STIPULATION OF SETTLEMENT AND COMPROMISE OF ALL CLAIMS
AMONG
INTEGRAMED AMERICA, INC.
AND
ASSISTED REPRODUCTIVE TECHNOLOGIES, P.C., d/b/aMAINLINE
REPRODUCTIVE SCIENCE CENTER, REPRODUCTIVE DIAGNOSTICS,
ABRAHAM MUNABI, M.D., REPRODUCTIVE SCIENCE CENTER OF
SUBURBAN PHILADELPHIA
THIS STIPULATION AND SETTLEMENT AGREEMENT dated July 1, 1998
["Agreement"], by and among (1) IntegraMed America, Inc., a Delaware corporation
with its principal place of business at One Manhattanville Road, Purchase, New
York 10577 ["INMD"]; and (2) Assisted Reproductive Technologies, P.C. d/b/a
Reproductive Science Center of Greater Philadelphia ("ART") and Reproductive
Science Center of Suburban Philadelphia ("PC"), both Pennsylvania professional
corporations with their principal place of business at 950 West Valley Road,
Suite 2401, Wayne Pennsylvania 19087, and Reproductive Diagnostics, Incorporated
("RDI") [RDI and ART collectively known as the "Companies"] and Dr. Abraham
Munabi ("Munabi")
R E C I T A L S
WHEREAS, Companies and INMD are parties to a Management Agreement dated
May 15, 1995 ["Management Agreement"]; and
WHEREAS, for the purposes of this Stipulation and Settlement Agreement
["Agreement"], the Companies, PC and INMD accept and adopt the defined terms and
definitions contained in the Management Agreement; and
WHEREAS, the Companies and INMD are parties to an Asset Purchase
Agreement dated May 15, 1995; and
WHEREAS, pursuant to such Management Agreement, the Companies, Munabi
and INMD have operated a program providing Infertility Services (as such term is
defined in ss. 1.7 of the Management Agreement) and known as "Reproductive
Science Center of Greater Philadelphia" [hereinafter "Program"]; and
WHEREAS the Program was part of the INMD Reproductive Science Center
Division, which consists of a national network of similar Programs; and
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WHEREAS, pursuant to the Asset Purchase Agreement, INMD purchased all
of the assets of the Companies and, on this date, is the record tenant of the
office and laboratory space of the Program, the owner and/or lessee of all
equipment, fixtures and fixed assets and the employer of all personnel at the
Program with the exception of physicians; and
WHEREAS, pursuant to the Asset Purchase Agreement and the Management
Agreement, INMD was to make certain payments, over the term of the Management
Agreement, for the Exclusive Management Right ["RTM Payments"];and
WHEREAS, pursuant to the Management Agreement, INMD made certain
Advances to the Companies, which Advances were to be repaid by the Companies to
INMD; and
WHEREAS, Munabi and ART were parties to a Physician Employment
Agreement dated May 15, 1995, pursuant to which Munabi was the medical director
of the Program and obligated to enforce said Management Agreement;
WHEREAS, certain disputes have arisen between and among the parties to
this Agreement in which the parties have mutually served Notices of Termination
and claimed breaches of the various agreements; and
WHEREAS, the parties desire to effectuate a termination of the
Management Agreement in an orderly fashion, so as to insure the quality of
Infertility Services at the Program, and to settle and compromise all their
disputes in order to avoid the expense and the uncertainty of litigation.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the parties, intending to be legally bound, agree as
follows:
1. Termination of Agreements. INMD and the Companies hereby terminate the
Asset Purchase Agreement and the Management Agreements, effective July
1, 1998 and, except for the rights and obligations contained in this
Agreement, all parties are discharged from any obligations under the
Asset Purchase or Management Agreements, including but not limited to
the repayment of Advances, payment of RTM payments, and covenants not
to compete, it being the intention of the parties to accelerate all RTM
payments and apply those accelerated payments to repay Advances and
discharge any remaining Advances' balance.
