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EXHIBIT 10.50
EXECUTION COPY
STOCK PURCHASE AGREEMENT
BY AND AMONG
PHYSICIANS' SPECIALTY CORP.
PSC ACQUISITION CORP.
AND
XXX XXXXXXXXX, M.D.
XXXXXX XXXXX, M.D.
XXXXXX XXXXX, M.D.
XXXXX XXXXXX, M.D.
XXXXX XXXXXX, M.D.
XXX XXXXXXXXX, M.D.
XXXXXXX XXXXXXXXX, M.D.
XXXX XXXXXXX, M.D.
XXXXX XXXXXX, M.D.
XXXXX XXXXXXXXX, M.D.
XXXXXXX XXXXXXXXX, M.D.
XXXXXX XXXX, M.D.
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TABLE OF CONTENTS
PAGE
SECTION 1. TERMS OF THE SALE AND PURCHASE OF THE STOCK ........................................................3
1.1 PURCHASE AND SALE OF THE SHARES.........................................................................3
1.2 ADDITIONAL PURCHASE PRICE CONSIDERATION.................................................................4
1.3 PAYMENT AND NON-ASSUMPTION OF LIABILITIES...............................................................5
1.4 EMPLOYMENT ARRANGEMENTS.................................................................................5
1.5 MANAGEMENT SERVICES AGREEMENT...........................................................................6
1.6 EACH PARTY TO BEAR COSTS................................................................................6
1.7 ASSIGNMENT OF CONTRACTS AND ASSETS; CONSENTS............................................................7
1.8 COOPERATION WITH REGULATORY APPROVALS...................................................................7
1.9 IRREVOCABLE GUARANTY BY PARENT..........................................................................7
1.10 CONSULTING AGREEMENT...................................................................................8
1.11 CLOSING................................................................................................8
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLERS...........................................................9
2.1 OWNERSHIP OF SHARES....................................................................................10
2.2 ORGANIZATION...........................................................................................10
2.3 POWER AND AUTHORITY FOR TRANSACTIONS...................................................................10
2.4 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS......................................................11
2.5 SUBSIDIARIES AND AFFILIATES............................................................................12
2.6 OUTSTANDING CAPITAL STOCK..............................................................................12
2.7 OPTIONS, WARRANTS AND OTHER RIGHTS.....................................................................12
2.8 FINANCIAL INFORMATION..................................................................................12
2.9 NO UNDISCLOSED LIABILITIES.............................................................................12
2.10 LEASES................................................................................................12
2.11 PERSONAL PROPERTY.....................................................................................13
2.12 INVENTORIES...........................................................................................13
2.13 PRINCIPAL PLACE OF BUSINESS...........................................................................13
2.14 [RESERVED]............................................................................................13
2.15 INTELLECTUAL PROPERTY RIGHTS..........................................................................13
2.16 DIRECTORS AND OFFICERS; PAYROLL INFORMATION...........................................................14
2.17 LEGAL PROCEEDINGS.....................................................................................14
2.18 CONTRACTS.............................................................................................14
2.19 SUBSEQUENT EVENTS.....................................................................................15
2.20 ACCOUNTS RECEIVABLE...................................................................................16
2.21 TAX RETURNS...........................................................................................16
2.22 COMMISSIONS AND FEES..................................................................................16
2.23 [RESERVED]............................................................................................16
2.24 INSURANCE POLICIES....................................................................................16
2.25 EMPLOYEE BENEFIT PLANS................................................................................16
2.26 COMPLIANCE WITH LAWS IN GENERAL.......................................................................17
2.27 FRAUD AND ABUSE.......................................................................................17
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2.28 MEDICARE, MEDICAID, AND OTHER THIRD-PARTY PAYOR PAYMENT LIABILITIES...................................18
2.29 BILLING PRACTICES AND REFERRAL SOURCES................................................................18
2.30 PHYSICIAN SELF-REFERRALS..............................................................................19
2.31 INVESTMENT INTENT.....................................................................................19
2.32 NO UNTRUE REPRESENTATIONS.............................................................................20
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND PSC...................................................20
3.1 CORPORATE EXISTENCE; GOOD STANDING; QUALIFICATION......................................................20
3.2 POWER AND AUTHORITY....................................................................................20
3.3 COMMISSIONS AND FEES...................................................................................21
3.4 PARENT DOCUMENTS.......................................................................................21
3.5 LEGAL PROCEEDINGS......................................................................................21
3.6 COMPLIANCE WITH LAWS IN GENERAL........................................................................21
3.7 BILLING PRACTICES IN GENERAL...........................................................................21
3.8 NO UNTRUE REPRESENTATIONS..............................................................................21
SECTION 4. ACCESS TO INFORMATION AND DOCUMENTS PRIOR TO CLOSING...............................................22
4.1 ACCESS TO SELLERS' INFORMATION.........................................................................22
4.2 ACCESS TO INFORMATION OF PARENT........................................................................22
4.3 RETENTION OF RECORDS...................................................................................22
SECTION 5. CONDITIONS TO OBLIGATION OF PARENT AND PSC TO CLOSE................................................22
5.1 REPRESENTATIONS AND WARRANTIES TRUE....................................................................22
5.2 COVENANTS..............................................................................................22
5.3 NO SUIT OR PROCEEDING..................................................................................22
5.4 ABSENCE OF MATERIAL ADVERSE CHANGE.....................................................................23
5.5 CERTIFICATE............................................................................................23
5.6 APPROVAL OF PARENT'S SENIOR LENDER.....................................................................23
5.7 RECEIPT OF FINANCIAL INFORMATION.......................................................................23
5.8 CONSENTS AND APPROVALS.................................................................................23
5.9 COUNSEL OPINION........................................................................................23
5.10 OTHER AGREEMENTS EXECUTED.............................................................................23
5.11 PURCHASE OF FIXED ASSETS, EQUIPMENT, AND TRADE NAME OF PHYSICIANS DOMAIN, INC.........................24
5.12 RELEASE OF LIENS......................................................................................24
5.13 NEW YORK NEWCO STOCK OPTIONS..........................................................................24
5.14 NEW JERSEY NEWCO STOCK OPTIONS........................................................................24
5.15 CLOSING DATE FINANCIAL CERTIFICATE....................................................................24
5.16 CLOSING NET WORTH AND ACCOUNTS RECEIVABLE.............................................................24
5.17 CORPORATE DOCUMENTS...................................................................................24
5.18 ASSIGNMENT OF ASSUMPTION AGREEMENTS...................................................................25
5.19 FORMATION OF NEW YORK NEWCO AND NEW JERSEY NEWCO......................................................25
5.20 TERMINATION OF CORPORATION PLANS......................................................................25
5.21 RESIGNATIONS..........................................................................................25
5.22 DUE DILIGENCE.........................................................................................25
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SECTION 6. CONDITIONS TO OBLIGATION OF SELLERS................................................................25
6.1 REPRESENTATIONS AND WARRANTIES TRUE....................................................................25
6.2 COVENANTS..............................................................................................25
6.3 NO SUIT OR PROCEEDING..................................................................................25
6.4 CERTIFICATE............................................................................................26
6.5 GOVERNMENT APPROVALS...................................................................................26
6.6 OTHER AGREEMENTS EXECUTED..............................................................................26
6.7 PURCHASE PRICE.........................................................................................26
6.8 FINANCIAL CONDITION OF PARENT..........................................................................26
6.9 CONSENT OF NATIONSBANK.................................................................................26
6.10 COUNSEL OPINION.......................................................................................26
6.11 PSC DEBENTURE.........................................................................................26
6.12 SECURITY AGREEMENT....................................................................................26
6.13 ASSIGNMENT AND ASSUMPTION AGREEMENT...................................................................26
SECTION 7. CERTAIN ADDITIONAL COVENANTS.......................................................................26
7.1 CONDUCT OF PRACTICE PRIOR TO CLOSING...................................................................26
7.2 FUNDING OF ACCRUED EMPLOYEE BENEFITS...................................................................27
7.3 [RESERVED].............................................................................................27
7.4 COVENANT NOT TO COMPETE................................................................................27
7.5 CONFIDENTIALITY........................................................................................28
7.6 PREPARATION OF TAX RETURNS AND PAYMENT OF TAXES........................................................29
7.7 COLLECTIONS OF ACCOUNTS................................................................................30
7.8 TERMINATION OF CORPORATION PLANS.......................................................................30
7.9 REORGANIZATIONS PRIOR TO CLOSING.......................................................................30
7.10 SELLER'S NOMINATION OF DIRECTOR TO PARENT BOARD OF DIRECTORS..........................................31
7.11 PDI OFFICE LEASE DEPOSIT..............................................................................31
7.12 CERTAIN PRE-CLOSING CLAIMS............................................................................31
7.13 REFUND OF MALPRACTICE PREMIUMS........................................................................31
SECTION 8. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.............................31
8.1 NATURE AND SURVIVAL....................................................................................31
8.2 INDEMNIFICATION BY PSC AND PARENT......................................................................32
8.3 INDEMNIFICATION BY SELLERS.............................................................................32
8.4 INDEMNIFICATION PROCEDURE..............................................................................36
8.5 LIMITATIONS UPON OBLIGATIONS...........................................................................37
8.6 RIGHT TO OFFSET........................................................................................37
SECTION 9. TERMINATION........................................................................................39
9.1 RIGHT TO TERMINATE.....................................................................................39
9.2 EFFECT OF TERMINATION..................................................................................40
SECTION 10. MISCELLANEOUS.....................................................................................40
10.1 NOTICES...............................................................................................40
10.2 FURTHER ASSURANCES....................................................................................42
10.3 PUBLIC DISCLOSURES....................................................................................42
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10.4 GOVERNING LAW.........................................................................................42
10.5 "INCLUDING"...........................................................................................42
10.6 "KNOWLEDGE"...........................................................................................42
10.7 "MATERIAL"............................................................................................42
10.8 "MATERIAL ADVERSE CHANGE" OR "MATERIAL ADVERSE EFFECT"................................................43
10.9 "HAZARDOUS MATERIALS".................................................................................43
10.10 "ENVIRONMENTAL LAWS".................................................................................43
10.11 CAPTIONS.............................................................................................43
10.12 INTEGRATION OF EXHIBITS..............................................................................43
10.13 ENTIRE AGREEMENT.....................................................................................43
10.14 COUNTERPARTS.........................................................................................44
10.15 BINDING EFFECT.......................................................................................44
10.16 NO RULE OF CONSTRUCTION..............................................................................44
10.17 COSTS OF ENFORCEMENT.................................................................................44
10.18 ASSIGNMENT...........................................................................................44
10.19 PERIOD PRIOR TO CLOSING..............................................................................44
10.20 ARBITRATION..........................................................................................45
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is dated as of May 27,
1998, by and among PHYSICIANS' SPECIALTY CORP., a Delaware corporation
("PARENT"); PSC ACQUISITION CORP., a Delaware corporation and a wholly-owned
subsidiary of Parent ("PSC"); XXXXX XXXXXX, M.D., XXXXX XXXXXX, M.D., XXX
XXXXXXXXX, M.D., XXXXXXX XXXXXXXXX, M.D., XXXX XXXXXXX, M.D., XXXXX XXXXXX,
M.D., XXXXX XXXXXXXXX, M.D., XXXXXXX XXXXXXXXX, M.D. AND XXXXXX XXXX, M.D.,
(individually an "ENT SELLER" and collectively the "ENT SELLERS"); XXX
XXXXXXXXX, M.D. ("CEA SELLER"); XXXXXX XXXXX, M.D. and XXXXXX XXXXX, M.D.
(individually a "RGSS SELLER" and collectively the "RGSS SELLERS") (ENT Sellers,
CEA Seller and RGSS Sellers are sometimes referred to herein individually as a
"SELLER" and collectively as the "SELLERS").
W I T N E S S E T H:
WHEREAS, the ENT Sellers are the shareholders of Ear Nose & Throat
Associates, P.C., a New York professional corporation ("ENT Medical Practice"),
and operate a medical practice with locations at 00 Xxxx Xxxx Xxxx, Xxxxx
Xxxxxx, Xxx Xxxx; 000 Xxxxx Xxxxxx, Xxxxx 000, Xxxxx Xxxxxx, Xxx Xxxx;
Xxxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxx Xxxx; 0000 Xxxxxxxx Xxxx, Xxxxx 0,
Xxxxxxxxx, Xxx Xxxx; 000 Xxxxx Xxxxxxxx, Xxxxx 000, Xxxxxxxxx, Xxx Xxxx; 000
Xxxxx Xxxxxxxx, Xxxxx 000, Xxxxxxx, Xxx Xxxx; 0 Xxxxxxxxx Xxxxxx Xxxx, Xxxxxx
Xxxxxx, Xxx Xxxx; 0 Xxxxx Xxxx, Xxxxx 00, Xxxxxxxxx, Xxx Xxxx, Xxx Xxx
Xxxxxxxxxx Xxxx, Xxxxx Xxxxxx, Xxx Xxxx; and 000 Xxxxxxxxx Xxxxx, Xxxxxxxx, Xxx
Xxxx;
WHEREAS, CEA Seller is the sole shareholder of Chestnut ENT Associates,
P.A., a New Jersey professional association ("CEA Medical Practice"), and
operates a medical practice located at 000 Xxxxx Xxxx Xxxxxx, Xxxxxxxxx, Xxx
Xxxxxx;
WHEREAS, the RGSS Sellers are the shareholders of Xxxxxx Xxxxx, M.D.
