parties are not otherwise in material default or in material breach of this Agreement); or (ii) Sellers, if Acquirors shall fail to perform in any material respect its agreements contained herein required to be performed prior to Closing, or materially breach (that is, a breach which would be subject to indemnification under ARTICLE VI) any of its representations, warranties or covenants contained herein, in each case in writing, without liability to the terminating parties on account of such termination (provided the terminating parties are not otherwise in material default or in material breach of this Agreement); or
(e) by either party if the Closing Date does not occur on or prior to December 16, 2013.
7.2 Procedure and Effect of Termination. In the event of termination by Acquirors, on the one hand, or Sellers, on the other hand, pursuant to Section 7.1, written notice thereof shall immediately be given to the other parties and this Agreement shall terminate and the transactions contemplated hereby shall be abandoned without further action by any of the parties hereto. Notwithstanding the foregoing, the obligations set forth in Section 5.7 (Public Announcement), ARTICLE VIII (Miscellaneous), this Section 7.2 and the obligations contained in that certain Nondisclosure Agreement executed on April 4, 2010, by and among PC Seller and an Affiliate of Acquirors, shall survive termination of this Agreement, and nothing herein shall relieve any party from its obligations with respect to any breach of this Agreement occurring prior to a termination. In such event, each party shall, upon request, return all documents, work papers and other material of any other party (and all copies thereof) relating to the transactions contemplated herein, whether so obtained before or after the execution hereof, to the party furnishing the same.
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ARTICLE VIII
MISCELLANEOUS
8.1 Expenses. Except as otherwise provided in this Agreement, each of the parties hereto shall pay its, his or her own fees and expenses (including the fees of any attorneys, accountants, investment bankers, advisors or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby whether or not the transactions contemplated hereby are consummated.
8.2 Headings. Headings herein are for convenience of reference only, do not constitute part of this Agreement, and shall not be deemed to limit or otherwise affect any of the provisions hereof.
8.3 Notices. All notices or other communications required or permitted hereunder shall be given in writing and shall be deemed given if delivered by hand (including by courier), mailed by registered or certified mail, postage prepaid (return receipt requested), sent by nationally recognized overnight courier providing a delivery receipt, or sent by facsimile or other electronic means, to the address or facsimile number as set forth on the signature pages hereto or such other address or facsimile number as shall be furnished in writing by such party, and any such notice or communication shall be effective and be deemed to have been given as of the date so delivered or, if mailed upon receipt thereof, or if sent by facsimile, or other electronic means, on production of a transmission report by the machine from which it was sent which indicates that the notice was sent successfully in its entirety, and received by, to the recipient; provided, however, that any notice or communication changing any of the addresses or facsimile numbers set forth above shall be effective and deemed given only upon its receipt.
8.4 Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, and the provisions of ARTICLE VI shall inure to the benefit of the Indemnified Parties referred to therein; provided, however, that neither this Agreement nor any of the rights, interests or obligations of the parties hereunder may be assigned by any of the parties without the prior written consent of the other parties.
8.5 Entire Agreement. This Agreement (including the Schedules and Exhibits attached hereto which are incorporated herein) embodies the entire agreement and understanding of the parties with respect to the transactions contemplated hereby and supersedes all prior or contemporaneous written or oral agreements, commitments, arrangements or understandings with respect thereto including that certain letter of intent dated June 19, 2013, by and among the Selling Group and an Affiliate of Acquirors, but excluding that certain Nondisclosure Agreement executed as of April 9, 2010, by and among PC Seller and an Affiliate of Acquirors and such other documents executed contemporaneously with this Agreement.
8.6 Counterparts; Facsimile Transmission. This Agreement may be executed in any number of counterpart signature pages each of which shall be deemed to be an original and all of which together shall constitute one and the same original instrument. This Agreement and its counterparts may be executed and delivered by facsimile transmission with confirmation of received transmission or other electronic means that faithfully reproduces the original with same effect as if a manually signed original were personally delivered.
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8.7 Confidentiality.
(a) No party shall issue any press release or announcement or make any disclosure to any other Person (other than its counsel, financial advisors and accountants) relating to the subject matter of this Agreement without the prior written approval of Acquirors and the Selling Group; provided, however, that any party may make any public disclosure it believes in good faith is required by Law, legal process, the Corporate Integrity Agreement or other contract or the requirements of any stock market on which such party’s (or such party’s parent corporation’s), capital stock is listed or quoted (in which case the disclosing party shall advise the other parties of such disclosure and provide them with a copy of such disclosure); and provided further, that Acquirors shall be permitted to issue one press release prior to Closing, regardless of Selling Group’s consent. Notwithstanding the foregoing, following the Closing, Acquirors or their Affiliates shall have the right to issue a press release or other announcement announcing the consummation of the transactions contemplated by this Agreement.
(b) Notwithstanding anything to the contrary contained in this Agreement, Sellers may disclose to the OIG as part of the disclosure Sellers make under the Corporate Integrity Agreement the fact that Sellers and Acquirors have entered into the transactions contemplated by the parties and any information relating to such transaction or this Agreement which Sellers determine, in good faith upon advice of counsel, is required or, in light of Sellers’ obligations under the Corporate Integrity Agreement, appropriate for Sellers to make, or Sellers propose to make in response to a request for such information from the OIG, provided that Acquirors shall be given opportunity (which shall be reasonable in light of all facts and circumstances) to review and comment upon the information Sellers intend to include in any such submission. In the event that any such disclosure that Sellers intend to make includes any information that constitutes the Intellectual Property of Acquirors, Sellers will provide reasonable (in light of all facts and circumstances, including the time frame in which such disclosure is required to be made) assistance to Acquirors to take reasonable steps to assure that such information concerning the Intellectual Property of Acquirors is maintained in confidence, including, but not limited to, (i) requesting that the OIG treat such information in accordance with the Freedom of Information Act, 5 U.S.C. Section 552(b)(4), (ii) requesting of the OIG that Sellers and Acquirors be given prior notice of a proposed release of such information to Persons or entities outside of the OIG; (iii) requesting that the OIG otherwise assure the confidentiality of such information provided by Acquirors in accordance with the Corporate Integrity Agreement and taking other reasonable steps that may be requested by Acquirors and to which Sellers may, in their sole discretion, agree to assure that the OIG honors its confidentiality obligations in that section; (iv) where such information is to be provided in response to a request by the OIG, take reasonable steps to narrow the request from the OIG in an appropriate manner in order to limit the amount of information, if any, that constitutes the Intellectual Property of Acquirors covered by such request; and (v) make reasonable efforts to permit Acquirors, with the concurrence of the OIG, to disclose such information directly to the OIG, provided that in any such case, Acquirors shall give Sellers a timely opportunity to review, comment upon and approve the information Acquirors intend to include in such submission. The additional safeguards described in subsections (i) through (v) above are designed to help assure the confidentiality of the Trade Secrets, the disclosure of which would have a material adverse impact on Acquirors. These additional provisions are not intended to interfere with Sellers’ ability to meet its disclosure obligations under the Corporate Integrity Agreement. Each party shall promptly notify the other in the event it receives an inquiry, investigation or request for information from the OIG or other governmental agency into the matters relating to the proposed transactions.
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8.8 Governing Law. This Agreement shall in all respects be interpreted, construed and governed exclusively by and in accordance with the Laws of the State of New York; provided, however, that each right transferred under Section 5.9 of this Agreement (relating to the enforcement of noncompetition and nonsolicitation provisions) will be governed by the choice of law provision contained in the agreement wherein such noncompetition and nonsolicitation provisions are set forth.