2. General Releases. IntegraMed, on the one hand, and the Companies, the
PC and Munabi, on the other hand, hereby release and forever discharge
one another (including their subsidiaries, affiliates, successors,
assigns, agents, officers, directors and employees) from any and all
claims, suits, demands, debts, causes of action, liabilities,
indemnities, obligations, costs, losses, damages and expenses of
whatsoever kind or nature, whether legal, equitable or statutory,
liquidated or unliquidated, known or unknown, including but not limited
to those arising out of the Management Agreement, Asset Purchase
Agreement and Physician Employment Agreement, arising from the first
day of the world until the date of this Settlement Agreement.
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3. Continuation of the Program and Withdrawal of INMD. (a) The parties
acknowledge and agree that the Program shall, commencing July 1, 1998,
be operated solely by Munabi, PC and the Companies, and that INMD shall
withdraw (except for the INMD Representative detailed in paragraph 11
hereof) and cease to offer any management, administrative or support
services to the Program.
(b) Employees. Effective July 1, 1998, at the opening of business, INMD
shall terminate the employment of all its employees located at the
Program (other than the INMD Representative referred to in paragraph
11) and the Companies or the PC shall hire such employees.
(c) Insurances. Effective July 1, 1998, INMD shall cancel the general
liability insurance policy in effect for the Companies and the Program
Premises [as defined in paragraph 7(c)] and shall cancel the
professional liability insurance policy in effect for the Companies'
and PC's staff (including Munabi). Munabi covenants and warrants that
the PC and Munabi have had professional liability insurance. in an
amount of no less than $1 million per claim/$3 million in the
aggregate, since June 24, 1998 and that the Companies and Munabi shall
provide INMD, proof of such insurance, and proof of general liability
insurance for the Program Premises no later than July 8, 1998. The
Munabi/Companies/PC obligation to provide proof of such insurance shall
continue annually (on the anniversary date of the first proof) until
and unless the Payment Price, as defined in paragraph 5 hereof, has
been fully paid to INMD. Munabi hereby acknowledges and agrees that any
and all health and/or disability benefits provided by INMD shall cease
on July 1, 1998.
(d) Notification of Patients. Munabi, the Companies and PC shall notify
patients of the Program, on or before July 10, 1998, that he and the
Companies/PC are no longer affiliated with INMD. The form and content
of such notification shall be previously approved by INMD, such
approval not to be unreasonably withheld.
(e) Biological Materials.
(i) The Companies, PC and Munabi, hereby acknowledge and agree
that, at all times during the time period of the Management
Agreement, and at all times hereafter, the Companies, Munabi
and/or PC have solely been the rightful custodian of all
biological materials, including but not limited to sperm,
oocytes and embryos (cryopreserved or fresh)["Biological
Materials"] and that they shall continue to preserve and
protect such Biological Materials as are in their custody.
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(ii) The Companies and PC shall provide INMD with a list of
all patients who (1) have cryopreserved biological materials
in storage at the Program as of July 1, 1998, and (2) who have
had cryopreserved biological materials in storage at the
Program from May 15, 1995 through July 1, 1998, together with
information as to and the date as to when storage ceased.
(iii) The Companies/PC shall indemnify, defend and hold
harmless INMD against any claims arising out of the custody or
storage of Biological Materials on or after July 1, 1998.
(f) Removal of Proprietary Information. INMD shall remove from the
Program Premises any and all copies of proprietary information, as
listed on Schedule A annexed hereto, and the Companies, Munabi and PC
hereby covenant not to copy or utilize any consents, procedure or
policy manuals or proprietary information henceforth in operation of
the Program.
(g) Billing Cooperation. INMD shall leave at the Program any and all
documentation and equipment necessary for the Program to bill for
unbilled Infertility Services and to collect outstanding amounts. This
shall include data stored in the computer system at the Program. INMD's
corporate staff, with the exception of the INMD Representative
described in paragraph 11, shall no longer have modem or network access
to the Companies/PC's computers at the Program.
4. Change of name. On or before March 31, 1999, ART, Munabi, PC or any PC,
fictitious name and/or business entity through which Munabi shall
practice medicine, shall cease and desist from utilizing any corporate
name and/or any fictitious name under which each or any may trade, that
includes the phrase "Reproductive Science Center" and shall cease and
desist from using any marketing materials that include the name
"Reproductive Science Center".