and Xxxxxx Xxxxx, M.D., P.C., a New York professional corporation ("RGSS Medical
Practice"), and operate a medical practice located at 0000 0xx Xxxxxx, Xxx Xxxx,
Xxx Xxxx (ENT Medical Practice, CEA Medical Practice and RGSS Medical Practice
are referred to individually as a "Practice" and collectively as the
"Practices".);
WHEREAS, Parent through its wholly-owned subsidiaries is engaged in the
business of acquiring and managing medical practices and PSC is a wholly-owned
subsidiary of Parent;
WHEREAS, the ENT Sellers wish to transfer, pursuant to a tax-free
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), substantially all of the assets of ENT Medical Practice to
a Delaware corporation to be named ENT Associates Acquisition Corp. ("ENT
Corporation") subject to the liabilities of ENT Medical Practice; CEA Seller
wishes to transfer, pursuant to a tax-free reorganization under Section 368 of
the Code, substantially all of the assets of CEA Medical Practice to a Delaware
corporation to be named Chestnut ENT Acquisition Corp. ("CEA Corporation")
subject to the liabilities of CEA Medical
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Practice; the RGSS Sellers wish to transfer, pursuant to a tax-free
reorganization under 368 of the Code, substantially all of the assets of RGSS
Medical Practice to a Delaware corporation to be named Green & Sacks Acquisition
Corp. ("RGSS Corporation") subject to the liabilities of RGSS Medical Practice;
(ENT Corporation, CEA Corporation and RGSS Corporation are referred to herein
individually as a "Corporation" and collectively as the "Corporations"); and
WHEREAS, the ENT Sellers wish to sell and convey to PSC and PSC wishes
to acquire from the ENT Sellers all of the issued and outstanding shares of
capital stock of ENT Corporation (the "ENT Shares"); CEA Seller wishes to sell
and convey to PSC and PSC wishes to acquire from CEA Seller all of the issued
and outstanding shares of capital stock of CEA Corporation (the "CEA Shares");
the RGSS Sellers wish to sell and convey to PSC and PSC wishes to acquire from
the RGSS Sellers all of the issued and outstanding shares of capital stock of
RGSS Corporation (the "RGSS Shares"); (the ENT Shares, CEA Shares and RGSS
Shares are referred to herein collectively as the "Shares"), upon the terms and
conditions set forth herein;
NOW THEREFORE, in consideration of the premises, the mutual promises
and covenants hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto do hereby agree as follows:
SECTION 1. TERMS OF THE SALE AND PURCHASE OF THE STOCK. The sale of the Shares
by Sellers and the purchase thereof by PSC shall be made at the "Closing" (as
defined in Section 1.11) based on the respective representations, warranties and
agreements of the parties hereto and subject to the terms and conditions herein
stated.
1.1 PURCHASE AND SALE OF THE SHARES At the Closing, Sellers shall sell
all the Shares, which shall be free and clear of all liens, security interests,
claims or encumbrances, to PSC, and PSC shall purchase the Shares from the
Sellers, for the aggregate purchase price (the "Purchase Price") of $15,614,600,
as adjusted, which Purchase Price shall be payable as set forth in this Section
1.1.
(a) Cash. At Closing, Parent or PSC shall pay Sellers collectively
an aggregate cash payment in the amount of $5,012,614.00, which amount
shall be subject to adjustment as set forth in Section 1.1(d)
hereinbelow.
(b) PSC Debenture. At Closing, PSC and PSC Management Corp., a
wholly-owned subsidiary of Parent ("PSC Management"), shall issue to a
paying and collateral agent (the "Paying Agent") on behalf of the Sellers
collectively a sixty (60) month debenture (the "PSC Debenture") in the
aggregate principal amount of $6,401,986.00. The PSC Debenture shall bear
simple interest at a rate of 6% per annum, payable quarterly, shall be in
substantially the same form as attached hereto as Exhibit 1.1A.
Contemporaneously with the Closing, PSC will cause each Corporation to
convey its furniture, fixtures and equipment to PSC Management for good
consideration, and PSC Management shall cause the Debenture to be secured
by a security interest in favor of the Paying Agent for the benefit of
the Sellers, in the furniture, fixtures, and equipment so
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acquired by PSC Management from the Corporations at the time of Closing,
but not any after acquired property, all pursuant to a security agreement
to be entered into at Closing in substantially the same form as attached
hereto as Exhibit 1.1B (the "Security Agreement"), and such security
interest will be released by the Paying Agent upon request of PSC or PSC
Management with respect to items replaced in the ordinary course of
business.
(c) Liabilities to Be Discharged. At Closing, Parent or PSC shall
retire or discharge the debt set forth on Exhibit 1.1C (the "Discharged
Debt") on behalf of Sellers and the Corporations.
(d) Adjustment of Cash Payment. At the Closing, the cash payment set
forth in Section 1.1(a) shall be adjusted, if applicable, as follows:
(i) In the event the aggregate amount of the liabilities to be
discharged under Section 1.1(c) or otherwise by PSC pursuant to this
Agreement is less than $4,200,000 at Closing, the amount of the cash
payment under Section 1.1(a) shall be increased by the difference
between $4,200,000 and the actual amount of the liabilities retired
or discharged at Closing, and if the amount of the liabilities to be
discharged under Section 1.1(c) or otherwise by PSC pursuant to this
Agreement is more than $4,200,000 at Closing, the amount of the cash
payment under Section 1.1(a) shall be decreased by the difference
between the actual amount of the liabilities retired or discharged
at Closing and $4,200,000.
(ii) The amount of the cash payment under Section 1.1(a) shall
be reduced by any shortfall in the amount of aggregate accounts
receivable of the Corporations at Closing below the requirement of
$3,804,668 set forth in Section 5.16 hereinbelow.
(e) Allocation of Purchase Price Among Sellers. The Purchase Price
shall be allocated among the individual Sellers as set forth in Exhibit
1.1E.
1.2 ADDITIONAL PURCHASE PRICE CONSIDERATION. If within twenty-four (24)
months following the Closing, "New York NewCo" and "New Jersey NewCo" (as
hereinafter defined) collectively add ten (10) full-time physician-employees and
have an aggregate of thirty (30) full-time physician-employees who are employed
by New York NewCo or New Jersey NewCo pursuant to valid employment agreements as
required by the "MSAs" (as hereinafter defined in Section 1.5) or other
employment agreements consented to by PSC in writing hereunder, Parent will pay
to the Paying Agent for the benefit of Sellers bonus purchase price
consideration in the aggregate amount of $500,000, payable, at Parent's
election, in the form of cash or shares of Parent common stock. If Parent elects
to pay the bonus consideration in the form of Parent common stock, all shares of
stock issued shall be restricted stock under the Securities Act of 1933, as
amended, and shall be valued based on the average closing price of Parent common
stock on NASDAQ for the twenty (20) trading days ending on the trading day
preceding the date of delivery. Any such bonus consideration will be delivered
to the Paying Agent for the benefit
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of Sellers on the tenth business day following the date that the condition
giving rise to bonus consideration has been achieved. For purposes of this
Agreement, a full-time physician-employee shall mean a physician whose sole
employment as a practicing physician consists of practicing medicine at least
thirty (30) hours per week and at least 45 weeks per year (to allow for 7 weeks
of vacation and/or continuing medical education) with New York NewCo or New
Jersey NewCo. Such bonus consideration shall be divided among the Sellers in the
same proportions as the allocations set forth on Exhibit 1.1E. In connection
with and at the time of delivery of any shares of Parent common stock pursuant
to this Section 1.2, Sellers shall provide such investment representations or
investment letters as Parent may determine to be reasonably necessary or
appropriate under applicable securities laws. Parent shall deliver any such
common stock free and clear of all liens, claims, encumbrances or restrictions
(other than restrictions on transferability arising under applicable securities
laws and any liens, claims or encumbrances arising from any Seller's actions).
Parent represents and warrants to Sellers that any common stock delivered as
bonus consideration hereunder shall be duly and validly authorized and issued,
fully paid and nonassessable.
1.3 PAYMENT AND NON-ASSUMPTION OF LIABILITIES. Each Seller covenants and
agrees that such Seller's Shares shall be free and clear of all security
interests, liens, claims, encumbrances and restrictions at Closing. Each Seller
covenants and agrees that all of the creditors with respect to such Seller's
Practice or Corporation will be paid in full by such Seller or such Seller's
Practice or Corporation prior to the Closing Date, other than the Discharged
Debt to be discharged at Closing. Without limiting the generality of the
foregoing, any amounts owed to a Seller by any Corporation, whether or not shown
on the Balance Sheet of such Corporation, shall be (i) satisfied prior to
Closing, or (ii) deemed a contribution to capital of such Corporation and shall
be deemed discharged prior to Closing. If required by Parent or PSC, Sellers
shall furnish Parent with proof of payment of all other known creditors of each
Seller's respective Practice or Corporation. Sellers further acknowledge and
agree that Parent, PSC Management and PSC shall have no liability whatsoever now
or at any time in the future with respect to (1) any "Corporation Plan" (as
defined in Section 2.25) or (2) services performed prior to the Closing Date by
any employees or agents or similar persons or entities of such Seller, his
Corporation or Practice. The parties acknowledge that Sellers may direct a
portion of the Purchase Price to fund payment of any such liabilities
contemporaneously with the Closing. Except for the office and equipment leases
identified on Exhibits 2.10A through 2.10G and Exhibits 2.11A through 2.11G, and
subject to the condition precedent set forth in Section 5.18, neither Parent,
PSC Management nor PSC will assume pursuant to the transactions contemplated by
this Agreement, any liabilities or obligations of Sellers, the Corporations,
Physicians Domain, Inc. ("PDI") or the Practices, whether known or unknown,
liquidated or unliquidated, contingent or fixed, and whether or not disclosed in
this Agreement or any schedule or exhibit hereto.
1.4 EMPLOYMENT ARRANGEMENTS.
(a) At the Closing all Sellers practicing medicine at a New York
office listed on Exhibit 7.4 shall enter into full-time employment
agreements with ENT Associates, LLP ("New York NewCo"), and CEA Seller
shall enter into a full-time employment agreement with ENT Associates of
New Jersey, P.C. ("New Jersey NewCo"), in each case
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such employment agreement to be in the form required by the applicable
"MSA" (as defined in Section 1.5). Sellers shall use best efforts to
cause the other employee physicians of the Practices identified on
Exhibit 1.4 to enter into prior to Closing employment agreements with New
York NewCo or New Jersey NewCo, as the case may be, in the form required
by the applicable MSA, other than those physician employees identified on
Exhibit 1.4 whose current contracts Seller may elect to let expire or who
are expected by Sellers to become partners of New York NewCo or New
Jersey NewCo within six (6) months of Closing. Sellers agree that any
employee physician whose employment will continue beyond the Closing Date
will either sign such new employment agreement or have a valid written
employment agreement in form reasonably acceptable to PSC Management
properly assigned to New York NewCo or New Jersey NewCo.
(b) Prior to the Closing Date, the Sellers will cause the
Corporations, the Practices, and PDI to: (i) terminate any employment
agreements with all physicians, including Sellers, and all other
employees except for assignment by the Practices of certain physician
employment contracts pursuant to Section 1.4(a) above, (ii) terminate or,
if termination is not reasonably achievable prior to Closing, freeze all
"Corporation Plans" (as defined hereinafter) such termination to be
effected in accordance with and to the extent permitted by applicable
provisions of the Code and the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and all other applicable laws, rules,
governmental orders, statutes, decrees, and regulations (collectively,
"Laws") and (iii) cause the Corporation Plans to make timely and
appropriate distributions, to the extent required, to such employees in
accordance with, and to the extent permitted by the terms and conditions
of such Corporation Plans, ERISA, and the Code. Sellers will provide to
PSC such copies of documents and other information related to the
termination or freezing of the Corporation Plans as PSC may reasonably
request. All costs and expenses associated with administration,
termination or freezing of the Corporation Plans, whether incurred before
or after Closing, shall be the responsibility of Sellers, the Practices
and PDI respectively.
1.5 MANAGEMENT SERVICES AGREEMENT. At Closing, New York NewCo, New
Jersey NewCo, Parent and PSC Management shall execute and deliver Management
Services Agreements (collectively the "MSAs" and individually an "MSA")
substantially in the same forms as attached hereto as Exhibit 1.5A ("New York
MSA") and Exhibit 1.5B ("New Jersey MSA") pursuant to which PSC Management will
provide management services to New York NewCo and New Jersey NewCo from and
after the Closing Date.
1.6 EACH PARTY TO BEAR COSTS. Each of the parties to this Agreement
shall pay all of the costs and expenses incurred by such party in connection
with the transactions contemplated by this Agreement, except as otherwise
provided herein. Without limiting the generality of the foregoing, and whether
or not such liabilities may be deemed to have been incurred in the ordinary
course of business, except as provided in Section 9.2(b) and (c), neither party
shall be liable for or required to pay, either directly or indirectly, any of
the following liabilities or expenses incurred by the other party: (a) fees and
expenses of any person for services as a finder, or for fees and expenses of any
persons for financial services rendered to such other party
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in connection with negotiating and closing the sale contemplated by this
Agreement; (b) fees and expenses of legal counsel retained by such other party
for services rendered to such party in connection with negotiating and closing
the transactions contemplated by this Agreement; (c) fees and expenses of any
auditors and accountants retained by such other party for services rendered to
such party in connection with negotiating and closing the sale contemplated by
this Agreement; (d) state and federal income taxes or other similar charges on
income incurred by such other party on any gain from the purchase and sale of
the Shares hereunder; and (e) expenses and fees relating to feasibility studies,
appraisals and similar valuation services performed on behalf of such other
party in connection with the transactions contemplated hereby.
1.7 ASSIGNMENT OF CONTRACTS AND ASSETS; CONSENTS. Nothing in this
Agreement or delivered pursuant to this Agreement shall be construed as an
attempt to agree to assign any contract, certificate, license or other asset
which is in law or by agreement nonassignable without the consent of the other
party or parties thereto, or of any governmental authority, as the case may be,
unless such consent shall be given. Sellers will use their reasonable good faith
efforts to obtain all such necessary consents of the parties to any such
contracts prior to the Closing. In order, however, that the full value of every
such contract, certificate, license or other asset and all claims and demands in
such contracts may be realized, Sellers hereby covenant to PSC and Parent that
Sellers, or their agents, will, at the request and under the direction of PSC,
in the individual names of Sellers or otherwise, as PSC shall specify and as
shall be permitted by law, take all such reasonable actions and do or cause to
be done all such reasonable things as shall, in the opinion of PSC, be necessary
or proper (a) in order that the rights and obligations of Sellers under such
contracts, certificates, licenses and other assets shall be preserved, and (b)
for, and to facilitate, from and after the Closing, the collection of the moneys
due and payable, and to become due and payable, to Sellers in and under every
such contract and in respect of every such claim and demand, from and after the
Closing, and Sellers shall hold the same for the benefit of, and shall pay the
same over to, PSC.