8.9 Certain Definitions.
(a) An “Affiliate” or “affiliate” of a specified Person is a Person, that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the Person specified. As used in this definition, “control” (including, with correlative meanings, “controlled by” and “under common control with”) shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies of the specified Person (whether through ownership of securities or other ownership interest, by contract or otherwise).
(b) “Acquirors’ Knowledge” means (i) the actual knowledge of Adam Singer, M.D. and R. Jeffrey Taylor as to the matter to which the knowledge relates; and (ii) any additional knowledge that would be available to such persons after making such inquiry into such matter as a reasonable person seeking to accurately, truthfully and completely address such matter would have made under the circumstances applicable to such matter.
(c) “Business” shall mean (1) with respect to PC Seller, any of the following: (i) the arranging for and/or provision of Facilities-based medical care and associated services for patients of other physicians, or for patients who do not have a primary care physician while such patients are in Facilities (whether or not such patients are referred via an arms-length contractual relationship with a Facility or a payor); (ii) the arranging for and/or provision of more than a Provider’s pro rata share of emergency room, department, or Facility coverage at a Facility if a Provider is required to provide such coverage by contractual arrangement or by the Facility’s medical staff bylaws, policies, or procedures generally applicable to members of such Facility’s medical staff; (iii) the arranging for and/or provision of medical care and associated services by a Provider for patients in a skilled nursing facility, nursing home, assisted living facility, hospice, or adult care home where such Provider is acting as a primary caregiver; (iv) the arranging for and/or provision of emergency room, department, or Facility coverage at a Facility which does not require such coverage by its medical staff bylaws, policies, or procedures; (v) the development and implementation of programs to provide and/or manage Facilities-based medical care; and (vi) the provision of billing, management, medical director, or other services or software to any such Facilities or programs; and (2) with respect to Management Seller, any of the following: (i) the development and implementation of programs to manage Facilities-based medical care and associated services for patients of other physicians, or for patients who do not have a primary care physician while such patients are in Facilities; and (ii) the provision of billing, management or other non-clinical administrative services or software to any such Facilities or Facility-based programs.
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(d) “COBRA” means Part 6 of Subtitle B of Title I of ERISA, Code §4980B, and any similar state Law.
(e) “Code” means the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
(f) “Employee Benefit Plan” means (i) each “employee benefit plan” (as defined in ERISA §3(3)) and (ii) any other arrangement, obligation, plan, program or practice, whether or not legally enforceable, to provide benefits or compensation, other than currently-paid salary, as compensation for services rendered, to one or more present or former employees, directors, agents, or independent contractors, that is maintained, sponsored, contributed to (or required to be contributed to) by any Seller or any ERISA Affiliate, or for which a Seller or any ERISA Affiliate otherwise has or may have any Liability, contingent or otherwise, including employment agreements, offer letters, severance policies, programs or agreements, post-employment arrangements, change in control agreements, executive compensation arrangements, deferred compensation arrangements, incentive arrangements, consulting or other compensation arrangements, bonus plans, phantom stock or equity plans, tuition reimbursement programs or scholarship programs, Section 529 plans, health or medical benefits, insurance (including self-insurance), disability or sick leave, any plans subject to Section 125 of the Code or any comparable provision of any other applicable Law, any plans providing benefits or payments in the event of a change of ownership or control, and each other employee benefit plan, fund, program, agreement or arrangement.
(g) “Environmental Law” means any common law principle or Law of any governmental authority relating to the environment or public health and safety, including any statute, regulation or order pertaining to any of the following: (i) treatment, storage, disposal, generation and transportation of toxic or hazardous substances or solid or hazardous waste; (ii) air, water and noise pollution; (iii) groundwater and soil contamination; (iv) the release or threatened release into the environment of toxic or hazardous substances, or solid or hazardous waste, including emissions, discharges, injections, spills, escapes or dumping of pollutants, contaminants or chemicals; (v) the protection of wild life, marine sanctuaries and wetlands, including all endangered and threatened species; (vi) underground and other storage tanks or vessels, abandoned, disposed or discarded barrels, containers and other closed receptacles; (vii) public health and safety; and (viii) manufacture, processing, use, distribution, treatment, storage, disposal, transportation or handling of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or oil or petroleum products or solid or hazardous waste. As used above, the terms “release” and “environment” have the meanings set forth in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended.
(h) “Escrow Deposit” shall mean an amount of One Million Dollars ($1,000,000) which shall be deducted from the Closing Payment and remain with the Escrow Agent for a period of two (2) years following the Closing unless earlier disbursed pursuant to the Escrow Agreement;
(i) “Facility” or “Facilities” means short-term and long-term acute care hospitals and long term care facilities, including but not limited to, rehabilitation hospitals, skilled nursing facilities, nursing homes, assisted living facilities, adult foster care homes, hospice facilities and programs and other long term care or residential facilities.
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(j) “Immediately Available Funds” shall mean good funds delivered by wire transfer to an account designated by the intended recipient.
(k) “Including” or “includes” shall be deemed to mean “including, without limitation” and “includes, without limitation.”
(l) “Intellectual Property” means (i) inventions (whether patentable or unpatentable and whether or not reduced to practice), and all improvements thereto; (ii) trademarks, service marks, logos, trade names, Internet domain names and websites, and corporate names, together with all translations, adaptations, derivations and combinations thereof and including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith, copyrightable works, all copyrights and all applications, registrations and renewals in connection therewith; (iii) trade secrets and confidential business information (including, but not limited to, data, know-how, customer lists, current and anticipated customer requirements, price lists, market studies and business plans), however documented; (iv) proprietary computer software and programs (including object code and source code) and other proprietary rights and copies and tangible embodiments thereof (in whatever form or medium); (v) database technologies and systems (and related processes, formulae, compositions, improvements, devices, know-how, inventions, discoveries, concepts, ideas, designs, methods and information) and any other related information, however documented; (vi) all databases and data collections and all rights therein; and (vii) any similar or equivalent rights to any of the foregoing anywhere in the world.
(m) “Law” or “Laws” means, collectively, all federal, state and local laws, statutes, codes, ordinances, orders, decrees, rulings, rules and regulations, including judicial opinions.
(n) “Liability” or “Liabilities” shall mean any liability or obligation of whatever kind or nature (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due).
(o) “Lien” or “Liens” shall mean any pledge, lien (including any Tax lien), charge, claim, encumbrance, security interest, deed of trust, mortgage, or outstanding tax obligations.
(p) “Material Adverse Effect” shall mean any change, effect, event, occurrence, state of facts, or development that, individually or in the aggregate with any other change, effect, event, occurrence, state of facts, or development, is materially adverse to the financial condition or results of operations of the entity or entities taken as a whole; provided, however, that none of the following shall be deemed in itself, or in any combination, to constitute, and none of the following shall be taken into account in determining whether there has been or will be, a Material Adverse Effect: (i) any adverse change, effect, event, occurrence, state of facts, or development attributable to conditions affecting providers of Facility based medical services, the United States economy as a whole or the capital markets in general or the markets in which the party operates; (ii) any adverse change, event, development or effect arising from or relating to changes in Generally Accepted Accounting Principles; (iii) any adverse change, event, development or effect arising from or relating to changes in Law, rules,
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regulations, orders or other binding directives issued by any governmental authority; (iv) any adverse change, effect, event, occurrence, state of facts, or development arising from or relating to the commencement, continuation or escalation of a war, material armed hostilities or other material international or national calamity or act of terrorism directly or indirectly involving the United States; and (v) the announcement of the transactions contemplated hereby; (vi) actions or omissions of, or on behalf of, the other party; other than, in the case of clauses (i) through (iv), to the extent such circumstances affect the party in a disproportionate manner as compared to other businesses in the industry in which such party operates.