5. Payment Price for INMD Withdrawal. In consideration of the termination
of the Management Agreement and Asset Purchase Agreement and for the
withdrawal of INMD from the Program as described above at paragraph 4,
PC shall pay the following to INMD:
(a) The Asset Price as delineated in paragraph 7 below; and
(b) An amount ("June Net Costs") equal to the difference between (1)
the Costs of Services (as defined in Section 2.1 of the Management
Agreement) actually incurred by INMD in the operation of the Program
during the time period June 1 through June 30, 1998; and (2) INMD's
Severance Cost, such term being defined as the costs and expenses that
INMD would have incurred had it terminated all of its employees at the
Program on July 1, 1998. The parties agree that INMD and PC's agent,
Cogen & Sklar, shall, in good faith, agree on the foregoing Costs of
Services and Severance Costs, no later than July 15, 1998, and that
INMD shall provide appropriate backup information and documentation to
support the calculation thereof.
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The parties hereto agree that items (a) and (b), in the aggregate,
represent the total "Payment Price" for the assets and withdrawal of
INMD.
6. Payment of Payment Price and Covenant by Munabi. Munabi hereby
covenants and represents that the obligation for payment of the Payment
Price is that of the PC, which is the current professional corporation
through which he practices medicine. He hereby covenants and represents
that if, at any time prior to the full payment of the Payment Price, he
should establish another professional corporation or entity through
which he shall practice medicine, he shall do so only if such PC and/or
sole proprietorship or business entity expressly assumes the
obligations of the Payment Price and the obligations of this Agreement.
7. Purchase of Assets. The PC shall purchase the tangible assets (a
tentative schedule of such assets being here attached as Schedule B) at
a Closing ("Closing") to occur at a mutually convenient date on or
before July 30, 1998. The documents to be exchanged at such closing
shall be held in escrow by the law firm of Ledy-Gurren & Blumenstock,
LLP ["LG&B"], 230 Park Avenue, New York, New York, until the first
installment of the Payment Price has been paid.
(a) The parties agree that the PC and IntegraMed shall agree, in good
faith, on the accuracy of such schedule on or before July 15, 1998.
(b) The purchase price for such assets shall be the net book value
thereof ("Asset Price") and the parties agree to utilize Schedule B
attached hereto as a starting point, and to come to an agreement, in
good faith,as to the net book value of such assets. Such agreement
shall occur on or before July 15, 1998.
(c) The PC shall assume, as of July 1, 1998, the lease for the office
space of the Program located in Wayne, PA ("Program Premises") and
shall indemnify INMD against any claims for rent or payments thereunder
made by the Landlord.
(d) The PC shall assume the leases,as of July 1, 1998, for any and all
medical and/or office equipment located at the Program Premises and
shall indemnify INMD against any claims for rent or payments thereunder
made by the Lessors thereof.
8. Payment of Payment Price. The Payment Price shall be paid as follows:
(a). a down payment equal to 10% thereof ["Downpayment"], payable on
September 1, 1998.
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(b). the balance thereof due in 16 quarterly payments, with the first
quarterly payment due on December 1, 1998. The quarterly payments for
the first two years ("Year 1" and "Year 2") shall be eight equal
payments which, together with the Downpayment shall, in the aggregate,
be in an amount equal to 40% of the total Payment Price, and those for
the last 2 years ("Year 3" and "Year 4") shall be eight equal payments
which, in the aggregate, shall be in an amount equal to 60% of the
total Payment Price.
(c). Interest shall accrue on the Payment Price as of September 1, 1998
at a rate equal to the lesser of INMD's cost of funds (as of September
1, 1998) or the "Prime Rate" (as of September 1, 1998) as the same
shall be published in The Wall Street Journal on September 2, 1998)
(hereafter, the "Interest Rate").
(d) In the event that the Payment Price is fully repaid prior to
the end of Year 4, the PC shall be entitled to a discount on
the remaining balance, as of the date of such pre-payment, in
an amount equal to the then remaining balance of the Payment
Price multiplied by the Interest Rate.