1.8 COOPERATION WITH REGULATORY APPROVALS. Sellers shall cooperate with
and assist PSC, as PSC shall reasonably request, at no cost to Sellers, in
obtaining the approval of all regulatory agencies and officials whose approval
is required for the transfer of all licenses and other regulatory approvals
required to enable PSC to acquire the Shares.
1.9 IRREVOCABLE GUARANTY BY PARENT. To induce Sellers to execute and
deliver this Agreement, Parent hereby unconditionally and irrevocably guarantees
to Sellers the full, prompt and faithful performance by PSC of all covenants and
obligations to be performed by PSC under this Agreement, including, but not
limited to, the payment of all sums by PSC pursuant to this Agreement and the
PSC Debenture and PSC's obligation to indemnify the Sellers pursuant to Section
8.2. This guaranty shall be a guaranty of payment, not merely of collection, and
shall be unaffected by any subsequent modification or amendment of this
Agreement whether or not Parent has knowledge of or consented to such
modification or amendment. In the event that PSC fails to fully perform any such
covenants or obligations in accordance with their terms or pay all or any part
of such sums when due, Parent will perform all such covenants and obligations in
accordance with their terms or immediately pay or deliver to Sellers (or such
other payee or transferee as may be provided in any such agreement) the amount
due and unpaid, as the case
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may be, by PSC. In the event of bankruptcy, termination, liquidation or
dissolution of PSC, this unconditional guaranty shall continue in full force and
effect. In the event of any extension of time for payment or performance or
other modification of any guaranteed obligation or covenant, or any waiver
thereof or other compromise or indulgence with respect thereto or any release or
impairment of any security for any such obligation or covenant, or any other
circumstance which might otherwise constitute a legal or equitable discharge of
a surety or guarantor, no notice to, or consent of, Parent shall be required.
Parent hereby waives (i) promptness and diligence in collection; (ii) notice of
acceptance and notice of the incurrence of any obligation by PSC; (iii) all
other notices, demands and protests of every kind in connection with the
enforcement of the obligations of Parent pursuant to this Section 1.9, the
omission of or delay of which, but for the provisions of this Section 1.9, might
constitute grounds for relieving Parent of its obligations under this Section
1.9; (v) the right to a trial by jury of any dispute arising under, or relating
to, the guaranty set forth in this Section 1.9; (vi) any right or claim of right
to cause a marshaling of PSC's assets or to cause the Sellers to proceed against
any security for the PSC Debenture before proceeding against Parent hereunder;
and (vii) any requirement that the Sellers protect, secure, perfect or insure
any security interest or lien in or on any property subject thereto or exhaust
any right or take any action against PSC or any other person or any collateral
as a precondition to the Sellers' right to enforce the guaranty set forth in
this Section 1.9 in accordance with its terms. Without limiting the generality
of the foregoing, Parent hereby waives any defense to the guaranty set forth in
this Section 1.9 which may arise by reason of (A) the incapacity, lack of
authority, death or disability of, or revocation hereof by, any person or
entity, (B) the failure of the Sellers to file or enforce any claim against the
estate (in probate, bankruptcy or any other proceedings) of any person or
entity, or (C) any defense based upon an election of remedies by Sellers.
1.10 CONSULTING AGREEMENT. At Closing the Sellers and Parent shall
execute and deliver a letter agreement regarding consulting services
substantially in the form set forth on Exhibit 1.10 attached hereto.
1.11 CLOSING.
(a) Closing. Subject to the fulfillment of the conditions precedent
specified in Sections 5 and 6 of this Agreement, the transactions
contemplated by this Agreement shall be consummated at a closing (the
"Closing") to be held at the offices of Xxxxxxx & Xxxxxxxxx, LLP, One
North Broadway, White Plains, New York, or at such other location as is
mutually agreed upon by Parent and the Sellers, on May 22, 1998 or such
other date as the parties may agree. The date on which the Closing occurs
or is effective shall be referred to as the "Closing Date."
(b) Documents to be Delivered by Sellers. At the Closing, Sellers
shall deliver, or cause to be delivered, to PSC the following:
(i) The certificates representing all of the Shares of each
of the Corporations, duly endorsed for transfer or accompanied by
duly executed stock powers, which certificates or stock powers shall
either be physically executed and
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delivered by Sellers at Closing or shall have the signatures of
Sellers guaranteed or notarized;
(ii) The other agreements, documents, certificates and
instruments required by Sections 5.7, 5.13, 5.14, 5.15, 5.17,
5.20(c) and 5.21;
(iii) Insurance policies providing professional liability
coverage for New York NewCo and New Jersey NewCo, all Sellers and
the Practices in amounts of not less than $1,000,000 per occurrence
and $3,000,000 aggregate on a claims made basis and prior acts
coverage ("tail coverage") if required for the Practices and Sellers
providing continuity of coverage until the expiration of applicable
statutes of limitations; and
(iv) Any other documentation required to be delivered under
this Agreement or otherwise reasonably requested by PSC as necessary
or appropriate to consummate the transactions contemplated hereby.
(c) Documents and Other Items to be Delivered by PSC. At the
Closing, PSC shall deliver or cause to be delivered to Sellers the
following:
(i) The cash portion of the Purchase Price determined in
accordance with the provisions of Section 1.1 by wire transfer in
accordance with the written instructions of Sellers;
(ii) The executed PSC Debenture and Guaranty, Security
Agreement, and any UCC-1 Financing Statement reasonably required by
the Paying Agent to perfect the security interest granted in the
Security Agreement;
(iii) Certified copies of the resolutions of the boards of
directors of Parent, PSC and PSC Management authorizing the
transactions contemplated hereby; and
(iv) Any other documentation required to be delivered under
this Agreement or otherwise reasonably requested by Sellers as
necessary or appropriate to consummate the transactions contemplated
hereby.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLERS.
Except as set forth in the next sentence of this preamble to Section
2, for purposes of the representations and warranties set forth in this Section
2, ENT Sellers are jointly and severally representing and warranting solely with
respect to ENT Sellers, ENT Medical Practice and ENT Corporation; CEA Seller is
representing and warranting solely with respect to CEA Seller, CEA Medical
Practice and CEA Corporation; RGSS Sellers are jointly and severally
representing and warranting solely with respect to RGSS Sellers, RGSS Medical
Practice and RGSS Corporation; and any references in this Agreement to the
Seller(s), the Corporation(s), the
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Practice(s) or the Shares and any information set forth on the Exhibits hereto
shall be construed in accordance with the foregoing. Notwithstanding the
foregoing, the representations and warranties set forth in this Section 2 with
respect to PDI are made jointly and severally by all Sellers, and with regard to
the representations and warranties set forth in Sections 2.3(a), 2.3(c), 2.4(b),
2.4(d) and 2.4(e), each Seller is representing and warranting severally but not
jointly, with respect to such Seller. In accordance with the foregoing, Sellers
hereby represent and warrant to Parent and PSC as follows:
2.1 OWNERSHIP OF SHARES. Sellers are the record and beneficial owners of
the Shares of their respective Corporation, free and clear of all liens, claims,
and encumbrances. Exhibits 2.1A through 2.1D set forth a true and accurate list
of the names and addresses of the shareholders of the Corporation, together with
the number of shares that each Seller owns in such Corporation. The Shares
constitute all of the issued and outstanding shares of capital stock of any
class of the Corporation. Upon delivery to PSC at Closing of the certificates
representing the Shares, duly endorsed by Sellers for transfer to PSC, PSC shall
be the lawful owner of the Shares, free and clear of all liens, security
interests, claims or encumbrances (other than those arising from PSC's actions).
There are no shareholders agreements, voting trusts, agreements, or proxies with
respect to the Shares.
2.2 ORGANIZATION. The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is qualified to transact business and is in good standing in all states in
which the failure to so qualify would have a Material Adverse Effect on such
Corporation. The Corporation owns, leases or operates real property, maintains
an office or employees or otherwise transacts business only in the state of New
York or New Jersey. The Corporation has the corporate power and authority to
own, lease and operate its assets, property and business. Certified copies of
the Corporation's articles/certificate of incorporation and bylaws, and all
amendments thereto, all of which are true, correct and complete, are attached
hereto on Exhibit 2.2.
2.3 POWER AND AUTHORITY FOR TRANSACTIONS.
(a) Seller has the power to execute, deliver and perform his or her
obligations under this Agreement and all agreements and other documents
executed and delivered by Seller pursuant to this Agreement, and has
taken all action required by law, to authorize the execution, delivery
and performance of this Agreement and such related documents.
(b) The execution and delivery of this Agreement, and the agreements
related hereto to be executed and delivered pursuant to this Agreement,
do not, and (subject to obtaining all necessary consents from landlords
or lessors to assignment of leases and contracts) the consummation of the
transactions contemplated hereby will not, violate any provisions of the
Articles of Incorporation or Bylaws of the Corporation or any provisions
of, or result in the acceleration of, any obligation under any material
mortgage, lien, lease, agreement, instrument, order, arbitration award,
judgment or decree to which the Practice, Corporation, PDI or Seller is a
party or by which the Practice, Corporation, PDI or Seller
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is bound, or violate any material restrictions of any kind to which the
Practice, Corporation, PDI or Seller is subject.
(c) This Agreement has been duly and validly executed and delivered
by Seller and constitutes the valid and binding agreement of Seller
enforceable against Seller in accordance with its terms (subject to
applicable bankruptcy, insolvency, moratorium and similar laws affecting
creditors' rights generally and general principles of equity), and each
other agreement to be executed and delivered at the Closing by Seller
will, upon such execution and delivery, constitute the valid and binding
agreement of Seller enforceable against Seller in accordance with its
terms (subject to applicable bankruptcy, insolvency, moratorium and
similar laws affecting creditors' rights generally and general principles
of equity).
2.4 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS.
(a) All material building or other permits, certificates of
occupancy, concessions, grants, franchises, licenses, certificates of
need and other material governmental authorizations and approvals
necessary for the conduct of the business of the Practice and
Corporation, or waivers thereof, have been duly obtained and are in full
force and effect. Except as set forth on Exhibits 2.4A through 2.4C,
there are no proceedings pending or, to the knowledge of Sellers,
threatened which may result in the revocation, cancellation or
suspension, or any adverse modification, of any of the foregoing.
(b) Approvals. Seller holds in full force and effect all approvals,
authorizations, licenses, and certifications required by law (the
"Approvals") to practice medicine in New York or New Jersey, as
applicable. Evidence of such Approvals has been delivered to Parent.
Except as set forth on Exhibits 2.4A through 2.4C, no revocation or
suspension of any Approval is now in effect, and no formal allegation
(including any complaint, indictment or initiation of proceedings) is
pending before a court of law, licensing or regulatory authority,
professional organization, or the medical staff or committee of a
hospital, regarding Seller's practice or fitness to practice medicine,
including any allegation of the following: alcohol abuse, a violation of
any law or regulation relating to controlled substances, professional
malpractice or misconduct, improper billing practices, or a crime
involving moral turpitude. The foregoing does not include any action
taken as a result of failure to timely complete medical records.
(c) Provider Numbers. The Practice and Seller holds a valid Medicare
provider number, and Seller has a valid uniform physician identification
number. Evidence of such numbers has been delivered to Parent.
(d) Board Certification. Seller is certified by the American Board
of Otolaryngology and evidence of such board certification(s) has been
delivered to Parent.
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(e) No Conviction. Seller has never been convicted of a criminal
offense relating to Medicare or any federally-funded state health care
program. For purposes of this Agreement, the term "conviction" includes
the entry of a plea of guilty or nolo contendere or participation in a
first offender, deferred adjudication, or other arrangement or program
whereby a judgment of conviction has been withheld.
2.5 SUBSIDIARIES AND AFFILIATES. The Corporation has no subsidiaries.
2.6 OUTSTANDING CAPITAL STOCK. The Corporation is authorized to issue
the number of shares of common stock, at the par values set forth on Exhibits
2.1A through 2.1C. The Shares listed in Exhibits 2.1A through 2.1C are the only
shares issued and outstanding. No other class of capital stock of the
Corporation is authorized or outstanding. All of the Shares of the Corporation
are duly authorized, validly issued, fully paid and nonassessable.
2.7 OPTIONS, WARRANTS AND OTHER RIGHTS. There are no authorized or
outstanding options, warrants, convertible securities, subscriptions or other
agreements or rights of any nature (other than pursuant to this Agreement) under
which the Corporation may be obligated to issue or transfer any shares of its
capital stock.
2.8 FINANCIAL INFORMATION. Seller has furnished Parent and PSC with
copies of financial information about the Practice for the years ending December
31, 1997, 1996 and 1995, as included in Exhibits 2.8A through 2.8C including,
but not limited to, (as to the ENT Sellers) the audited balance sheets of the
ENT Medical Practice and (as to the other Sellers) the unaudited balance sheets
of all of the other Practices (collectively the "Balance Sheets") as of December
31, 1997 (the "Balance Sheet Date"). Except with respect to the ENT Medical
Practice, all such financial statements of Seller's respective Practice have
been prepared on the cash basis of accounting consistently followed throughout
the periods indicated, reflect all assets and all known liabilities of the
Practice as of their respective dates, and present fairly the cash basis
financial position of the Practice as of such dates and the results of
operations for the period or periods reflected therein. In the case of ENT
Medical Practice, all such financial statements have been prepared on the
accrual basis of accounting consistently followed throughout the period or
periods indicated, reflect all assets and liabilities of the ENT Medical
Practice, as of their respective dates, and present fairly the financial
position of ENT Medical Practice as of such dates and the results of operation
for the period or periods reflected therein in accordance with generally
accepted accounting principles ("GAAP").