(q) “Person” or “person” shall mean an individual or any corporation, partnership, joint venture, association, limited liability company, trust, unincorporated organization or other legal entity or a government or governmental entity;
(r) “Personal Goodwill” shall mean the business created or developed by the Owners, or by or through their personal reputation, contacts or relationships, or otherwise possessed by the Owners in connection with the management and operation of the Business, including the Owners’ personal business relationships with referral sources, customers, suppliers and any others having business relationships with Sellers.
(s) “Provider” shall mean a Person who has met the requirements of the New York State Board of Medicine or any other appropriate New York state authority, and has a current New York license to provide professional services as a medical doctor, doctor of osteopathy, doctor of psychology, nurse practitioner, physician assistant, or clinical social worker.
(t) “Revenue Contracts” shall mean, to the extent PC Seller is a party thereto or a beneficiary thereof, all contracts to provide healthcare services, including medical directorship and other administrative services, as set forth in Attachment 2 to Schedule 1.1.
(u) “Selling Group’s Knowledge” means (i) the actual knowledge of any Owner or Marianne Rattray as to the matter to which the knowledge relates; and (ii) any additional knowledge that would be available to such persons after making such inquiry into such matter as a reasonable person seeking to accurately, truthfully and completely address such matter would have made under the circumstances applicable to such matter.
(v) “Tax” or “Taxes” shall mean any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, abandoned property, escheat, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, whether computed on a separate or consolidated, unitary or combined basis or in any other manner, including any interest, penalty, or addition thereto, whether disputed or not and including any obligation to indemnify or otherwise assume or succeed to the Tax liability of any other Person.
(w) “Tax Return” shall mean all returns, declarations, reports, estimates and information statements and returns required or permitted to be filed with a governmental authority relating to Taxes, including, but not limited to, original returns and filings, amended
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returns, claims for refunds, information returns, ruling requests, administrative or judicial filings, accounting method change requests, responses to revenue agents’ reports (federal, state, foreign, municipal or local) and settlement documents, and any schedules attached to any of the foregoing.
8.10 Severability. If any one or more of the provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected thereby and this Agreement will be construed and enforced as if such invalid, illegal or unenforceable provisions had not been included herein. To the extent permitted by applicable law, each party waives any provision of law which renders any provision of this Agreement invalid, illegal or unenforceable in any respect.
8.11 Remedies. The parties hereto recognize that any breach of the terms of this Agreement may give rise to irreparable harm for which money damages would not be an adequate remedy, and accordingly agree that, in addition to the indemnification remedies set forth in ARTICLE VI hereof, any non-breaching party shall be entitled to enforce the terms of this Agreement by a decree of specific performance and the non-defaulting party shall be entitled to recover its costs and expenses, including reasonable attorneys fees, incurred as a result of the defaulting party’s breach.
8.12 Amendment; Waiver. The parties may, only by written agreement, modify, amend or supplement any term or provision of this Agreement, and any term or provision of this Agreement may be waived by the party which is entitled to the benefit thereof. Any waiver pursuant to this Agreement shall be in writing and shall be effective only in the specific instance and for the purpose for which given. No failure or delay on the part of any party in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies expressly specified in the Agreement are cumulative and are not exclusive of any rights or remedies which any party would otherwise have.
8.13 Third Parties. Nothing in this Agreement shall be deemed to be for the benefit of, or enforceable by or on behalf of any Person other than the parties to this Agreement or their Affiliate, which shall be deemed third party beneficiaries of this Agreement, and the Indemnified Parties.
8.14 Attorneys’ Fees. If any party files a suit or an action, or commences any proceeding (whether in arbitration, mediation or otherwise), to enforce the provisions of this Agreement or otherwise with respect to the subject matter of this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys’ fees as fixed by the court or arbitrator.
8.15 Arbitration. The parties agree to submit any controversy, claim or dispute arising out of or relating to the interpretation, performance or breach of this Agreement, including the scope of this arbitration provision and the parties’ compliance with their obligations under this Section 8.15 to binding arbitration administered by the American Arbitration Association (“AAA”) in its New York, New York regional office in accordance with AAA Rules and Procedures, as modified by the specific provisions set forth in this Section 8.15. In the event of any conflict between AAA Rules and Procedures and the specific provisions set forth in this Section 8.15, the provisions of this Section 8.15 shall prevail.
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(a) Notice of Grievance. Before submitting any controversy, claim or dispute to arbitration, any parties claiming to be aggrieved shall deliver to the other parties, in the same manner provided in this Agreement for the delivery of notices, a written statement of the alleged grievance identifying any documents then reasonably known to that party that support the grievance and the relief requested or proposed. If, within thirty (30) days after delivery of the written statement of grievance, the other parties do not agree to furnish the relief requested or proposed, or otherwise does not satisfy the demand of the party claiming to be aggrieved, then the parties claiming to be aggrieved may demand arbitration in accordance with this Section 8.15.
(b) Selection of Arbitrator. The arbitration shall take place before a single arbitrator who shall be selected jointly by both parties. If the parties are unable to agree within fifteen (15) days each party shall submit a list of three (3) arbitrators from the AAA panel to the other party. Each party may strike two (2) from the list. AAA shall make the final selection of the arbitrator from the two (2) remaining names.
(c) Power of Arbitrator In addition to all other powers the arbitrator enjoys under this Agreement, AAA Rules and Procedures, AAA Code of Ethics and the laws of the State of New York, the arbitrator expressly shall have all jurisdiction and power to make rulings as to procedures for the conduct for the arbitration; to declare rights of the parties, and to grant temporary and permanent injunctive and other equitable relief; to order specific performance of contractual obligations; to grant compensatory and punitive damages; to determine the admissibility, relevance, materiality and weight of any evidence offered by any of the parties (provided, that mere affidavits without the ability of a party to examine the affiant shall not be admissible); and to take any interim measure with respect to the subject matter in dispute, including but not limited to, measures to facilitate or compel discovery and measures to conserve the rights, funds, goods or materials forming the subject matter in dispute. The decision of the arbitrator shall be in accordance with the substantive laws of the State of New York. The parties may apply for confirmation and/or enforcement of any arbitration award hereunder to the Courts of the State of New York or of such other state, locality, country or territory as may have jurisdiction over the party or parties subject to the award.
(d) Discovery. Each party shall have the right to conduct discovery in the manner and to the extent authorized by the Federal Rules of Civil Procedure as interpreted by the federal courts.
(e) Arbitrator’s Award. The arbitrator’s award shall state the factual and legal basis for the award. The arbitrator’s award shall be final and binding on the parties, and judgment on the award may be entered in any court of competent jurisdiction.
(f) Cost of Arbitration. The cost of the arbitration, including arbitrator’s fees, shall initially be shared equally by the parties. The arbitrator shall award the prevailing party costs of the arbitration in the award, including the prevailing party’s Legal Expenses. The term “costs” includes the fees of the arbitrator, but remains within the sole discretion of the arbitrator as to the awarding of any specific item (other than reasonable attorneys’ fees and costs).