(e) The payment schedule detailed in sections (a) through (d)
above is specifically subject to paragraph 12 below.
9. Security. The Payment Price shall be secured as follows:
(a) PC shall, at Closing, grant and deliver to INMD, a security
interest, in proper form suitable for filing pursuant to the
Uniform Commercial Code, in the Assets, such security interest
to be operative from the period beginning at the Closing and
ending on September 1, 2000 and to secure the payments of
Years 1 and 2; and
(b) Munabi's shall, at Closing, deliver to INMD, his personal
guaranty, in mutually acceptable form (the parties to use good
faith in agreeing to such form) for the payment of the amounts
that shall become payable in Years 3 and 4.
(c) The securities granted hereunder shall be fully operative and
subject to paragraph 12 below.
10. Right to Accounts Receivable. The parties hereby acknowledge and agree
that, during the operation of the Program, certain accounts receivable
were, and shall continue to be, generated. For the purposes of this
Agreement, accounts receivable are deemed generated on the date that
the medical or laboratory service or treatment is provided to a
patient, irrespective of the date (before or after treatment) that
payment is actually received. The parties hereby agree and acknowledge
the following rights and interests in accounts receivable of the
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Program, it being understood and agreed that any "unapplied payments"
(that is, payments as to which, after reasonable inquiry, it is not
possible to determine which medical or laboratory service it relates
to) made by patients and/or payors shall be prorated, between May and
June Receivables, based on the percentage of May and June Receivables
contained in the entire outstanding balance of the patient at the time
of the receipt of the unapplied payment.
(a) Any and all accounts receivable generated on or prior to May 31,
1998 ("May Receivables") are the sole property of INMD, whether payment
therefor has, or in the future is, received by INMD, the Companies, the
PC and/or Munabi.
(b) Any and all accounts receivable generated on and after June 1, 1998
("June Receivables") are the sole property of the Companies and the PC,
whether payment therefor has been, or in the future is, received by any
or all of INMD, the Companies, the PC and/or Munabi.
(c) The Companies, PC and Munabi shall provide to INMD a full
accounting of payments received by them since June 1, 1998 ["PC
Receipts"], estimated at approximately $20,000 (twenty thousand
dollars), by providing all bank statements and records of the PC and/or
Munabi relating to such monies and identifying the patient names,
amounts paid and procedures performed and the date thereof, so that
INMD may identify such amounts as May Receivables or June Receivables,
or a combination thereof. It is understood and agreed that such bank
records will reveal a deposit of $3300 (thirty-three hundred dollars)
to the PC account which represents the personal money of Munabi.
(d) INMD shall provide a full accounting to the PC of the amount
"swept" by INMD on or about June 18, 1998, estimated at approximately
$118,000 ["Swept Money"], by identifying the patient names, amounts
paid and date of medical treatment performed, so that PC can identify
such amounts as May Receivables or June Receivables, or a combination
thereof. Further, INMD shall provide a full accounting, in the same
manner, to the PC of any amount "swept" by INMD on or after June 1,
1998.
(e) In the event there arises a dispute between INMD and PC as to the
nature and character of the PC Receipts or Swept Money (as May or June
Receivables), the parties shall first rely on the date the service was
rendered, as shown on the computer records generated by INMD. PC shall
have the burden of proving such records erroneous by supplying copies
of the patient medical records.
(f) Escrow monies. Munabi, the PC and the Companies shall promptly, and
no later than July 6, deliver the PC Receipts to LG&B, to be held in an
attorney escrow account (non-interest bearing). The parties shall
agree, in good faith, on the division of such PC Receipts no later than
July 10, 1998. LG&B shall fax notice of the proposed distribution to PC
or INMD, as the case shall be, and shall distribute such escrow money,
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at the conclusion of the next business day, in accordance with such
notice unless the PC counsel or INMD notifies LG&B of an intention to
arbitrate a disagreement with the terms of said proposed distribution.