2.9 NO UNDISCLOSED LIABILITIES. Except as disclosed in Section 1.3 or as
set forth in Exhibits 2.9A through 2.9C, Exhibits 2.10A through 2.10C and
Exhibits 2.11A through 2.11C, to Seller's knowledge the Practice did not have,
as of the Balance Sheet Date, and has not incurred since that date, and the
Corporation does not have any uninsured liabilities or obligations of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due which have not been or will not be satisfied or extinguished prior
to the Closing Date.
2.10 LEASES. Exhibits 2.10A through 2.10D list all leases, if any,
pursuant to which the Practice leases, as lessor or lessee, real property.
Except as indicated on Exhibits 2.10A through
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2.10D, all such leases are valid and effective in accordance with their
respective terms, and there is not under any such lease any existing default and
there is no condition or event of which the Practice or the Sellers have
knowledge which with notice or lapse of time, or both, would constitute a
material default, in respect of which the Practice has not taken adequate steps
to cure such default or to prevent a default from occurring.
2.11 PERSONAL PROPERTY. Except the cash items retained by Seller (subject
nevertheless to the requirements of Section 5.16 below), as of the Closing the
Corporation will own substantially all of the personal property reflected on the
Balance Sheet of its predecessor, including, but not limited to, all items of
personal property identified on Exhibits 2.11A through 2.11D, free and clear of
any liens, claims, charges, exceptions or encumbrances, except for those set
forth in Exhibits 2.11A through 2.11C. As of the Closing ENT Corporation will
own substantially all of the personal property assets and trade name of PDI
(excluding the office leases, lease security deposits and leasehold
improvements) including, but not limited to, those items identified on Exhibit
2.11D, free and clear of any liens, charges, exceptions or encumbrances, except
for those set forth on Exhibit 2.11D. Exhibits 2.11A through 2.11D list all
leases, if any, pursuant to which the Practice, the Corporation or PDI leases,
as lessor or lessee, personal property. Except as indicated on Exhibits 2.11A
through 2.11D, all such leases are valid and effective in accordance with their
respective terms, and there is not under any such lease any existing default and
there is no condition or event of which the Practice or the Sellers have
knowledge (except any failure to obtain a required consent to assignment in
connection with this transaction) which with notice or lapse of time, or both,
would constitute a material default, in respect of which the Practice or PDI has
not taken adequate steps to cure such default or to prevent a default from
occurring.
2.12 INVENTORIES. The items of the Practice's (non-pharmaceutical)
inventory of medical supplies have been acquired in the ordinary course of
business and maintained at levels consistent with past practices and are in all
material respects adequate for the reasonable requirements of the Practice, and
will be transferred to the Corporation prior to the Closing, other than
pharmaceutical inventory and patient charts and records which will be
transferred to either New York NewCo or New Jersey NewCo, as appropriate, prior
to Closing.
2.13 PRINCIPAL PLACE OF BUSINESS. The locations of the Practice are at
those addresses and those counties listed in Exhibits 2.13A through 2.13D. The
assets of the Corporation are located in those counties listed in Exhibits 2.13A
through 2.13D.
2.14 [RESERVED].
2.15 INTELLECTUAL PROPERTY RIGHTS. Except as set forth in Exhibits 2.15A
through 2.15D, neither the Corporation nor the Practice has any right, title or
interest in or to any patents, patent rights, manufacturing processes, trade
names, trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas or trade secrets. Except for off-the-shelf software
licenses, neither the Practice nor the Corporation is a licensee in respect of
any patents, trademarks, service marks, trade names, copyrights or applications
therefor, or manufacturing processes, formulas or trade secrets. The Corporation
will as of Closing own and possess adequate
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licenses or other rights to use all such patents, trademarks, service marks,
trade names, copyrights, manufacturing processes, inventions, formulas and trade
secrets necessary to conduct its business. There is no claim pending to the
effect that the operations of the Practice infringe upon or conflict with the
asserted rights of others to such patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, copyrights,
formulas or trade secrets.
2.16 DIRECTORS AND OFFICERS; PAYROLL INFORMATION. Set forth on Exhibits
2.16A through 2.16D are true and complete lists, as of the date of this
Agreement, of: (a) the name of each director and officer of the Corporation and
Practice; and (b) a list of all current employees of the Practice, Corporation
and PDI and their current levels of compensation other than bonuses and other
extraordinary compensation.
2.17 LEGAL PROCEEDINGS. Except as set forth in Exhibits 2.17A through
2.17D, Seller has no knowledge of any pending, and has not received written
notice within 18 months of threatened, litigation, governmental investigation,
condemnation or other proceeding against or relating to or affecting the
Sellers, the Practice, the Corporation, PDI, the Shares or the transactions
contemplated by this Agreement, including, but not limited to, claims for
medical malpractice or negligence, and, to the knowledge of Sellers, no basis
for any such action exists, nor is there any legal impediment of which Seller
has knowledge to the continued operation of the Practice and Corporation in the
ordinary course other than the consent of landlords and lessors to the leases
described on Exhibits 2.10A through 2.10D and Exhibits 2.11A through 2.11D.
2.18 CONTRACTS. To the best of Seller's knowledge, Seller has delivered
to Parent true copies of all written, and disclosed to Parent all material oral,
outstanding contracts, obligations and commitments of Seller, the Practice and
the Corporation, all of which are listed on Exhibits 2.10A through 2.10D (in the
case of real property leases), Exhibits 2.11A through 2.11D (in the case of
personal property leases), Exhibits 2.18A through 2.18D (in the case of managed
care contracts, third party payor contracts and contracts other than leases) and
Exhibits 2.25A through 2.25D (in the case of Corporation Plans). Except as
otherwise indicated on such Exhibits, all of such contracts, obligations and
commitments are, to Seller's best knowledge, valid, binding and enforceable in
accordance with their terms and are in full force and effect, subject to
limitations on enforceability imposed by, bankruptcy, moratorium, creditors'
rights or similar laws and general equitable principles. Except as set forth on
such Exhibits, to Seller's knowledge, no default or alleged default by the
Seller or the Practice or Corporation exists thereunder. Except as listed on
Exhibits 2.10A through 2.10D, Exhibits 2.11A through 2.11D, Exhibits 2.18A
through 2.18D and Exhibits 2.25A through 2.25D, neither the Corporation,
Practice, or Seller is, or will be at Closing, a party to any material written
or oral agreement, contract, lease or plan of a type described as follows:
(a) Contract not made in the ordinary course of business, other than
this Agreement, the Partnership Agreement among Sellers and documents
executed pursuant to this Agreement.
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(b) Employment contract which is not terminable without cost or
other liability (except for salary and benefits accrued as of the date of
termination) to the Corporation or Practice, or any successors or assigns
thereof, upon notice of 30 days or less.
(c) Contract with any labor union.
(d) Bonus, pension, profit-sharing, retirement, stock acquisition,
hospitalization, insurance or similar plan providing for employee
benefits.
(e) Lease with respect to any property, real or personal, whether as
lessor or lessee.
(f) Contract for the future acquisition of materials, supplies or
equipment (i) which is in excess of the requirements of the Practice now
booked or for normal operating inventories, or (ii) which is not
terminable without material cost or liability to the Corporation or
Practice, or any successors or assigns thereof, upon notice of 30 days or
less.
(g) Insurance contract.
(h) Contract continuing for a period of more than six months from
the Closing Date.
(i) Loan agreement or other contract for money borrowed.
2.19 SUBSEQUENT EVENTS. Except as set forth on Exhibits 2.19A through
2.19C, neither the Practice nor the Corporation has since the Balance Sheet
Date:
(a) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have
been required due to income or operations of the Practice.
(b) Sold or transferred any of the Shares except to another Seller.
(c) Granted any general or uniform increase in the rates of pay of
employees or any substantial increase in salary payable or to become
payable by the Corporation or Practice to any of its officers or
employees (other than normal merit increases), or by means of any bonus
or pension plan, contract or other commitment, materially increased the
compensation of any of its officers or employees.
(d) Issued any stock, bonds or other securities except to a Seller.
(e) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its material
properties, assets or
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business, or experienced any other material adverse change in its
financial condition, assets, liabilities or business.
2.20 ACCOUNTS RECEIVABLE. Exhibits 2.20A through 2.20C reflect the
Practice's accounts receivable as of the Balance Sheet Date, net of allowances
for uncollectible and doubtful accounts. The Practice maintains its accounting
records in sufficient detail to substantiate its respective accounts receivable
reflected on Exhibits 2.20A through 2.20C. Except with the written consent of
PSC, or as needed to restate ENT Corporation's balance sheet on a GAAP basis,
since the Balance Sheet Date, the Practice has not changed any principle or
practice with respect to the recordation of accounts receivable or the
calculation of reserves therefor, or any material collection, discount or
write-off policy or procedure. To the best knowledge of the Seller, the Practice
is in substantial compliance with the terms and conditions of its third-party
payor arrangements, and to Seller's knowledge the reserves established by the
Practice are adequate to cover any liability resulting from lack of compliance.
2.21 TAX RETURNS. The Practice has filed all tax returns (or has obtained
appropriate extensions), required to be filed by it, and made all payments
required to be made by it, with respect to income taxes, real property taxes,
sales taxes, use taxes, employment taxes and similar taxes due and payable on or
before the date of this Agreement. The Practice has no tax liability or pending
tax audits, except as set forth on Exhibits 2.21A through 2.21C, and sales, use,
employment and similar taxes for periods as to which such taxes have not yet
become due and payable. True and correct copies of the Practice's respective
1997, 1996 and 1995 federal and state income tax returns have been attached
hereto on Exhibits 2.21A through 2.21C or, as to 1997 returns will be delivered
as required by Section 7.6.
2.22 COMMISSIONS AND FEES. There are no valid claims, including but not
limited to, any claim or claims by CIBC Xxxxxxxxxxx & Co., for brokerage
commissions or finder's or similar fees in connection with the transactions
contemplated by this Agreement which may be now or hereafter asserted against
PSC, Parent or the Corporation resulting from any action taken by Sellers, the
Practice, PDI, New Jersey NewCo or New York NewCo or their respective agents or
employees.
2.23 [RESERVED].
2.24 INSURANCE POLICIES. The Seller and/or the Practice maintain policies
of comprehensive general liability and professional liability insurance in
amounts of not less than $1,000,000 per occurrence and $3,000,000 aggregate on a
claims made basis and property damage insurance on the assets of the Practice,
and as of Closing, the Corporation. A description of all such policies are
attached on Exhibits 2.24A through 2.24D.
2.25 EMPLOYEE BENEFIT PLANS. Except as set forth on Exhibits 2.25A
through 2.25D or Exhibits 2.16A through 2.16D and except for employment
arrangements terminated prior to Closing, neither PDI nor the Practice or the
Corporation has established, or maintains, or is obligated to make contributions
to or under or otherwise participate in, (a) any bonus or other type of
incentive compensation plan, program, agreement, policy, commitment, contract or
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arrangement (whether or not set forth in a written document); (b) any pension,
profit sharing, retirement or other plan, program or arrangement; or (c) any
other employee benefit plan, fund or program, including, but not limited to,
those described in Section 3(3) of ERISA. All such plans listed on Exhibits
2.25A through 2.25D (individually "Corporation Plan," and collectively
"Corporation Plans") have been (i) furnished to Parent along with a copy of each
material document prepared in connection with such Corporation Plans and (ii)
operated and administered in all material respects in accordance with, as
applicable, ERISA, the Code and any other applicable laws, and the related rules
and regulations adopted by those federal agencies responsible for the
administration of such laws. To the best of Seller's knowledge, no act or
failure to act by PDI or the Practice, Seller, or the Corporation has resulted
in a "prohibited transaction" (as defined in ERISA) with respect to the
Corporation Plans. No "reportable event" (as defined in ERISA) has occurred with
respect to the Corporation Plans. Neither PDI nor the Practice or Corporation
has made, is currently making, or is obligated in any way to make, any
contributions to any multi-employer plan within the meaning of Section 3(37) of
ERISA. None of the Corporation Plans are multiple employer welfare arrangements
within the meaning of Section 3(40) of ERISA. The Corporation Plans do not
provide for the payment of separation, severance, termination or similar-type
benefits to any person or obligate PDI or the Practice or Corporation to pay
such benefits solely as a result of any transaction contemplated by this
Agreement, or as a result of a "change of control" within the meaning of Section
280G of the Code. None of the Corporation Plans provides for or promises retiree
medical, retiree disability or retiree life insurance benefits to any current or
former employee of PDI or the Practice or Corporation. Each Corporation Plan
which is intended to be qualified under Section 401(a) of the Code has received
a favorable determination letter from the IRS dated on or after January 1, 1995
that it is so qualified and no fact or event has occurred since the date of such
determination letter to adversely affect the qualified status of any such
Corporation Plan.
2.26 COMPLIANCE WITH LAWS IN GENERAL. The Seller has no knowledge of
material violations of any federal, state or local laws, regulations or
ordinances relating to the operations of the Practice or PDI, including, without
limitation, the Federal Environmental Protection Act, the Occupational Safety
and Health Act, the Americans with Disabilities Act or any Environmental Laws.
2.27 FRAUD AND ABUSE. To Seller's knowledge, none of PDI, Seller, or any
persons or entities providing professional services for the Practice have
engaged in any activities which are prohibited under Section 1320a-7b of Title
42 of the United States Code or the regulations promulgated thereunder, or
related state or local statutes or regulations, or which are prohibited by rules
of professional conduct, including, but not limited to, the following: (a)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact for use in determining rights to any benefit
or payment; (b) knowingly and willfully making or causing to be made any false
statement or representations of a material fact for use in determining rights to
any benefit or payment; (c) any failure by a claimant to disclose knowledge of
the occurrence of any event affecting the initial or continued right to any
benefit or payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; (d) knowingly and willfully
soliciting or receiving any remuneration (including any kickback, bribe or
rebate) directly or indirectly, overtly or covertly, in cash or in kind, or
offering
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to pay or receive such remuneration (i) in return for referring an individual to
a person for the furnishing or arranging for the furnishing of any item or
service for which payment may be made in whole or in part by Medicare or
Medicaid, or (ii) in return for purchasing, leasing or ordering or arranging
for, or recommending, purchasing, leasing or ordering any good, facility,
service or item for which payment may be made in whole or in part by Medicare or
Medicaid; (e) engaging in any activity which is a basis for exclusion from the
Medicare, Medicaid and other federally-funded programs under Section 1320a-7a of
Title 42 of the United States Code; (f) any violation of the Medicare or
Medicaid requirements, including and fraud and abuse provisions, except where
such circumstances would not have a Material Adverse Effect.