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8.16 Attorney and Tax Advisor Approval. The parties acknowledge that each of them have had the opportunity to have this Agreement and the related documents described herein reviewed by their own counsel and the terms and conditions of same have been deemed satisfactory by all parties. In addition, all parties acknowledge that each of them have had the opportunity to have the tax consequences of the transactions contemplated herein and the other related agreements reviewed by their own tax advisors and are not relying on the other parties or their advisors for any such review or tax advice.
8.17 Time. The parties acknowledge and agree that time shall be of the essence in this Agreement.
8.18 Bulk Sales. If applicable, Acquirors and Sellers hereby waive compliance with the bulk sales Laws and any other similar Laws in any applicable jurisdiction in respect of the transactions contemplated by this Agreement; provided, however, that Sellers shall pay and discharge when due, and agree to hold harmless and indemnify Acquirors against any Losses arising from or otherwise relating to, all claims of creditors (including any taxing authority) asserted against any Acquiror, the Business or the Purchased Assets by reason of such noncompliance and shall take promptly all necessary actions required to remove any Lien which may be placed upon any of the Purchased Assets by reason of such noncompliance.
(Signature Pages Follow)
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written.
| PC BUYER: | INPATIENT HOSPITALIST SERVICES OF NEW YORK, P.C. | |
| Address for Notice:
4605 Lankershim Blvd., Suite 617 |
Adam Singer, M.D. President | |
| North Hollywood, CA 91602 Attention: Chief Executive Officer FAX: 818 ###-###-#### | ||
| with a copy to (which shall not constitute notice):
4605 Lankershim Blvd., Suite 617 North Hollywood, CA 91602 Attention: Vice President of Legal Affairs FAX: 818 ###-###-#### | ||
(PC Buyer’s Signature Page to Asset Purchase Agreement)
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written.
| BUYER: | HOSPITALIST MANAGEMENT CONSULTANTS OF NEW YORK, INC. | |
| Address for Notice: |
| |
|
4605 Lankershim Blvd., Suite 617 North Hollywood, CA 91602 Attention: Chief Executive Officer FAX: 818 ###-###-#### | Adam Singer, M.D. President | |
| with a copy to (which shall not constitute notice):
4605 Lankershim Blvd., Suite 617 North Hollywood, CA 91602 Attention: Vice President of Legal Affairs FAX: 818 ###-###-#### | ||
(Buyer’s Signature Page to Asset Purchase Agreement)
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written.
| PC SELLER: | PARK AVENUE MEDICAL ASSOCIATES, P.C. | |
| Address for Notice: |
| |
| 3 Barker Avenue | Mitchel Kaplan, M.D., President | |
| White Plains, New York 10601 | ||
| Attention: President | ||
| with a copy to | ||
| (which shall not constitute notice): | ||
| Garfunkel Wild, P.C.111 Great Neck Road Great Neck, New York 11021 Attention: Judith Eisen, Esq. FAX: 516 ###-###-#### | ||
(PC Seller’s Signature Page to Asset Purchase Agreement)
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written.
| MANAGEMENT SELLER: | PARK AVENUE HEALTH CARE MANAGEMENT, LLC | |
| Address for Notice: |
| |
| 3 Barker Avenue | Brad Markowitz, President | |
| White Plains, New York 10601 | ||
| Attention: President | ||
| with a copy to | ||
| (which shall not constitute notice): | ||
| Garfunkel Wild, P.C. | ||
| 111 Great Neck Road | ||
| Great Neck, New York 11021 | ||
| Attention: Judith Eisen, Esq. | ||
| FAX: 516 ###-###-#### | ||
(Management Seller’s Signature Page to Asset Purchase Agreement)
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written.
| OWNERS: | ||
| Address for notice: |
| |
|
3 Barker Avenue White Plains, New York 10601 | Mitchel Kaplan, M.D., as an individual | |
| Address for notice: |
| |
|
3 Barker Avenue White Plains, New York 10601 | Mitchell Wolfson, M.D., as an individual | |
| Address for notice: |
| |
|
3 Barker Avenue White Plains, New York 10601 | Joel Blass, M.D., as an individual | |
| Address for notice: |
| |
|
3 Barker Avenue White Plains, New York 10601 | Daniel Sussman, M.D., as an individual | |
| Address for notice: |
| |
|
3 Barker Avenue White Plains, New York 10601 | Brad Markowitz, as an individual | |
| with a copy for all (which shall not constitute notice) to:
Garfunkel Wild, P.C. 111 Great Neck Road Great Neck, New York 11021 Attention: Judith Eisen, Esq. FAX: 516 ###-###-#### | ||
(Owners’ Signature Page to Asset Purchase Agreement)
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EXHIBIT A
OWNERS
Park Avenue Medical Associates, P.C.
| Owner | Ownership Percentage | |
| Mitchel Kaplan | 25% | |
| Mitchell Wolfson | 25% | |
| Joel Blass | 25% | |
| Daniel Sussman | 25% |
Park Avenue Health Care Management LLC
| Owner | Ownership Percentage | |
| Mitchel Kaplan | 19% | |
| Mitchell Wolfson | 19% | |
| Joel Blass | 19% | |
| Daniel Sussman | 19% | |
| Brad Markowitz | 19% | |
| AEM SMM EJ Trust | 5% |
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EXHIBIT B
CALCULATION METHOD FOR PROFIT OF THE EARNOUT BUSINESS
“Earnout Measurement Period” shall be defined as the first full twelve (12) calendar months following the Closing.
“Profit of the Earnout Business” shall be calculated as the total revenue (measured on an accrual basis) for the Earnout Business, less Direct Practice Expenses of the Earnout Business, Local Support Expenses of the Earnout Business, and the IPC Centralized/Allocated Support Expenses, as such expenses are defined in this Exhibit B. Any Compliance Costs incurred by Acquirors or their Affiliates shall not be counted as costs in the calculation of the Earnout Payment or Supplemental Earnout Payment or Tuck-in Acquisition Payment. Further, any EHR-Related Payments shall not be counted in the calculation of the Earnout Payment or Supplemental Earnout Payment or Tuck-in Acquisition Payment.
“Earnout Business” shall be defined as, during the Earnout Measurement Period or Supplemental Earnout Measurement Period, as applicable: the revenues (measured on an accrual basis) generated by the Transferred Providers at the Facilities listed in Attachment 1 to this Exhibit B, plus the revenues generated by the Transferred Providers and any additional Providers hired on or after the Closing Date to provide services for PC Buyer or its Affiliates in the state of New York south of and including Dutchess, Sullivan, and Ulster Counties (the “Earnout Territory”), plus specific expansion of the business in the rest of New York State excluding the greater Buffalo and Syracuse markets (such area, excluding Buffalo/Syracuse, shall be referred to herein as “Upstate New York”) that is achieved through the substantial efforts and assistance of Owners, as such substantial efforts and assistance are reasonably determined by Acquirors. Notwithstanding the foregoing, the Earnout Business shall exclude the Business of PC Buyer and PC Buyer’s Affiliates existing as of the Closing (as measured by the revenues of PC Buyer and PC Buyer’s Affiliates prior to the Closing in the relevant area(s)).
Notwithstanding the foregoing, the Earnout Business (and the EHR-Related Payment and Tuck-In Acquisition Payment) shall exclude any business obtained through acquisition by PC Buyer and/or its Affiliates of Cap Medical PLLC (New Hartford, NY) or Adult Medical Services PC (Williamsville, NY).
The definition of Earnout Business shall not include any Business in any Facility in which any Owner (or a member of his or her immediate family), PC Seller, or Management Seller has an ownership or financial interest, or any referrals to or from any entity in which PC Seller, Management Seller, or any Owner has an ownership interest or financial interest (including but not limited to Hospice of New York).