INMD shall promptly, and no later than July 6, deliver the Swept Money
to LG&B, to be held in an attorney escrow account (non-interest
bearing). The parties shall agree, in good faith, on the division of
such Swept Money by July 10, 1998. LG&B shall fax notice of the
proposed distribution to PC or INMD, as the case shall be, and shall
distribute such escrow money, at the conclusion of the next business
day, in accordance with such notice, unless the PC counsel or INMD
notifies LG&B of an intention to arbitrate a disagreement with the
terms of said proposed distribution.
11. Collection of Accounts Receivable. A representative of INMD (of INMD's
choosing) (the "INMD Representative") shall be on the Program Premises
for up to and including 120 days, beginning July 1, 1998, in order to
oversee and make efforts for the collection of the accounts receivable
of the Program and the PC. Such collection shall be jointly supervised
and conducted by the INMD Representative and a representative of the
Companies/PC designated by Munabi (the "Companies Representative"). The
INMD and Companies Representatives shall have joint and simultaneous
access to the PC's P.O. Box at the Southeastern PA Post Office in
Wayne, PA. and shall have full and complete access to any and all
billing information, data and computer information necessary to
process, record and document payment of such accounts receivable. The
INMD Representative and the Companies Representative shall, jointly and
in good faith, allocate any and all monies received as being either May
Receivables or June Receivables. INMD and the PC shall, in good faith,
insure that the June Receivables are paid to the PC and the May
Receivables are paid to INMD. The PC and Munabi hereby covenant to
cooperate with the INMD Representative in his/her efforts to collect
May Receivables and agree not to interfere, by omission or commission,
with that effort. In the event that there is a dispute between the
Companies' Representative and the IntegraMed Representative concerning
whether monies received constitute a May Receivable or a June
Receivable, the parties shall first rely on the date of the service
rendered, as shown in the computer records generated by INMD and, if
the Companies' representative disagrees with such records, he/she shall
produce the patient's records. If the parties cannot, in good faith,
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agree to the allocation on the basis of such records, such collections
shall be put in escrow until the matter is determined by arbitration or
agreement.
12. Acceleration. The Payment Price shall be accelerated and become
immediately due and payable on the occurrence of any of the following::
(1) Munabi sells his reproductive science practice, or a greater than
49% interest therein; or (2) if Munabi, the Companies or the PC
interfere in the collection of the accounts receivable, as the same is
described in Paragraph 11 above; or (3) if a payment is not made within
fifteen (15) days after written notice by INMD of a default in payment,
sent by certified mail to the PC.
13. Waiver of Further Walter Reed Payments. The parties acknowledge agree
that, during the operation of the Management Agreement, Munabi has
received monthly payments, in the nature of a "finder's fee" arising
out of INMD's management agreement with the U.S. Defense Department and
Walter Reed Hospital. Munabi hereby waives any and all future payment
or claim of any nature, to such monies or any interest in said
management agreement or renewal thereof.
14. Cooperation. In the event of any claims, suits or governmental
investigations, arising out of or relating to the Program, in which
INMD, Munabi, the Companies and/or the PC shall be named or involved,
whether or not pending during the term of the Management Agreement, the
parties hereto agree to fully cooperate with each other in the defense
of such suit, claim or investigation. Such cooperation shall include,
by way of example but not limitation, meeting with defense counsel, the
production of any documents in their possession for review,
participation in discovery or an investigation by an insurer, response
to subpoenae and the coordination of any individual defenses with
counsel for all parties. Munabi, the Companies and the PC shall, as
soon as practicable, deliver to INMD copies of any summonses,
complaints, suit letters, subpoenae or legal papers of any kind, served
upon them or their attorneys. This obligation to cooperate shall
survive the satisfaction of any payment obligations hereunder, or the
termination of this Agreement for whatever reason, and nothing in this
paragraph shall obligate the parties to pay any legal fees incurred by
the other.
15. Non-Disparagement and Confidentiality. The parties acknowledge that
this Agreement represents a fully consensual and amicable separation of
interests and that, hereafter, each party covenants that, in
communicating with third parties, they shall not, by action or word,
defame, criticize or condemn the actions, conduct or motives of the
other. Each party recognizes that this covenant represents a material
obligation of both parties under this Agreement, the breach of which
may impact adversely on the business interests of the non-breaching
party. The parties further covenant that they shall keep the terms of
this Agreement confidential, except to the extent necessary to enforce
the terms hereof.