2.28 MEDICARE, MEDICAID, AND OTHER THIRD-PARTY PAYOR PAYMENT LIABILITIES.
To Seller's knowledge, except as described in Exhibits 2.28A through 2.28C, none
of PDI, Seller, the Practice or the Corporation has any liabilities to any third
party fiscal intermediary or carrier administering any state Medicaid program or
the federal Medicare program, or to any other third party payor for the
recoupment of any amounts previously paid to PDI, Seller, the Practice (or any
predecessor corporation) or the Corporation by any such third-party fiscal
intermediary, carrier, Medicaid program, Medicare program, or third party payor.
There are no pending or, to Seller's knowledge, threatened actions by any third
party fiscal intermediary or carrier administering any state Medicaid or the
federal Medicare program, by the Department of Health and Human Services, any
state Medicaid agency, or any third party payor to suspend payments to the
Practice, the Corporation or Seller.
2.29 BILLING PRACTICES AND REFERRAL SOURCES.
(a) Billing Practices Generally. All billing practices by PDI, the
Practice and Seller to all third party payors, including, but not limited
to, the federal Medicare program, state Medicaid programs and private
insurance companies, have been, to Seller's knowledge, true, fair and
correct and in material compliance with all applicable laws, regulations
and policies of all such third party payors, and, to Seller's knowledge,
none of PDI, Seller or the Practice have billed for or received any
payment or reimbursement in excess of amounts allowed by law which have
not been appropriately adjusted or refunded.
(b) Gratuitous Payments. Neither PDI, Seller nor any shareholder,
director, or officer of the Practice or Corporation, or any employee or
agent acting on behalf of or for the benefit of PDI, the Practice or
Seller, has, directly or indirectly, in violation of applicable Laws: (i)
offered or paid any remuneration, in cash or in kind, to, or made any
financial arrangements with, any past or present customers, past or
present patients, past or present suppliers, contractors or third party
payors of the Practice in order to obtain business or payments from such
persons; (ii) given or agreed to give, or is aware that there has been
made or that there is any agreement to make, any gift or gratuitous
payment of any kind, nature or description (whether in money, property or
services) to any customer or potential customer, patient or potential
patient, supplier or potential supplier, contractors, third party payor
or any other person; (iii) made or agreed to make, or is aware that there
has been made or that there is any agreement to make, any
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contribution, payment or gift of funds or property to, or for the private
use of, any governmental official, employee or agent; (iv) established or
maintained any unrecorded fund or asset for any purpose or made any false
or artificial entries on any of its books or records for any reason; or
(v) made, or agreed to make, or is aware that there has been made or that
there is any agreement to make, any payment to any person with the
intention or understanding that any part of such payment would be used
for any purpose other than that described in the documents supporting
such payment.
(c) Transactions with Referral Sources. None of PDI, the Seller, the
Practice, nor to the knowledge of Seller, any officers, directors or
employees thereof, is a party to any contract, lease, agreement or
arrangement in violation of applicable Laws, including, but not limited
to, any joint venture or consulting agreement with any physician,
hospital, nursing facility, home health agency or other person who makes
or influences referrals to or otherwise generates business for any
Practice or any Seller in violation of applicable Laws.
2.30 PHYSICIAN SELF-REFERRALS. Neither PDI nor the Practice or Seller has
submitted any claims in connection with any referrals which violated any
applicable self-referral law, including the Xxxxx Law (42 U.S.C. ss. 1395nn) or
any applicable state self-referral law as those laws were interpreted at the
time the claim was submitted.
2.31 INVESTMENT INTENT.
(a) The Seller is acquiring the PSC Debenture pursuant to this
Agreement for investment purposes only and not with a view to the sale or
distribution thereof. The Seller has such knowledge and expertise in
financial matters that Seller is capable of evaluating the merits and
risks of an investment in the PSC Debenture.
(b) The Seller acknowledges that since the PSC Debenture has not
been registered under the Securities Act of 1933, as amended (the "1933
Act"), the PSC Debenture must be held indefinitely unless subsequently
registered under the 1933 Act or exemptions from such registration under
the 1933 Act are available. The Seller acknowledges that PSC is under no
obligation to register under the 1933 Act the issuance of the PSC
Debenture or to comply with any provision which would entitle any such
sale pursuant to any exemption from registration under the 1993 Act.
(c) The Seller is an "accredited investor" within the meaning of
Regulation D under the 1993 Act.
(d) The PSC Debenture shall bear a legend in substantially the
following form and any other legend required by any other applicable
state securities or Blue Sky laws:
This Debenture has not been registered or qualified pursuant to
the Securities Act of 1933, as amended (the "1933 Act"), or any
other state securities law, and may not be sold, pledged,
transferred or otherwise
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disposed of unless the same is registered and qualified in
accordance with the 1933 Act and any other applicable state
securities laws, or after receipt of an opinion of counsel
satisfactory to the company that an exemption from registration
under the 1933 Act, and any applicable state securities laws is then
available."
2.32 NO UNTRUE REPRESENTATIONS. To the knowledge of Seller, no
representation or warranty by Seller in this Agreement, and no Exhibit or
certificate furnished or to be furnished to PSC or Parent pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained therein not
misleading. All information provided by the Seller in writing for valuation of
the Practices by PSC and Parent is true, accurate and complete in all material
respects, as the same may have been modified by the Exhibits and Schedules
hereto.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND PSC.
Parent and PSC hereby, jointly and severally, represent and warrant to
Sellers as follows:
3.1 CORPORATE EXISTENCE; GOOD STANDING; QUALIFICATION. Each of PSC, PSC
Management and Parent is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of PSC, PSC
Management and Parent has all necessary corporate power and authority to own,
lease or operate its properties and assets and to carry on its business as
presently conducted and as contemplated by this Agreement and is duly qualified
to do business and is in good standing in all jurisdictions in which the
character of the property owned, leased or operated or the nature of the
business transacted by it makes qualification necessary, except where failure to
qualify would not have Material Adverse Effect on Parent, PSC or PSC Management.
3.2 POWER AND AUTHORITY. Each of PSC and Parent has corporate power and
authority to execute and deliver and perform its obligations under this
Agreement and all agreements and other documents to be executed and delivered by
it pursuant to this Agreement, and has taken all actions required by law, its
Certificate of Incorporation and its By-laws, to authorize the execution,
delivery and performance of this Agreement and such related documents. PSC
Management has the corporate power and authority to execute and deliver and
perform its obligations under the Debenture and Security Agreement and has taken
all action required by law, its Certificate of Incorporation and By-laws to
authorize the execution, delivery and performance of such instruments. The
execution and delivery of this Agreement, and the agreements related hereto
executed and delivered pursuant to this Agreement do not and, subject to the
receipt of consents to assignments of leases and other contracts where required
and the receipt of regulatory approvals where required, the consummation of the
transactions contemplated hereby will not, violate any provision of the
Certificate of Incorporation or Bylaws of either PSC, PSC Management or Parent
or any provisions of, or result in the acceleration of, any obligation under any
mortgage, lien, lease, agreement, instrument, order, arbitration award, judgment
or decree to which PSC, PSC Management or Parent is a party or by which either
of them is bound, or violate
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any restrictions of any kind to which PSC, PSC Management or Parent is subject.
The execution and delivery of this Agreement have been approved by the
respective Boards of Directors of PSC and Parent.
3.3 COMMISSIONS AND FEES. There are no valid claims for brokerage
commissions or finder's or similar fees in connection with the transactions
contemplated by this Agreement which may be now or hereafter asserted against
any Seller, Practice, or Corporation or PDI, New York NewCo or New Jersey NewCo
resulting from any brokers or agents engaged by PSC or Parent or their
respective agents or employees.
3.4 PARENT DOCUMENTS. Parent has heretofore made available to Sellers or
their representative its Prospectus dated March 20, 1997 with respect to the
offer and sale of 2,200,000 shares of Parent common stock; SEC Forms 10Q of
Parent for the quarters ended March 31, 1997, June 30, 1997, and September 30,
1997, filed with the Securities and Exchange Commission ("S.E.C."), and Form 10K
of Parent for the year ended December 31, 1997 filed with the S.E.C. The
foregoing SEC filings were true and correct in all material respects as of their
respective dates and fairly present the financial position of Parent as of such
dates. There has been no material adverse change with respect to Parent since
December 31, 1997.
3.5 LEGAL PROCEEDINGS. There is no material litigation, governmental
investigation or other proceeding pending or, so far as is known to Parent or
PSC, threatened against or relating to or affecting PSC or Parent or PSC
Management or medical practices managed by Parent that would have a Material
Adverse Effect on Parent or PSC or the transactions contemplated hereby.
3.6 COMPLIANCE WITH LAWS IN GENERAL. Parent and PSC have no knowledge of
material violations of any federal, state or local laws, regulations or
ordinances relating to the operations of Parent, PSC and PSC Management,
including, without limitation, the Federal Environmental Protection Act, the
Occupational Safety and Health Act, the Americans with Disabilities Act and any
Environmental Laws.
3.7 BILLING PRACTICES IN GENERAL. All billing practices by Parent and
PSC Management to all third party payors, including, but not limited to, the
federal Medicare program, state Medicaid programs and private insurance
companies, have been, to Parent's knowledge, true, fair and correct and in
material compliance with all applicable laws, regulations and policies of all
such third party payors, and, to Parent's knowledge, neither Parent nor PSC
Management has billed for or received any payment or reimbursement in excess of
amounts allowed by law which have not been appropriately adjusted or refunded.
3.8 NO UNTRUE REPRESENTATIONS. To the knowledge of Parent and PSC, no
representation or warranty by Parent or PSC in this Agreement, and no Exhibit or
certificate furnished or to be furnished by Parent or PSC pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained therein not
misleading.
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SECTION 4. ACCESS TO INFORMATION AND DOCUMENTS PRIOR TO CLOSING.
4.1 ACCESS TO SELLERS' INFORMATION. Each Seller shall give to Parent and
PSC and its counsel, accountants, engineers and other representatives full
access to all the requested properties, documents, contracts, personnel files
and other records of such Seller's Corporation and Practice and shall furnish
Parent and PSC with copies of such requested documents and with such information
with respect to the affairs of Seller, the Practice and the Corporation as
Parent and PSC shall from time to time reasonably request. Seller shall disclose
and make available to Parent, PSC, and their representatives all requested
books, contracts, accounts, personnel records, letters of intent papers,
records, communications with regulatory authorities and other documents relating
to the Shares and to the Practice.
4.2 ACCESS TO INFORMATION OF PARENT. Prior to Closing, Parent shall give
to Sellers and their respective counsel, accountants and other representatives
such access to the documents, contracts and other records of Parent as Sellers
shall from time to time reasonably request and shall furnish copies of such
documents as reasonably requested.
4.3 RETENTION OF RECORDS. PSC shall retain all books and records of the
Corporations ("Records") for the greater of four years from the Closing Date or
such longer periods of time as required by applicable statutes, rules and
regulations. For a period of four years after the Closing Date, and for such
longer period as the Records are maintained, each party will, during normal
business hours and so as not to unreasonably disrupt normal business, afford any
other party, its counsel, its accountants or other parties who have a reasonable
need for such access full access (and copying at the expense of the requesting
party, if desired) to the books and records in the possession of such party as
such other party may reasonably request.
SECTION 5. CONDITIONS TO OBLIGATION OF PARENT AND PSC TO CLOSE.
The obligation of PSC and Parent to consummate the transactions
contemplated by this Agreement is subject to satisfaction of the following
conditions precedent (any of which may be waived in writing by Parent at or
prior to the Closing):
5.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Sellers set forth in Article 2 shall be true and correct in all
material respects as of the date made and at and as of the Closing, except as a
result of changes expressly permitted by this Agreement.
5.2 COVENANTS. The Sellers shall have performed and complied with all of
their covenants and agreements under this Agreement in all material respects
through the Closing.
5.3 NO SUIT OR PROCEEDING. No action, suit, or proceeding shall be
pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction in which an unfavorable
injunction, judgment, order, decree, ruling, or charge would (i) prevent
consummation of any 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 PSC's receipt of the Shares
free of all liabilities, liens, mortgages,
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encumbrances, debts, obligations or other third-party interests of whatever
nature (and no such injunction, judgment, order, decree, ruling, or charge shall
be in effect).
5.4 ABSENCE OF MATERIAL ADVERSE CHANGE. There shall have been no change
in the condition (financial or otherwise), business, assets, or prospects of any
Corporation or Practice from the Balance Sheet Date which has had or could
reasonably be expected to have a Material Adverse Effect on any Corporation or
the business to be conducted by New York NewCo or New Jersey NewCo.
5.5 CERTIFICATE. Each Seller shall have delivered to PSC a certificate
to the effect that each of the conditions specified in Sections 5.1-5.4 is
satisfied in all respects as to such Seller's respective Corporation and
Practice.
5.6 APPROVAL OF PARENT'S SENIOR LENDER. Parent shall have received
written approval from Parent's senior lender, NationsBank, N.A., of the
transactions contemplated by this Agreement including, without limitation, the
issuance of the PSC Debenture and Guaranty and the grant of the first lien
security interest provided for in the Security Agreement; provided, however,
that such consent is not conditioned on the Sellers signing a subordination
agreement that contains a standstill period in excess of that provided in the
PSC Debenture.