“Tuck-in Acquisition Payment” shall be defined as follows: should PC Buyer and/or its Affiliates (i) successfully close one or more other acquisitions of either acute-care-focused or post-acute care (in skilled nursing facilities, nursing homes, assisted living facilities, hospices, or adult care homes) focused provider groups in the Earnout Territory (each such entity, an “Acquired Entity”) during the Earnout Measurement Period or Supplemental Earnout Measurement Period, with the substantial efforts and assistance of one or more Owners; and/or
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(ii) successfully close one or more acquisitions of post-acute-care focused provider groups in Upstate New York (each such entity, also an “Acquired Entity”) during the Earnout Measurement Period or Supplemental Earnout Measurement Period with the substantial efforts and assistance of one or more Owners (any of either, a “Tuck-in Acquisition”); then PC Seller shall receive a payment from Acquirors (the “Tuck-in Acquisition Payment”) in Immediately Available Funds, calculated as follows:
| (a) | The Tuck-in Acquisition Payment for each Tuck-in Acquisition shall be made to PC Seller at the same time the seller of the Acquired Entity is paid an earnout payment if the relevant earnout measurement period ends prior to the end of the Supplemental Earnout Measurement Period, or at the time the Supplemental Earnout Payment is made or otherwise would be due to PC Seller, if the Acquired Entity’s earnout measurement period extends past the end of the Supplemental Earnout Measurement Period; |
| (b) | For Tuck-in Acquisitions with an earnout component, the Tuck-in Acquisition Payment for such Tuck-in Acquisition shall be calculated as follows: |
| 1. | If the Acquired Entity’s earnout measurement period is completed before or concurrently with the end of the Supplemental Earnout Measurement Period, the Tuck-in Acquisition Payment for such Acquired Entity shall equal the profit of the earnout business of the Acquired Entity during its earnout measurement period up to the applicable threshold in such Tuck-in Acquisition multiplied by six and one half (6.5), plus any profit of the earnout business of the Acquired Entity above the applicable threshold multiplied by one (1), minus the closing payment. |
| 2. | If the Acquired Entity’s earnout measurement period is not completed before the end of the Supplemental Earnout Measurement Period, PC Buyer or its Affiliate shall calculate the annualized profit of the earnout business of the Acquired Entity, and such calculation shall be based on the actual profit of the earnout business of the Acquired Entity through the end of the Supplemental Earnout Measurement Period. The Tuck-in Acquisition Payment for such Acquired Entity shall equal the annualized profit of the earnout business of the Acquired Entity up to the applicable threshold multiplied by six and one half (6.5), plus any annualized profit of the earnout business above the applicable threshold multiplied by one (1), minus the closing payment paid to the Acquired Entity, and the result multiplied by the following ratio: the number of days the Acquired Entity’s earnout measurement period runs concurrently with the Supplemental Earnout Measurement divided by three hundred sixty five (365). |
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| (c) | For Tuck-in Acquisitions with no earnout component, the Tuck-in Acquisition Payment for such Tuck-in Acquisition shall be calculated as follows: |
| 1. | If the first year following the closing of the Tuck-in Acquisition is completed before or concurrently with the Supplemental Earnout Measurement Period, the Tuck-in Acquisition Payment shall equal six and one half (6.5) times eighty five percent (85%) of the profit of the business of the Acquired Entity calculated at the end of the first year following the closing, and one (1) times the remaining fifteen percent (15%) of the profit of the business of the Acquired Entity, minus the closing payment paid to the Acquired Entity. |
| 2. | If the first year following the closing is not completed before the end of the Supplemental Earnout Measurement Period, PC Buyer or its Affiliate shall calculate the annualized profit of the business of the Acquired Entity, and such calculation shall be based on the actual profit of the earnout business of the Acquired Entity through the end of the Supplemental Earnout Measurement Period. The Tuck-in Acquisition Payment shall equal six and one half (6.5) times eighty five percent (85%) of the annualized profit of the business of the Acquired Entity, and one (1) times the remaining fifteen percent (15%) of the annualized profit of the business of the Acquired Entity, minus the closing payment paid to the Acquired Entity, and the result multiplied by the following ratio: the number of days within the Acquired Entity’s first year post-closing that run concurrently with the Supplemental Earnout Measurement Period divided by three hundred sixty five (365). |
Acquirors shall have the obligation to allow one or more Owners the opportunity to substantially assist with all of PC Buyer’s and/or its Affiliates potential Tuck-in Acquisitions within the Earnout Territory. All such Tuck-in Acquisitions shall be subject to the due diligence process of PC Buyer and/or its Affiliate(s), and PC Buyer and/or its Affiliates shall not be liable to Selling Group for any delay in the acquisition of any target or proposed group or for the failure to acquire any proposed group.
“Supplemental Earnout Measurement Period” shall be defined as the thirteenth (13th) full calendar month through the twenty-fourth (24th) full calendar month following the Closing.
| A. | Direct Practice Expenses |
Note: This list represents the typical types of expenses included. Depending on the needs of the acquired Business, additional/other expenses may be involved.
| Total salary and benefits | Types of Expenses/Comments | |
| Salaries–Physicians | All physician compensation, including physician bonuses, signing bonuses, discretionary bonuses, PGL bonuses, guarantees, and stipends from hospitals or other sources | |
| Salaries–Physician Extenders | All physician extender compensation including extender bonus distributions, bonus guarantees, and stipends from hospitals or other sources | |
| Salaries–Moonlighters | Includes fees for all MLs and/or independent contractors servicing the acquired operations | |
| Salaries–Call coverage | ||
| Salaries–Other clinical and direct admin | i.e. psychologists, social workers, nurses, medical assistants, care coordinators | |
| Locum tenens costs | All locum tenens compensation and related costs | |
| Benefits | Employer taxes related to provider salaries, healthcare & other benefit costs, workers compensation, employer 401k match, relocation costs | |
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Other provider-related Expenses
| Credentialing | Direct costs to be credentialed in facilities or with payers | |
| Communications | Cell phones, pagers, answering service | |
| Travel and entertainment | Excludes provider travel outside market (e.g. to IPC Leadership Conferences, PGL Meetings) | |
| Marketing expenses | Locally generated expenses only (e.g. practice group mailers, lunches) | |
| Office expenses | Lab coats, scopes, etc. | |
| Rent expense | Rent costs for offices in the hospital/other clinical worksite, if applicable | |
| Education & seminars | ||
| Employee functions | Functions directly for physicians (including practice group meetings) | |
| CME and Med soc memberships | ||
| Legal fees | Immigration-related costs or other legal expense directly related to the practice | |
| Charitable contributions | Need prior approval from corporate | |
| Malpractice insurance | Expenses for the providers in the practice | |
NOTE: IPC President and/or designee will collaborate with the leader(s) of the acquired operation in operational decisions.
IPC President and/or designee are responsible for making final decisions on expenses needed to adequately support operations.