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16. Additional Agreements. The parties anticipate that it will be necessary
to prepare various documents (including but not limited to "Bill of
Sale", security agreement and guaranty) to effectuate the intent of
this Agreement. They shall agree in good faith on the terms of such
documents. In addition, the parties shall cooperate in good faith to
carry out the provisions of this Agreement and the intent thereof, and
shall deliver the necessary documents to effectuate the intention of
this Agreement.
17. Arbitration. Any dispute arising out of or relating to this Agreement,
or the obligations of the parties to each other, shall be settled by
arbitration in accordance with the Rules of Commercial Arbitration of
the American Arbitration Association and judgement upon such award
rendered by the arbitrator shall be final and binding upon the parties
and may be entered in any court having jurisdiction thereof. The
arbitrator shall be an arbitrator qualified to serve in accordance with
the rules of the American Arbitration Association who is approved by
both Munabi and INMD. In the absence of such approval, Dr. Munabi and
INMD each shall designate a person qualified to serve as an arbitrator
in accordance with the rules of the American Arbitration Association
and the two persons so designated shall select the arbitrator from
among those persons qualified to serve in accordance with the rules of
the American Arbitration Association. The arbitration shall be held in
Philadelphia, PA. Except as otherwise provided herein, the costs and
expenses of the two individuals who shall have selected the arbitrator
and of the arbitrator shall be paid by the losing party (who shall be
specifically designated as such by the arbitrator as part of his or her
judgment). Notwithstanding the foregoing, the parties shall be entitled
to obtain an injunction, temporary restraining order or other equitable
relief from a court of competent jurisdiction.
18. Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania, without reference to rules of conflicts
of laws.
19. Amendment. No modification, amendment or addition to this Agreement,
nor waiver of any of its provisions, shall be valid or enforceable
unless in writing and signed by all parties.
20. No assignment or delegation of this Agreement or the rights and
obligations hereunder shall be valid without the specific consent of
all parties.
21. No consent or waiver, express or implied, by either party hereto, of
any breach or default by the other party in the performance by the
other of its obligations hereunder, shall be valid unless in writing,
and no such consent or waiver shall be deemed or construed to be a
consent or waiver to or of any other breach or default in the
performance by such other party of the same or any other obligation of
such party hereunder. Failure on the part of either party to complain
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of any act or failure to act of the other party or to declare the other
party in default, irrespective of how long such failure continues,
shall not constitute a waiver by such party of its rights hereunder.
22. Any notices, requests, demands and other communications provided for in
this Agreement as required among the parties in connection with the
Agreement shall be in writing and shall be deemed to have been given at
the time when mailed at any United States Post Office via register or
certified mail, prepaid, or sent by overnight delivery services,
addressed to the party at the address set forth below or such other
addresses as such party may designate by notice:
To PC, Companies and/or Munabi:
Abraham Munabi, M.D.
950 West Valley Road
Suite 2401
Wayne, Pennsylvania 19087
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To IntegraMed America, Inc:
Donald S. Wood, Ph.D.
Chief Operating Officer
Integramed America, Inc.
One Manhattanville Road
Purchase, New York 10577
IN WITNESS WHEREOF, the parties have set their hands hereunto this 1st day of
July 1998.
INTEGRAMED AMERICA,INC. ART
By: /s/Donald S. Wood By: /s/Abraham Munabi
----------------------- ----------------------
Donald S. Wood, Ph.D. Abraham Munabi, M.D.
Title: Chief Operating Officer Title: President
RDI REPRODUCTIVE SCIENCE CENTER
OF SUBURBAN PHILADELPHIA
By: /s/Abraham Munabi By: /s/Abraham Munabi
------------------- --------------------
Abraham Munabi, M.D. Abraham Munabi,M.D.
Title: President Title: President
/s/Abraham Munabi
- --------------------------------------
Abraham Munabi, M.D.
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