5.7 RECEIPT OF FINANCIAL INFORMATION. ENT Medical Practice shall have
delivered to Parent accrual basis financial statements and work papers suitable
for audit for the years ended December 31, 1997, and December 31, 1996. The
Practices shall have delivered to Parent unaudited financial statements and
federal income tax returns for the years ended December 31, 1997, December 31,
1996, and December 1995, and the Practices shall have delivered to Parent
unaudited financial statements for the quarter ended March 31, 1998.
Notwithstanding the foregoing, the Practices' returns for the year ended
December 31, 1997 may be delivered in accordance with Section 7.6.
5.8 CONSENTS AND APPROVALS. PSC and Parent shall have received all
authorizations, consents, and approvals of third parties and of governments and
governmental agencies, if any, that may be required for the purchase of the
Shares by PSC.
5.9 COUNSEL OPINION. Parent and PSC shall have received from counsel to
the Sellers and the Corporations an opinion dated as of the Closing Date, in
substantially the form attached hereto as Exhibit 5.9.
5.10 OTHER AGREEMENTS EXECUTED. The employment agreements required by
Section 1.4(a) shall have been executed and delivered or, in the case of certain
physician employees, assigned in accordance with Section 1.4, and each of New
York NewCo and New Jersey NewCo shall have executed and delivered the respective
MSA with PSC Management and Parent; provided that notwithstanding the foregoing,
each of the seven associate physicians at the Practices shall have either (1)
been admitted as a partner of New York NewCo, (2) signed a new employment
agreement with New York NewCo in accordance with the New York MSA, or (3)
consented in writing to assignment of his existing employment agreement to New
York NewCo.
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5.11 PURCHASE OF FIXED ASSETS, EQUIPMENT, AND TRADE NAME OF PHYSICIANS
DOMAIN, INC. ENT Corporation shall have acquired the furniture, fixtures,
equipment and trade name of PDI as set forth on Exhibit 2.11D and any applicable
equipment leases of PDI assumed by ENT Corporation as set forth on Exhibit
2.11D.
5.12 RELEASE OF LIENS. Except as set forth on Exhibits 5.12A-5.12C, all
liens encumbering the assets of any Practice or Corporation shall be duly
released at Closing by the secured parties and other lien holders.
5.13 NEW YORK NEWCO STOCK OPTIONS. Parent or its designee shall receive
an option to acquire the shares of New York NewCo from the Sellers who are
shareholders in New York NewCo substantially in the form attached hereto as
Exhibit 5.13.
5.14 NEW JERSEY NEWCO STOCK OPTIONS. Parent or its designee shall receive
an option to acquire the shares of New Jersey NewCo from the Sellers who are
shareholders in New Jersey NewCo substantially in the form attached hereto as
Exhibit 5.14.
5.15 CLOSING DATE FINANCIAL CERTIFICATE. Each Seller shall have delivered
to Parent and PSC a closing date financial certificate which shall certify the
March 31, 1998 unaudited balance sheets of each such Seller's Practice and for
the period ended as of such date statements of operations of the Practice, along
with detailed accounts receivable aging analysis of the Practice as of the close
of business on the date prior to Closing acceptable to Parent, all prepared in
accordance with prior practice, provided that goodwill and capitalized
intangible assets may be written off such balance sheets as provided in Section
7.1(a) below. Each Seller shall have delivered to Parent a computation of each
such Seller's Corporation's net worth (as defined in Section 5.16 below) as of
the Closing.
5.16 CLOSING NET WORTH AND ACCOUNTS RECEIVABLE. The Corporations'
combined net worth at Closing (defined as GAAP basis of assets acquired in
excess of liabilities existing or to be discharged or to which assets are
subject, including assets acquired from PDI) shall equal or exceed $2,494,000
and the net realizable value (measured in accordance with GAAP) of the
Corporations' aggregate accounts receivable at Closing (the "Closing Accounts
Receivable") shall equal or exceed $3,804,668, provided, however, that if the
aggregate accounts receivables at Closing are at least 90% of such amount the
condition of this Section 5.16 with respect to the amount of accounts receivable
will be deemed satisfied. Any known Medicare/Medicaid or other patient or third
party payor refunds due at Closing shall reduce the amount of Closing Accounts
Receivable (and correspondingly the Corporations' net worth at Closing).
5.17 CORPORATE DOCUMENTS. Sellers shall have furnished PSC with copies of
the following documents: the Articles of Incorporation and all amendments
thereto of each Corporation, duly certified by the Secretary of State of the
State of Delaware; and certificates, executed by the proper officials of the
State of Delaware, as to the valid existence and good standing of each
Corporation in the State of Delaware.
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5.18 ASSIGNMENT OF ASSUMPTION AGREEMENTS. Each of the landlords and
tenants under the leases for the medical offices listed on Exhibits 5.18-5.18C
shall have executed and delivered an assignment and assumption agreement
substantially in the form of Exhibit 5.18 (each a "Lease Assignment") with
respect to each such lease, or other arrangements satisfactory to PSC Management
with respect thereto shall have been made.
5.19 FORMATION OF NEW YORK NEWCO AND NEW JERSEY NEWCO. Sellers who
practice at the New York offices listed in Exhibits 2.13A through 2.13D shall
have formed ENT Associates, LLP, and Seller who practices at the New Jersey
office listed in Exhibits 2.13A through 2.13D shall have formed ENT Associates
of New Jersey, P.C.
5.20 TERMINATION OF CORPORATION PLANS. The Sellers and Corporations shall
have (a) terminated or frozen all Corporation Plans as required under Section
1.4(b); (b) performed and complied with all of their other covenants contained
in Section 1.4; and (c) furnished Parent or PSC with documentation sufficient to
evidence such termination or freezing of the Corporation Plans.
5.21 RESIGNATIONS. There shall have been delivered to Parent and PSC the
signed resignations of the officers and directors of each of the Corporations.
5.22 DUE DILIGENCE. PSC shall have been satisfied with its due diligence
of Sellers, Practices and the Corporations and shall have such information
related thereto as it shall have in good faith requested.
SECTION 6. CONDITIONS TO OBLIGATION OF SELLERS
The obligation of Sellers to consummate the transactions contemplated by
this Agreement is subject to satisfaction of the following conditions (any one
of which may be waived in writing by Sellers at or prior to the Closing):
6.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Parent and PSC set forth in Article 3 above shall be true and
correct in all material respects on the date of this Agreement and at and as of
the Closing.
6.2 COVENANTS. Parent and PSC shall have performed and complied with all
of their covenants and agreements under this Agreement in all material respects
through the Closing.
6.3 NO SUIT OR PROCEEDING. No action, suit or proceeding shall be
pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (a) prevent
consummation of any of the transactions contemplated by this Agreement or (b)
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), or (c) have a Material Adverse Effect on Parent
or PSC.
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6.4 CERTIFICATE. Parent and PSC shall have delivered to Sellers a
certificate to the effect that each of the conditions specified in Sections 6.1,
6.2, 6.3 and 6.8 is satisfied in all respects.
6.5 GOVERNMENT APPROVALS. Sellers shall have received all
authorizations, consents, and approvals of governments and governmental
agencies, if any, that may be required.
6.6 OTHER AGREEMENTS EXECUTED. PSC Management, PSC and Parent shall have
executed and delivered the MSAs.
6.7 PURCHASE PRICE. At the Closing, the cash consideration required
under Section 1.1 shall be delivered by wire transfer in accordance with the
written instructions of Sellers.
6.8 FINANCIAL CONDITION OF PARENT. There shall not have occurred any
Material Adverse Change with respect to Parent from the date of Parent's Form
10K filed with the S.E.C. for the year ended December 31, 1997.
6.9 CONSENT OF NATIONSBANK. Seller shall have received a copy of the
written approval from Parent's senior lender, NationsBank, N.A. to the
transactions contemplated by this Agreement including, without limitation, the
issuance of the PSC Debenture and Guaranty and the grant of the first lien
security interest provided for in the Security Agreement; provided, however,
that such consent shall not be conditioned on the Sellers signing a
subordination agreement that contains a standstill period in excess of that
provided in the PSC Debenture.
6.10 COUNSEL OPINION. Sellers shall have received from counsel to Parent,
PSC Management and PSC an opinion dated as of the Closing Date, in substantially
the form attached hereto as Exhibit 6.10.
6.11 PSC DEBENTURE. PSC, PSC Management and Parent shall have delivered
the PSC Debenture and Guaranty to the Paying Agent for Sellers.
6.12 SECURITY AGREEMENT. PSC Management shall have executed and delivered
the Security Agreement.
6.13 ASSIGNMENT AND ASSUMPTION AGREEMENT. PSC Management shall have
executed and delivered a Lease Assignment with respect to each of the real
property leases for the medical offices listed on Exhibits 5.18A-5.18C.
SECTION 7. CERTAIN ADDITIONAL COVENANTS
7.1 CONDUCT OF PRACTICE PRIOR TO CLOSING. During the period from and
after the date of this Agreement and until the Closing Date:
(a) Sellers will each carry on their respective Practice in
substantially the same manner as heretofore carried on and will not make
any purchase or sale, incur any
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indebtedness or liens, or introduce any method of management or operation
in respect to such Practice or otherwise engage in any transaction except
in the ordinary course of business and in the manner not inconsistent
with prior practice and the terms of this Agreement, other than with the
prior written consent of PSC and, subject to the requirements of Section
5.16, the write-off of goodwill and certain capitalized intangibles from
their respective balance sheets.
(b) Sellers shall cause their respective Practice to transfer the
physician employment agreements, patient charts and records and
pharmaceutical inventory of such Practice to New York NewCo or New Jersey
NewCo as appropriate.
(c) No Practice or Corporation will acquire or dispose of any
capital assets having a current value in excess of $1,000 other than with
the prior written consent of PSC, or except in connection with the
replacement or elimination of obsolete or damaged equipment in the
ordinary course of business.
7.2 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Other than with respect to
salaries or bonuses payable to physician employees of the Practices based on the
amount of collected accounts receivable, all of which will be paid by Sellers or
the Practices when due and payable consistent with past practice, Sellers hereby
covenant and agree that Sellers will take whatever steps are necessary to pay or
fund completely at or prior to Closing any accrued benefits, where applicable,
or vested accrued benefits for which such Sellers, PDI or such Sellers' Practice
or Corporation might have any liability whatsoever arising from any salary,
wage, benefit, bonus, vacation pay, sick leave, insurance, employment tax or
similar liability to any employee or other person or entity (including, without
limitation, any Corporation Plan and any liability under employment contracts
with PDI, Sellers, Practice or Corporation) attributable to services performed
prior to the Closing Date.
7.3 [RESERVED].
7.4 COVENANT NOT TO COMPETE.
(a) Except as provided in Section 7.4(b) below, for a period of five
(5) years from and after the Closing Date, each of the Sellers agrees
that, he or she will not (i) directly or indirectly, engage in, manage,
operate, control, conduct, consult for or be employed in a management
capacity by, provide services to or invest in any business or venture in
competition (as of the Closing Date) with the Practices, the
Corporations, PSC, PSC Management, Parent, or either NewCo in his or her
Restricted Territory (as defined below); provided however, that ownership
of less than 1% of the outstanding stock of any publicly traded
corporation shall not be deemed to violate this clause, (ii) within his
or her Restricted Territory, directly or indirectly, solicit or attempt
to solicit any customer or client of PSC, PSC Management, Parent or
patient of either NewCo other than in the course of a Seller's
performance of services and duties for the applicable NewCo as a
physician-shareholder thereof; or (iii) solicit or employ or attempt to
solicit or hire away or employ any employee of PSC, PSC Management,
Parent, any Corporation or NewCo.
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Notwithstanding the foregoing, general advertising by a Seller in
newspapers, magazines, radio, television or similar media that is not
directly targeted at patients, customers or employees of any Corporation,
NewCo, Practice, PSC, PSC Management or Parent shall not, by itself, be
deemed a violation of this Section 7.4(a). If the final judgment of a
court of competent jurisdiction declares that any term or provision of
this Section is invalid or unenforceable, the Sellers and PSC agree that
the court making the determination of invalidity or unenforceability
shall have the power to reduce the scope, duration, or area, to delete
specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable
and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable
as so modified. As used herein, the "Restricted Territory" for each of
the Sellers is set forth in Exhibit 7.4. The parties agree that the
restraints set forth above in this Section 7.4(a) and Exhibit 7.4 are
reasonable in respect to subject matter, length of time and geographic
area. Each of the Sellers agrees that the restrictions on their
activities contained in this Section are reasonable and necessary to
protect the goodwill and relationships, economic advantage and other
legitimate interests of PSC, PSC Management, Parent and each NewCo, and
that, were it, he or she to breach any of the covenants contained in this
Section 7.4(a), PSC, PSC Management, Parent and each NewCo would be
harmed and the damage to PSC, PSC Management, Parent and each NewCo would
be irreparable. Accordingly, Sellers acknowledge and agree that, as
PSC's, PSC Management's, Parent's and each NewCo's and Corporation's
legal remedies would be inadequate in the event of a breach of the
covenants in this Section 7.4(a), in addition to damages and other
remedies available, such covenants may be enforced by injunction or other
equitable remedies.
(b) Parent and PSC agree that the Sellers who are partners in the
New York NewCo shall be released from the restrictive covenants set forth
in Section 7.4(a) in the event of termination of the New York MSA by New
York NewCo due to the occurrence of a "Manager Event of Default"
thereunder (as such term is defined therein), and Parent and PSC agree
that CEA Seller shall be released from the restrictive covenants set
forth in Section 7.4(a) in the event of termination of the New Jersey MSA
by New Jersey NewCo due to the occurrence of a "Manager Event of Default"
thereunder (as such term is defined therein).