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| B. | Local Support Expenses |
Note: This list represents the typical types of expenses included. Depending on the needs of the acquired Business, additional/other expenses may be involved.
| Description of Expenses | Examples/Comments | |
| Exempt salaries | Executive Director (ED); Region Directors/Business Directors; Directors of Operations, Recruiters, Office Managers, and/or other exempt employees (all only for the % dedicated to the acquired operation) | |
| Non-exempt salaries | Credentialing and other admin assistance, but only for the % dedicated to the acquired operation | |
| Temp help | Charges related to the acquired operations | |
| Benefits | Employer taxes, insurance benefits, 401k employer match for the % region staff dedicated to the acquired operation | |
| Region admin bonus | Formula calculation related to the profit contribution and growth of the acquired operation (distributed to staff who directly support the acquired operation) | |
| Telephone | Installation/usage charges for land lines, cell phones related to the acquired operation | |
| Paging services | Charges related to the acquired operation | |
| Travel and entertainment | Travel/entertainment expenses for admin persons but only for trips related to the acquired operation | |
| Dues and subscriptions | Charges related to the acquired operation | |
| Purchased services | If needed, local IT support and other professional services related to the acquired operation | |
| Marketing expenses | Charges related to the acquired operation (e.g. mailers, lunches), excludes any corporate development expenses | |
| Computer expenses | Internet fees, videoconferencing fees, misc computer accessories related to the acquired operation | |
| Office supplies | Charges related to the acquired operation | |
| Printing | Charges related to the acquired operation | |
| Postage | Charges related to the acquired operation | |
| Delivery services | Charges related to the acquired operation | |
| Equipment purchases (under $1,000) | e.g. cell phones | |
| Equipment repairs and maintenance | Charges related to the acquired operation | |
| Equipment rentals | Charges related to the acquired operation | |
| Facility Rent expense | Any admin office dedicated to the acquired operations | |
| Recruiting | Professional outside recruiter fees, if any, related to the acquired operation; costs to entertain such provider candidates (T&E, Hotel, Airfare, etc.) | |
| Education & seminars | Charges related to the acquired operation | |
| Meetings | Practice or Market meetings for the providers in the acquired operation | |
| Employee functions | Charges related to the acquired operation | |
| Business taxes and other fees | Charges related to the acquired operation (excludes Federal and state income taxes) | |
| Legal fees | Fees related to the specific operations (excludes practice acquisition costs) | |
| Depreciation expenses | Depreciation of assets used in the acquired operations (furniture, videoconference and other equipment>$1000, PC’s, etc.) | |
| Charitable contributions | Charges related to the acquired operation; need prior approval from corporate | |
NOTE: IPC Executive Director and/or designee will collaborate with the leader(s) of the acquired operation in operational decisions.
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Executive Director and designee are responsible for making final decisions on expenses needed to adequately support acquired operations.
| C. | IPC Centralized/Allocated Support Expenses |
| Billing/Collections/Technology fee | Fee not to exceed 4.0% of fee for service revenues, including PCIP revenues and any revenues related to provision of clinical services under facility agreements (excluding medical director and other similar payments) |
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ATTACHMENT 1
FACILITIES
| DEWITT REHABILITATION & NURSING | SNF | 211 EAST 79TH STREET | NEW YORK | NY | 10021-0819 | |||||
| GRACIE SQUARE HOSPITAL | HOSP | 420 EAST 76TH STREET | NEW YORK | NY | 10021-3396 | |||||
| KATERI RESIDENCE | SNF | 150 RIVERSIDE DRIVE | NEW YORK | NY | 10024-2298 | |||||
| AMSTERDAM ADULT DAY CARE | ADC | 1070 AMSTERDAM AVENUE | NEW YORK | NY | 10025-1715 | |||||
| AMSTERDAM NURSING HOME | SNF | 1060 AMSTERDAM AVENUE | NEW YORK | NY | 10025-1715 | |||||
| ST LUKES CLARK 9 C9HP | HOSP | 1090 AMSTERDAM AVE 16TH F | NEW YORK | NY | 10025-1737 | |||||
| JEWISH HOME & HOSPITAL | SNF | 120 WEST 106TH STREET | NEW YORK | NY | 10025-3923 | |||||
| TERENCE CARDINAL COOKE HEALTH CARE | SNF | 1249 FIFTH AVENUE | NEW YORK | NY | 10029-4413 | |||||
| NORTHERN MANHATTAN REHAB | SNF | 116 EAST 125TH STREET | NEW YORK | NY | 10035-1612 | |||||
| GREATER HARLEM NURSING HOME | SNF | 30 WEST 138TH STREET | NEW YORK | NY | 10037-1710 | |||||
| SILVER LAKE SPECIALIZE CC | SNF | 275 CASTLETON AVENUE | STATEN ISLAND | NY | 10301-2709 | |||||
| LAKESIDE MANOR HOME FOR ADULTS, INC | ASL | 797 BRIGHTON AVENUE | STATEN ISLAND | NY | 10301-2736 | |||||
| VERRAZANO NURSING HOME | SNF | 100 CASTLETON AVENUE | STATEN ISLAND | NY | 10301-3004 | |||||
| EGER HARBOR HOUSE | ASL | 110 MEISNER AVENUE | STATEN ISLAND | NY | 10306-1236 | |||||
| EGER LUTHERAN NURSING HOME | SNF | 140 MEISNER AVENUE | STATEN ISLAND | NY | 10306-1236 | |||||
| CLOVE LAKES NURSING | SNF | 25 FANNING STREET | STATEN ISLAND | NY | 10314-5307 | |||||
| CONCOURSE NURSING HOME | SNF | 1072 GRAND CONCOURSE | BRONX | NY | 10456-3901 | |||||
| DAUGHTER OF JACOB NURSING HOME | SNF | 1160 TELLER AVENUE | BRONX | NY | 10456-4145 | |||||
| ST BARNABAS HOSPITAL | HOSP | 4422 3RD AVENUE | BRONX | NY | 10457-2545 | |||||