7.5 CONFIDENTIALITY.
(a) Sellers shall, for a period of three (3) years after the
Closing, hold in confidence all financial information about the
Corporation, Practice and Shares, except such disclosure as may be
required by law or governmental order or regulation, or by subpoena or
other legal process (provided Parent will be provided advance notice of
such disclosure in order to afford it the opportunity to seek an
appropriate protective order). Sellers further agree to keep confidential
for a period of three (3) years after the Closing, any and all
information relating to services, products, marketing information,
sources of supply, pricing and patients of the Practice on the date
hereof or developed by or for the Practice, except such disclosure as may
be required by law or governmental order or
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regulation, or by subpoena or other legal process (provided Parent will
be provided advance notice of such disclosure in order to seek an
appropriate protective order). The restrictions in this Section 7.5(a)
shall not apply to any information that comes into the public domain
through no fault of Sellers. Nothing in this Section 7.5(a) shall
prohibit Sellers from (i) producing information compelled to be produced
by law, governmental regulation, or in a legal proceeding or
investigation provided that Parent is provided advance notice of such
disclosure to provide an opportunity to seek a protective order to
prevent such disclosure, or (ii) providing information to their
accountants, consultants or attorneys in connection with a tax audit,
third party payor audit, governmental agency review or malpractice suits,
or (iii) in a legal proceeding between any Seller and PSC, Parent or PSC
Management.
(b) Regardless of whether the Closing shall occur, Parent and PSC
shall, for a period of three (3) years from the date hereof, hold in
confidence all financial information about the Sellers and the Practices,
except such disclosure as may be required by law or governmental order or
regulation, or by subpoena or other legal process (provided the Sellers
will be provided advance notice of such disclosure in order to afford
Sellers the opportunity to seek an appropriate protective order), except
that no such advance notice shall be required with respect to Parent's
disclosure requirements under applicable securities laws. Regardless of
whether the Closing shall occur, Parent and PSC further agree to keep
confidential for a period of three (3) years from the date hereof, any
and all information relating to services, products, marketing
information, sources of supply, pricing and patients of the Practices
disclosed to Parent and PSC hereunder, except such disclosure as may be
required by law or governmental order or regulation, or by subpoena or
other legal process (provided the Sellers will be provided advance notice
of such disclosure in order to afford Sellers the opportunity to seek an
appropriate protective order), except that no such advance notice shall
be required with respect to Parent's disclosure requirements under
applicable securities laws. The restrictions in this Section 7.5(b) shall
not apply to any information that comes into the public domain through no
fault of Parent or PSC. Nothing in this Section 7.5(b) shall prohibit
Parent or PSC from (i) producing information compelled to be produced by
law, governmental regulation or in a legal proceeding or investigation
provided that Sellers' counsel is provided advance notice of such
disclosure in order that Sellers are provided an opportunity to seek a
protective order to prevent such disclosure, or (ii) providing
information to their accountants, consultants or attorneys in connection
with a tax audit, third party payor audit, governmental agency review, or
malpractice suits, or (iii) in a legal proceeding between any Seller and
PSC, Parent or PSC Management.
7.6 PREPARATION OF TAX RETURNS AND PAYMENT OF TAXES. Sellers shall file
all tax returns for their respective Practices and Corporations and make all
payments required to be made by their respective Practices and Corporations,
with respect to income taxes, real estate taxes, sales taxes, use taxes,
employment taxes for the period ending with the Closing Date and prior periods.
Each Seller shall provide Parent and/or PSC with copies of such tax returns
within ninety (90) days of Closing, including specifically the Practice's tax
returns for 1997 and 1998 (short-period) federal and state income taxes. Sellers
shall be entitled to any tax refunds of the
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Corporations for tax periods ending on or prior to the Closing Date, and subject
to the right of offset hereinafter provided, the Corporations shall remit any
such refunds received by them to the Paying Agent promptly after receipt.
7.7 COLLECTIONS OF ACCOUNTS. In the event that at the end of the
six-month period following the Closing the aggregate amount realized from
collection of the Closing Accounts Receivable is less than $3,804,668,
notwithstanding reasonable diligence consistent with industry practice to
collect such accounts by PSC Management under the MSAs, Sellers (jointly and
severally) shall pay Parent upon delivery to the Paying Agent of notice of the
amount of such shortfall and a reconciliation with respect thereto, cash in an
amount equal to the shortfall. If not paid within one (1) day of delivery, at
PSC's election any such shortfall may be offset (without regard to the
limitations set forth in Section 8.5(a) or 8.6) against the amounts payable by
Parent, PSC, or PSC Management to the Sellers under (i) any MSA and/or (ii) the
PSC Debenture. Following any such payment or offset, Parent, PSC and PSC
Management shall assign to the Paying Agent for the benefit of the Sellers the
remaining uncollected Closing Accounts Receivable. Following any such offset
pursuant to Section 7.7, in the event the Sellers dispute such offset, the
dispute shall be resolved in accordance with Section 10.20 hereof. Any amount
realized from the collection of the Closing Accounts Receivable at the end of
the six month period following the Closing Date in excess of $3,804,668 shall be
remitted to the Paying Agent for the benefit of the Sellers.
7.8 TERMINATION OF CORPORATION PLANS. For those Corporation Plans being
terminated, within thirty (30) days after the Closing Date, Sellers terminating
such Corporation Plans shall provide to Parent a copy of Form 5310 as filed with
the Internal Revenue Service ("IRS"). Sellers shall provide to Parent a copy of
any correspondence between Sellers and the IRS regarding such filing or freezing
of Corporation Plans upon receipt of any such correspondence.
7.9 REORGANIZATIONS PRIOR TO CLOSING. ENT Sellers will cause ENT Medical
Practice to transfer substantially all its assets subject to its liabilities to
ENT Corporation pursuant to a tax-free reorganization under the Code; CEA Seller
will cause CEA Medical Practice to transfer substantially all its assets subject
to its liabilities to CEA Corporation pursuant to a tax-free reorganization
under the Code; RGSS Sellers will cause RGSS Medical Practice to transfer
substantially all its assets subject to its liabilities to RGSS Corporation
pursuant to a tax-free reorganization under the Code. In connection with such
reorganizations, each Corporation will assume the contractual obligations and
liabilities of the respective Practice transferring its assets to such
Corporation.
7.10 SELLERS' NOMINATION OF DIRECTOR TO PARENT BOARD OF DIRECTORS.
Sellers shall have the right to nominate one director to Parent's Board of
Directors to serve for the same term as existing Parent directors.
7.11 PDI OFFICE LEASE DEPOSIT. Prior to Closing, Sellers shall determine
whether to assign to PSC Management the office lease of PDI at White Plains, New
York (the "PDI Office Lease") or to request PSC Management to find other office
space for the central billing office of
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the manager under the MSAs. In the event that Sellers determine to assign the
PDI Office Lease to PSC Management, and the landlord and tenant consent thereto,
PSC Management shall assume such lease pursuant to a Lease Assignment, and PSC
Management shall also agree to pay to the Paying Agent on behalf of Sellers an
amount equal to the security deposit for such PDI Office Lease when and if such
security deposit is released or surrendered to PSC Management by the landlord at
or prior to expiration of the PDI Office Lease or any extension or renewal
thereof, or in the event the security deposit is applied by the landlord to pay
rent that arises from and after the date of the Lease Assignment that is not
paid by PSC Management in default of its obligations thereunder.
7.12 CERTAIN PRE-CLOSING CLAIMS. From time to time following Closing, as
and when reasonably requested by Sellers, PSC agrees to permit such Sellers to
assert on behalf of the Corporations and one or more Sellers, at the Sellers'
expense, any counterclaims in any litigation brought by a third party against a
Seller, Practice or Corporation, provided that such Sellers provide
indemnification of such Corporation and other "Indemnified Persons" in respect
thereof in accordance with the provisions of Section 8 hereinbelow. In such
event, the Corporation will assign any recovery (net of expenses) on such
counterclaim to such Seller.
7.13 REFUND OF MALPRACTICE PREMIUMS In the event that following Closing
any Corporation shall receive a refund of a malpractice insurance premium paid
by a Practice prior to Closing for a period after Closing, such Corporation
shall return to the appropriate Seller such refund provided that if the prepaid
premium were not treated as an asset for the purpose of the net worth
requirement of Section 5.16 the test would have been satisfied.
SECTION 8. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
8.1 NATURE AND SURVIVAL. All statements contained in this Agreement or
in any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties: (a) of all Sellers,
jointly and severally, as they relate to PDI; (b) of all ENT Sellers, jointly
and severally, as they relate to ENT Sellers, ENT Medical Practice or ENT
Corporation; (c) of CEA Seller, as they relate to CEA Seller, CEA Medical
Practice or CEA Corporation; (d) of all RGSS Sellers, jointly and severally, as
they relate to RGSS Sellers, RGSS Medical Practice or RGSS Corporation; or (e)
of PSC and Parent, jointly and severally, as they relate to PSC or Parent. All
such representations and warranties and all representations and warranties
expressly labeled as such in this Agreement shall survive the date of this
Agreement and the Closing Date for a period of five (5) years. Notwithstanding
the foregoing, the representations and warranties set forth in Sections 2.21,
2.25, 2.26, 2.27, 2.28, 2.29 and 2.30 and 3.6 and 3.7 shall survive the date of
this Agreement and the Closing Date for the greater of (i) a period of five (5)
years, or (ii) until the expiration of all applicable statutory periods of
limitation with respect to the subject matter of such respective Sections (after
giving effect to any waiver, mitigation or extension of any such statutory
periods of limitations). Any claim for indemnification for breach of a
representation or warranty shall be deemed waived if not asserted within the
applicable survival period.
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8.2 INDEMNIFICATION BY PSC AND PARENT. PSC and Parent, jointly and
severally, (for purposes of this Section 8.2 and, to the extent applicable,
Section 8.4, "Indemnitor"), shall indemnify and hold Sellers, and their
respective agents, employees, legal representatives, successors and assigns
(each of the foregoing, including Sellers, for purposes of this Section 8.2 and,
to the extent applicable, Section 8.4, an "Indemnified Person"), harmless from
and against any and all liabilities, losses, claims, damages, actions, suits,
costs, deficiencies and expenses (including, but not limited to, reasonable fees
and disbursements of counsel through appeal) arising from or by reason of or
resulting from any breach by Indemnitor of any representation, warranty,
agreement or covenant made by Indemnitor contained in this Agreement (including
the Exhibits hereto).
8.3 INDEMNIFICATION BY SELLERS.
(a) Indemnification with respect to PDI. Sellers (for purposes of
this Section 8.3(a) and, to the extent applicable, Section 8.4,
"Indemnitor"), shall jointly and severally indemnify and hold Parent,
PSC, PSC Management and their respective officers, directors,
shareholders, affiliates, agents, employees, legal representatives,
successors and assigns (each of the foregoing, for purposes of this
Section 8.3 and, to the extent applicable, Section 8.4, an "Indemnified
Person") harmless from and against any and all liabilities, losses,
claims, damages, actions, suits, costs, deficiencies and expenses
(including, but not limited to, reasonable fees and disbursements of
counsel through appeal), (i) arising from or by reason of or resulting
from any breach by Indemnitor (or any of them) of any representation,
warranty or covenant contained in this Agreement (including the Exhibits
hereto) with respect to PDI, it being understood and agreed that for
purposes of this Section 8.3(a) and, to the extent applicable, Section
8.4, all representations and warranties of the Indemnitor shall be
construed by disregarding and giving no effect whatsoever to any and all
knowledge qualifications or limitations (such as "to Sellers' best
knowledge" or "to their knowledge") as if such knowledge qualifications
or limitations were stricken from such representations and warranties,
and (ii) arising out of or with respect to all liabilities of PDI, known
or unknown, fixed or contingent, other than the PDI Bank Debt to be
discharged at Closing, whether now existing or hereafter arising, and any
and all taxes at any time owed by PDI.
(b) Indemnification with respect to the ENT Medical Practice. The
ENT Sellers (for purposes of this Section 8.3(b) and, to the extent
applicable, Section 8.4, "Indemnitor") shall jointly and severally
indemnify and hold PSC, Parent, ENT Corporation and any other Indemnified
Person harmless from and against any and all liabilities, losses, claims,
damages, actions, suits, costs, deficiencies, and expenses (including,
but not limited to, reasonable fees and disbursements of counsel through
appeal) (i) arising from or by reason of or resulting from any breach by
Indemnitor (or any of them) of any representation, warranty or covenant
contained in this Agreement (including the Exhibits hereto) with respect
to the Indemnitor, ENT Medical Practice or ENT Corporation, it being
understood and agreed that for the purposes of this Section 8.3(b) and,
to the extent applicable, 8.4, all representations and warranties of the
Indemnitor shall be construed by disregarding and giving no effect
whatsoever to any and
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all knowledge qualifications or limitations (such as "to Sellers' best
knowledge" or "to their knowledge") as if such knowledge qualifications
or limitations were stricken from such representations and warranties,
and (ii) arising out of or with respect to any liabilities of the
Indemnitor, ENT Medical Practice or ENT Corporation, known or unknown,
fixed or contingent (other than the ENT Bank Debt to be discharged at
Closing pursuant to Section 1.1) whatsoever existing at or prior to
Closing, and (iii) for or with respect to taxes of ENT Medical Practice
for any period or periods ending on or prior to the Closing Date, and
(iv) arising out of or resulting from any events or acts occurring on or
prior to the Closing Date in the ENT Medical Practice, including, but not
limited to, any alleged act of negligence of Indemnitor (or any of them)
or any employees, agents, and independent contractors, of the ENT
Practice or the ENT Corporation.