| BRONX LEBANON HOSPITAL | HOSP | 1650 GRAND CONCURSE | BRONX | NY | 10457-7606 | |||||
| ST PATRICKS HOME FOR THE AGED & INF | SNF | 66 VAN CORTLANDT PK SOUTH | BRONX | NY | 10463-3102 | |||||
| HUDSON POINTE AT RIVERDALE | SNF | 3220 HENRY HUDSON PARKWAY | BRONX | NY | 10463-3211 | |||||
| OUR LADY OF CONSOLATION | ASL | 3103 ARLINGTON AVENUE | BRONX | NY | 10463-3305 | |||||
| MANHATTANVILLE CARE CENTER | SNF | 311 WEST 231ST STREET | BRONX | NY | 10463-3804 | |||||
| PROVIDENCE REST | SNF | 3304 WATERBURY AVENUE | BRONX | NY | 10465-1554 | |||||
| THROGGS NECK NURSING HOME | SNF | 707 THROGGS NECK EXPWY | BRONX | NY | 10465-2319 | |||||
| JEANNE JUGAN RESIDENCE | SNF | 2999 SCHURZ AVENUE | BRONX | NY | 10465-3826 | |||||
| JEANNE JUGANS RESIDENCE | ASL | 2999 SCHURZ AVENUE | BRONX | NY | 10465-3826 | |||||
| BAINBRIDGE NURSING & REHABILITATION | SNF | 3518 BAINBRIDGE AVENUE | BRONX | NY | 10467-1402 | |||||
| MONTEFIORE HOSPITAL | HOSP | 111 EAST 210TH STREET | BRONX | NY | 10467-2401 | |||||
| PELHAM PARKWAY NH | SNF | 2401 LACONIA AVENUE | BRONX | NY | 10469-1406 | |||||
| WORKMENS CIRCLE NH | SNF | 3155 GRACE AVENUE | BRONX | NY | 10469-3134 | |||||
| MORRIS PARK NURSING HOME | SNF | 1235 PELHAM PARKWAY | BRONX | NY | 10469-5817 | |||||
| KINGS HARB MULTI CARE | SNF | 2000 EAST GUNHILL ROAD | BRONX | NY | 10469-6016 | |||||
| AMBER COURT OF PELHAM GDS | OFF | 1800 WARING AVENUE | BRONX | NY | 10469-6331 | |||||
| HEBREW HOME FOR THE AGED | SNF | 5901 PALISADE AVENUE | RIVERDALE | NY | 10471-1205 | |||||
| JOHN CARDINAL O’CONNOR CLERGY RESID | ASL | 5655 ARLINGTON AVENUE | BRONX | NY | 10471-1221 | |||||
| GRAND MANOR NURSING HOME | SNF | 700 WHITE PLAINS ROAD | BRONX | NY | 10473-2634 | |||||
| BAY PARK CENTER NURSING | SNF | 801 CO-OP CITY BLVD | BRONX | NY | 10475-1603 | |||||
| ELANT AT BRANDYWINE | SNF | 620 SLEEPY HOLLOW ROAD | BRIARCLIFF MANOR | NY | 10510-2516 |
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| BETHEL SPRINGVALE INN | ASL | 62 SPRINGVALE ROAD | CROTON-ON-HUDSN | NY | 10520-1341 | |||||
| SKY VIEW NURSING REH & NH | SNF | 1280 ALBANY POST ROAD | CROTON-ON-HUDSON | NY | 10520-1570 | |||||
| BETHEL NURSING & REHAB | SNF | 67 SPRINGVALE ROAD | CROTON ON HUDSON | NY | 10521-1343 | |||||
| MARION WOODS | ASL | 152 RIDGE ROAD | HARTSDALE | NY | 10530-2205 | |||||
| NORTH WESTCHESTER NH | SNF | 3550 LEXINGTON AVE | MOHEGAN LAKE | NY | 10547-1273 | |||||
| WESTCHESTER CTR REHAB | SNF | 10 CLAREMONT AVENUE | MOUNT VERNON | NY | 10550-1609 | |||||
| CEDAR MANOR NH | SNF | 32 CEDAR LANE | OSSINING | NY | 10562-2402 | |||||
| BETHEL NURSING OSSINING | SNF | 17 NARGANSET AVENUE | OSSINING | NY | 10562-2843 | |||||
| VICTORIA NURSING HOME | SNF | 25 NORTH MALCOLM STREET | OSSINING | NY | 10562-3216 | |||||
| WEST LEDGE HEALTH CARE | SNF | 200 MAIN STREET | PEEKSKILL | NY | 10566-6816 | |||||
| CORTLANDT HEALTHCARE | SNF | 110 OREGON ROAD | CORTLANDT MANOR | NY | 10567-1232 | |||||
| KING STREET HOME INC | SNF | 787 KING STREET | RYE BROOK | NY | 10573-1225 | |||||
| PORT CHESTER NURSING & REHAB | SNF | 1000 HIGH STREET | PORT CHESTER | NY | 10573-4402 | |||||
| MOUNT ST JOHN THE BAPTIST | ASL | 150 ANDERSON HILL ROAD | PURCHASE | NY | 10577-2006 | |||||
| SOMERS MANOR NURSING HOME INC | SNF | 189 ROUTE 100 | SOMERS | NY | 10589-2811 | |||||
| HEBREW HOSPITAL HOME OF WESTCHESTER | SNF | 61 GRASSLANDS ROAD | VALHALLA | NY | 10595-1543 | |||||
| FIELDSTONE AT WESTCHESTER MEADOWS | ASL | 55 GRASSLANDS ROAD | VALHALLA | NY | 10595-1655 | |||||
| WESTCHESTER MEADOWS | SNF | 55 GRASSLANDS ROAD | VALHALLA | NY | 10595-1688 | |||||
| WHITE PLAINS CENTER | SNF | 220 WEST POST ROAD | WHITE PLAINS | NY | 10601-2914 | |||||
| REGENCY EXTENDED CARE NH | SNF | 65 ASHBURTON AVENUE | YONKERS | NY | 10701-2930 | |||||
| ST JOSEPHS HOSPITAL NURSING HOME | SNF | 125 SOUTH BROADWAY | YONKERS | NY | 10701-4006 | |||||
| ST MICHAELS HOME FOR THE AGED | ASL | 3 LEHMAN TERRACE | YONKERS | NY | 10705-3630 | |||||
| ANDRUS-ON-HUDSON | SNF | 185 OLD BROADWAY | HASTINGS-ON-HUDSON | NY | 10706-3801 | |||||
| SUTTON PARK CENTER FOR NURSING & RE | SNF | 31 LOCKWOOD DRIVE | NEW ROCHELLE | NY | 10801-5023 | |||||
| DUMONT MASONIC HOME | SNF | 676 PELHAM WAY | NEW ROCHELLE | NY | 10805-1038 | |||||
| ATLANTIS REH& RHCF | SNF | 140 SAINT EDWARDS STREET | BROOKLYN | NY | 11201-3904 | |||||
| SEPHARDIC ADULT DAY CARE | ADC | 2266 CROPSEY AVENUE | BROOKLYN | NY | 11214-5797 | |||||
| SEPHARDIC NURSING & REHABILITATION | SNF | 2266 CROPSEY AVENUE | BROOKLYN | NY | 11214-5797 | |||||
| PALM GARDENS CENTER FOR NURSING | SNF | 615 AVENUE C | BROOKLYN | NY | 11218-4101 | |||||
| AUGUSTANA LUTHERAN | SNF | 5434 SECOND AVENUE | BROOKLYN | NY | 11220-2606 | |||||
| BUENA VIDA CONTINUING CARE & REHAB | SNF | 48 CEDAR STREET | BROOKLYN | NY | 11221-3253 | |||||
| CATON PARK NURSING | SNF | 1312 CATON AVENUE | BROOKLYN | NY | 11226-1002 | |||||
| CROWN NURSING & REHAB | SNF | 3457 NOSTRAND AVENUE | BROOKLYN | NY | 11229-5131 | |||||
| BISHOP HENRY B HUCLES ENH ADC | ADC | 835 HERKOMER STREET | BROOKLYN | NY | 11233-3031 | |||||
| BISHOP HENRY B.HUCLES EPISCOPAL NH | SNF | 835 HERKIMER STREET | BROOKLYN | NY | 11233-3031 | |||||
| MENORAH HOME & HOSPITAL | SNF | 1516 ORIENTAL BLVD | BROOKLYN | NY | 11235-2328 | |||||
| SHORE VIEW NURSING HOME | SNF | 2865 BRIGHTON 3RD STREET | BROOKLYN | NY | 11235-6762 | |||||
| SPRING CREEK REHAB HEALTH CARE | SNF | 660 LOUISIANA AVENUE | BROOKLYN | NY | 11239-1526 | |||||
| WINTHROP UNIVERSITY HOSP | HOSP | 259 FIRST STREET | MINEOLA | NY | 11501-3957 | |||||
| SOUTH SHORE HEALTH CARE | SNF | 275 WEST MERRICK ROAD | FREEPORT | NY | 11520-3346 | |||||
| HEMPSTEAD PARK NURSING | SNF | 800 FRONT STREET | HEMPSTEAD | NY | 11550-4600 | |||||
| MAYFAIR CARE CENTER | SNF | 100 BALDWIN ROAD | HEMPSTEAD | NY | 11550-6844 | |||||
| TOWNHOUSE CTR FOR REHAB | SNF | 755 HEMPSTEAD TURNPIKE | UNIONDALE | NY | 11553-1111 | |||||
| MERCY MEDICAL CENTER | HOSP | 1000 NORTH VILLAGE AVENUE | ROCKVILLE CENTRE | NY | 11570-1000 |
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| EAST NECK NURSING & REHABILITATION | SNF | 134 GREAT EAST NECK ROAD | WEST BABYLON | NY | 11704-8027 | |||||
| GURWIN JEWISH ADC | ADC | 68 HAUPPAUGE ROAD | COMMACK | NY | 11725-4403 | |||||
| GURWIN JEWISH GERIATRIC CT | SNF | 68 HAUPPAUGE ROAD | COMMACK | NY | 11725-4403 | |||||
| AVALON GARDENS REHABILITATION | SNF | 7 ROUTE 25A | SMITHTOWN | NY | 11787-1626 | |||||
| HAMPTONS CENTER FOR REHAB | SNF | 64 COUNTY ROAD 39 | SOUTHAMPTON | NY | 11968-5215 | |||||
| FERNCLIFF NURSING HOME | SNF | 21 FERNCLIFF DRIVE | RHINEBECK | NY | 12572-2068 | |||||
| RIVER VALLEY CARE CENTER | SNF | 140 MAIN STREET | POUGHKEEPSIE | NY | 12601-3018 | |||||
| RIVER VALLEY CARE CENTER ADC | ADC | 140 MAIN STREET | POUGHKEEPSIE | NY | 12601-3018 | |||||
| BRIDGE VIEW NURSING HOME | SNF | 143-10 20TH AVENUE | WHITESTONE | NY | 11357-3046 | |||||
| QUEENS EXTENDED CARE | SNF | 61-11 QUEENS BOULEVARD | WOODSIDE | NY | 11377-4965 | |||||
| MIDWAY NURSING HOME | SNF | 69-95 QUEENS MIDTOWN EXPY | MASPETH | NY | 11378-1922 | |||||
| HOLLISWOOD CARE CENTER | SNF | 195-44 WOODHULL AVENUE | HOLLIS | NY | 11423-2982 | |||||
| MARGARET TIETZ CENTER | SNF | 164-11 CHAPIN PARKWAY | JAMAICA | NY | 11432-1816 | |||||
| NYS VETERANS HOME | SNF | 178-50 LINDEN BLVD | JAMAICA | NY | 11434-1467 | |||||
| RESORT NURSING HOME | SNF | 430 BEACH 68TH STREET | FAR ROCKAWAY | NY | 11692-1407 | |||||
| HORIZON CARE CENTER | SNF | 64-11 BEACH CHANNEL DRIVE | ARVERNE | NY | 11692-1412 | |||||
| PARK NURSING HOME | SNF | 128 BEACH 115TH STREET | ROCKAWAY PK | NY | 11694-2408 |
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EXHIBIT D
SELLER NONCOMPETITION AGREEMENT
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EXHIBIT E
OWNER NONCOMPETITION AGREEMENT
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ATTACHMENT 1.4(d)
Compliance Costs
IPC Budget Model - No CIA
PAMA PC (NY) Only
| Assumptions: 153 FT/PT Providers | Assumptions: Employees with benefits = +18%; have 3% increase | |
| 15% turnover each year | annually | |
| 5% net growth each year |
Typical IPC Compliance Costs for PAMA PC
| Variable | Year 1 | Year 2 | ||||||
| # Providers | 153 | 161 | ||||||
| Turnover replaced | 23 | 24 | ||||||
| Growth | 8 | 8 | ||||||
| Net Providers To Audit | 184 | 193 | ||||||
| # New Doc Audits | 184 | 32 | ||||||
| # Routine Re-Audits | 0 | 161 | ||||||
| # Focused Reviews | 55 | 58 | ||||||
| # Medical Necessity Audits | 55 | 58 | ||||||
| # Follow Up Audits | 88 | 93 | ||||||
| Total # Records Audited | 1909 | 2005 | ||||||
| Total Cost of Audits | $ | 57,283 | $ | 60,147 | ||||
| PYA Education (Overflow education to providers) | $ | 17,626 | $ | 18,507 | ||||
| Coding Specialist (1.0) for Provider Education ** | $ | 88,500 | $ | 92,040 | ||||
| Medical Records Audit Coordinator Staff (0.3 FTE)** | $ | 10,620 | $ | 11,045 | ||||
| Medical Records expense | $ | 7,638 | $ | 8,020 | ||||
| Legal Expense | $ | 5,000 | $ | 5,000 | ||||
| Misc (staff education, materials, travel) | $ | 2,000 | $ | 2,000 | ||||
|
|
|
|
| |||||
| Total Cost for PAMA | $ | 188,667 | $ | 196,759 | ||||
|
|
|
|
| |||||
| ** | - Based in North Hollywood, includes 18% benefits |
CIA Scenario for PAMA
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| Variable | Year 1 | Year 2 | ||||||
| Auditors (employed & per diem) | $ | 113,100 | $ | 116,493 | ||||
| Audit Overflow (PYA) | $ | 18,000 | $ | 18,000 | ||||
| Compliance Officer (NY), plus 18% benefits | $ | 121,540 | $ | 125,186 | ||||
| Admin Support (0.5 FTE), part of existing staff member, plus 18% benefits | $ | 19,635 | $ | 19,635 | ||||
| Compliance Specialist Liaison (NoHo), plus 18% benefits | $ | 94,400 | $ | 94,400 | ||||
| Consulting for Program - Assess OIG/CIA Compliance | $ | 30,000 | $ | 20,000 | ||||
| Consulting To Assist With Package Prep for IRO and Annual Report to OIG | $ | 20,000 | $ | 20,000 | ||||
| Legal Review of IRO Package | $ | 20,000 | $ | 20,000 | ||||
| Legal Review of Annual Report to OIG | $ | 15,000 | $ | 12,500 | ||||
| Legal - Non CIA Related (Based on Estimate of Historical Costs) | $ | 40,000 | $ | 40,000 | ||||
| Legal - CIA Related, Additional | $ | 10,000 | $ | 10,000 | ||||
| Misc – (staff education, materials, travel, and all other costs directly attributable to CIA compliance) | $ | 5,000 | $ | 5,000 | ||||
| IRO - Additional Costs (Estimate) | $ | 5,000 | $ | 5,000 | ||||
| IRO - Bonadio (High) | $ | 60,000 | $ | 60,000 | ||||
| IRO - Bonadio (Low) | $ | 30,000 | $ | 30,000 | ||||
|
|
|
|
| |||||
| Total Costs With High IRO Estimate | $ | 571,675 | $ | 566,214 | ||||
|
|
|
|
| |||||
| Total Costs With Low IRO Estimate | $ | 541,675 | $ | 536,214 | ||||
|
|
|
|
| |||||
| Yolanda Opuku 25-30 hours/week @ $35/hr, no benefits | $ | 52,500 | ||||||
| Yolander Goodwin @30/hr per diem; est 5 hours/week, no benefits | $ | 7,500 | ||||||
| Marguerite Santiago (FT, not CPC), includes 18% benefits | $ | 53,100 | ||||||
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| Difference Between Std IPC Estimate vs. CIA (Incremental Compliance Costs – estimate only) | Year 1 | Year 2 | ||||||
| High Estimate | $ | 383,009 | $ | 369,456 | ||||
| Low Estimate | $ | 353,009 | $ | 339,456 | ||||
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