(c) Indemnification with respect to the CEA Medical Practice. The
CEA Seller (for purposes of this Section 8.3(c) and, to the extent
applicable, Section 8.4, "Indemnitor") shall jointly and severally
indemnify and hold PSC, Parent, CEA Corporation and any other Indemnified
Person harmless from and against any and all liabilities, losses, claims,
damages, actions, suits, costs, deficiencies, and expenses (including,
but not limited to, reasonable fees and disbursements of counsel through
appeal) (i) arising from or by reason of or resulting from any breach by
Indemnitor of any representation, warranty or covenant contained in this
Agreement (including the Exhibits hereto) with respect to the Indemnitor,
CEA Medical Practice or CEA Corporation, it being understood and agreed
that for the purposes of this Section 8.3(c) and, to the extent
applicable, 8.4, all representations and warranties of the Indemnitor
shall be construed by disregarding and giving no effect whatsoever to any
and all knowledge qualifications or limitations (such as "to Seller's
best knowledge" or "to his knowledge") as if such knowledge
qualifications or limitations were stricken from such representations and
warranties, and (ii) arising out of or with respect to any liabilities of
the Indemnitor, CEA Medical Practice or CEA Corporation, known or
unknown, fixed or contingent, whatsoever existing at or prior to Closing,
and (iii) for or with respect to taxes of CEA Medical Practice for any
period or periods ending on or prior to the Closing Date, and (iv)
arising out of or resulting from any events or acts occurring on or prior
to the Closing Date in the CEA Medical Practice, including, but not
limited to, any alleged act of negligence of the Indemnitor or any
employees, agents, and independent contractors, of the CEA Practice or
the CEA Corporation.
(d) Indemnification with respect to the RGSS Medical Practice. The
RGSS Sellers (for purposes of this Section 8.3(d) and, to the extent
applicable, Section 8.4, "Indemnitor") shall jointly and severally
indemnify and hold PSC, Parent, RGSS Corporation and any other
Indemnified Person harmless from and against any and all liabilities,
losses, claims, damages, actions, suits, costs, deficiencies, and
expenses (including, but not limited to, reasonable fees and
disbursements of counsel through appeal) (i) arising from or by reason of
or resulting from any breach by Indemnitor (or any of them) of any
representation, warranty or covenant contained in this Agreement
(including the Exhibits hereto) with respect to the Indemnitor, RGSS
Medical Practice or RGSS Corporation, it being understood and agreed that
for the purposes of this Section
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8.3(d) and, to the extent applicable, 8.4, all representations and
warranties of the Indemnitor shall be construed by disregarding and
giving no effect whatsoever to any and all knowledge qualifications or
limitations (such as "to Sellers' best knowledge" or "to their
knowledge") as if such knowledge qualifications or limitations were
stricken from such representations and warranties, and (ii) arising out
of or with respect to any liabilities of the Indemnitor, RGSS Medical
Practice or RGSS Corporation, known or unknown, fixed or contingent,
whatsoever existing at or prior to Closing, and (iii) for or with respect
to taxes of RGSS Medical Practice for any period or periods ending on or
prior to the Closing Date and (iv) arising out of or resulting from any
events or acts occurring on or prior to the Closing Date in the RGSS
Medical Practice, including, but not limited to, any alleged act of
negligence of Indemnitor (or any of them) or any employees, agents, and
independent contractors, of the RGSS Practice or the RGSS Corporation.
8.4 INDEMNIFICATION PROCEDURE.
(a) Within 30 days after Indemnified Person receives written notice
of the commencement of any action or other proceeding, or otherwise
becomes aware of any claim or other circumstance, in respect of which
indemnification or reimbursement may be sought under Section 8.2 or
Section 8.3, such Indemnified Person shall notify Indemnitor thereof in a
writing which encloses a copy of any relevant pleadings or written notice
of claim served upon the Indemnified Person. Any failure to provide such
notice shall not affect an Indemnitor's obligation to provide
indemnification hereunder except to the extent of actual prejudice
suffered from such failure to provide notice. If any such action or other
proceeding shall be brought against any Indemnified Person, Indemnitor
shall be entitled to assume the defense of such action or proceeding with
counsel chosen by Indemnitor and reasonably satisfactory to Indemnified
Person; provided, however, that any Indemnified Person may at its own
expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of
counsel to such Indemnified Person, (a) there are or may be legal
defenses available to such Indemnified Person that are different from or
additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person
that would make such separate representation advisable, or (c) injunctive
or criminal relief is sought, or (d) such action or proceeding threatens
loss of or adverse effect on the Indemnified Person's license to practice
medicine or to participate in government or third party payor
reimbursement programs or loss of hospital privileges; provided, however,
that in no event shall Indemnitor be required to pay fees and expenses
hereunder for more than one firm of attorneys in any jurisdiction in any
one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any
Indemnified Person, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action or proceeding to
which such Indemnified Person is a party unless such settlement,
compromise or consent includes an unconditional release of such
Indemnified Person from all liability arising or potentially arising from
or by
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reason of such claim, action or proceeding and does not provide for any
non-monetary relief or remedy against such Indemnified Person.
(b) If the Indemnitor fails to defend any action or proceeding
hereunder, or having commenced to defend such action or proceeding
hereunder, fails to continue such defense, the Indemnified Person may
conduct the defense of any such action or proceeding, subject to its
right of indemnification hereunder, and any settlement, compromise or
final judgment made or entered into in connection with such action or
proceeding shall be binding upon the Indemnitor as fully as though such
Indemnitor had conducted such defense as required hereby.
(c) The Indemnified Person shall cooperate fully with the Indemnitor
in connection with the litigation, arbitration, contest, compromise and
settlement of all actions and proceedings hereunder and shall make
available to Indemnitor and its agents all books, records and other
information reasonably necessary to defend, settle and investigate such
actions and proceedings, provided that at the expense of Indemnitor an
appropriate protective order for any confidential or proprietary
information shall be sought in any such proceeding at the request of
Indemnified Person.
(d) The procedure set within this Section 8.4 shall be applicable to
third party claims against an Indemnified Person if such Indemnified
Person seeks indemnification hereunder or asserts a claim for damages
based on breach of covenant, representation or warranty hereunder with
respect to the underlying event.
8.5 LIMITATIONS UPON OBLIGATIONS.
(a) Anything in this Section 8 to the contrary notwithstanding, it
is expressly acknowledged and agreed that no payment shall be made
hereunder by PSC, PSC Management or Parent (individually and collectively
a "Parent Party") to Sellers or any other Indemnified Person described in
Section 8.2 or, by a Seller or Sellers to a Parent Party or any other
Indemnified Person described in Section 8.3, on claims for
indemnification under Sections 8.2 or 8.3 or based on breach of any
covenant, representation or warranty, until the aggregate of all such
claims against Sellers under Section 8.3, or against a Parent Party under
Section 8.2, shall exceed $10,000, in which event the Indemnified Person
or Persons holding such claim shall be entitled to indemnification or to
damages with respect to all amounts in excess of such $10,000.
(b) The amount of the Indemnitor's liability under this Article 8 or
for breach of representation or warranty shall be determined taking into
account any applicable insurance proceeds actually received by the
Indemnified Person with respect to the underlying event that triggers the
indemnification obligation.
(c) OTHER THAN FOR CLAIMS BASED ON FRAUD, WILLFUL MISCONDUCT OR BAD
FAITH, NO PARTY SHALL BE LIABLE TO ANY OTHER PARTY UNDER ANY PROVISION OF
THIS AGREEMENT FOR
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INDIRECT, PUNITIVE OR CONSEQUENTIAL LOSSES OR DAMAGES (INCLUDING ANY LOSS
OF REVENUE OR PROFIT) ARISING OUT OF THIS AGREEMENT.
8.6 RIGHT TO OFFSET.
(a) Subject to the limitations set forth in Section 8.5 and this
Section 8.6, in the event that following the Closing a Parent Party (or
an Indemnified Person defined in Section 8.3) has a claim for
indemnification against a Seller under Section 8.3 (a "PSC Claim"), which
either (A) remains unpaid for more than ten (10) days after it has been
"finally resolved" (as defined below), or (B) results from damage
suffered by a Parent Party (or an Indemnified Person defined in Section
8.3) without a claim being asserted by a third party, then such Parent
Party may, upon not less than ten (10) days written notice (an "Offset
Notice") to such Seller, elect to offset an amount equal to the damages
suffered by such Parent Party (or an Indemnified Person defined in
Section 8.3) as a result of such PSC Claim, against
(i) the portion of any amounts payable under the PSC Debenture
or Guaranty to the Paying Agent on behalf of such Seller, as
determined by multiplying (1) the percentage set forth next to such
Seller's name on Exhibit 8.6 by (2) the amount of the payment then
due and payable under the PSC Debenture or Guaranty;
(ii) any other amounts owed to such Seller pursuant to this
Agreement; and/or
(iii) the portion of any amounts due or owing by Parent or PSC
Management to New York NewCo or New Jersey NewCo pursuant to Section
5.1(a) of the applicable MSA that is attributable to such Seller, as
determined by multiplying (1) the percentage set forth next to such
Seller's name on Exhibit 8.6 by (2) the "Amounts Available for
Offset" (as defined in Section 5.1(b) of each MSA) of the MSA with
the NewCo which employs such Seller, subject to the limitations
contained in Section 5.1(b) of the MSA with the NewCo which employs
such Seller;
(b) Notwithstanding anything contained in this Section 8.6 to the
contrary, if a PSC Claim arises from the claim of a third party and such
claim has not been "finally resolved" (as defined below), and Seller
notifies the Parent Party (or an Indemnified Person defined in Section
8.3) asserting the claim for indemnification and offset within ten (10)
days after receipt of the Offset Notice that such Seller objects to the
exercise of such right of offset and elects to undertake the defense of
such PSC Claim in accordance with the provisions of Article 8.4
(including payment of attorney's fees, court costs and the cost of
posting any bond required during the litigation, arbitration or other
adjudication of the claim and any appeal thereof), then no Parent Party
or other Person shall be entitled to offset any amount with respect to
such PSC Claim against any moneys
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owing to any Seller under the PSC Debenture, Guaranty, either MSA or any
other agreement until such PSC Claim is "finally resolved".
If the Seller against whom the PSC Claim is asserted does not notify
the Parent Party who sent the Offset Notice that he objects to the right
of offset within such ten (10) day period, or having assumed the defense
of the PSC Claim, fails to continue such defense in accordance with this
Article 8, Seller shall be deemed to have waived any objection thereto
and the Parent Party shall be free to exercise such offset as provided in
Section 8.6(a).
(c) For purposes hereof, a PSC Claim shall be deemed to be "finally
resolved" upon (1) the final determination of a court, arbitrator or
regulatory or other governmental authority having jurisdiction which is
subject to no further appeal, or (2) the settlement or compromise of the
PSC Claim, or consent thereto, by such Seller.
(d) Each "Offset Notice" (other than pursuant to Section 7.7) shall
specify (i) the basis for asserting the offset, (ii) the amount of the
offset and the method used to calculate such amount, and (iii) a copy of
any pleadings, or written notice of claim served upon the Parent Party or
other Indemnified Person evidencing the factual dispute underlying such
PSC Claim.
(e) Any dispute as to the exercise of a right of offset by a Parent
Party with respect to a PSC Claim shall be determined in accordance with
Section 10.20 hereinbelow.
SECTION 9. TERMINATION.
9.1 RIGHT TO TERMINATE. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by the mutual written consent of Parent, PSC and Sellers;
(b) by either PSC, Parent or Sellers upon prior written notice to
the other party
(i) if any court or governmental or regulatory agency,
authority or body shall have enacted, promulgated or issued any
statute, rule, regulation, ruling, writ or injunction, or taken any
other action, restraining, enjoining or otherwise prohibiting the
transactions contemplated hereby and all appeals and means of appeal
therefrom have been exhausted; or
(ii) if the Closing shall not have occurred on or before May
31, 1998 or such later date as the parties may agree to; provided,
however, that the right to terminate this Agreement pursuant to this
Section 9.1(b)(ii) shall not be available to any party whose breach
of any representation or warranty or failure
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to perform or comply with any obligation or condition under this
Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date;
(c) by PSC or Parent, upon prior written notice to Sellers, if any
of the conditions specified in Section 5 have not been met, or waived in
writing by Parent, prior to June 1, 1998 (or any extension thereof agreed
upon by the parties in writing);
(d) by Sellers, upon prior written notice to Parent, if any of the
conditions specified in Section 6 shall not have been met, or waived in
writing by Sellers, prior to June 1, 1998 (or any extension thereof
agreed upon by the parties in writing).
9.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement pursuant to this
Section 9, this Agreement shall forthwith become null and void and there
shall be no liability on the part of any of the parties hereto or their
respective officers, directors or affiliates with respect to this
Agreement, except as provided in 9.2(b) and 9.2(c) below, and except as
may arise under Sections 1.6, 2.22, 3.3, and 7.5 which shall remain in
full force and effect in accordance with their terms after any such
termination of this Agreement.
(b) If the transactions contemplated by this Agreement are not
consummated on or before June 1, 1998, for any reason other than (i) the
Sellers' decision not to proceed with the transactions due to a Material
Adverse Change in the financial condition of Parent since December 31,
1997, (ii) Parent's decision not to proceed with the transactions as a
result of its due diligence unless such decision is due to the current
per annum revenue "run rate" from all Practices being less than
$16,360,000 in the aggregate measured on an accrual basis, or (iii) the
inability of Parent to obtain the consent of its senior lender,
NationsBank, to this Agreement, in accordance with the provisions of
Section 6.9, Sellers, jointly and severally, agree to pay Parent upon
demand a "break-up" fee equal to $250,000, which shall constitute
Sellers' total liability to PSC and Parent for damages and PSC and Parent
shall have no right to other damages, specific performance or equitable
relief as a result of any breach by Sellers of their obligations under
this Agreement, which rights are hereby expressly waived. Notwithstanding
the foregoing, no break-up fee shall be payable by Sellers to PSC or
Parent if an alternative transaction, as contemplated by that certain
letter agreement between Parent and certain of the Sellers dated March
26, 1998 (the terms of which are hereby incorporated by reference), is
consummated on or before June 1, 1998.
(c) In the event that all conditions precedent specified in Section
5 to PSC's and Parent's obligation to consummate the transactions
contemplated by this Agreement have been satisfied in full, and Parent
and PSC nevertheless refuse to consummate the transactions contemplated
by this Agreement in breach hereof, PSC and Parent jointly and severally
agree to pay Sellers a break-up fee of $250,000 which break-up fee shall
constitute PSC's, PSC Management's and Parent's total liability to
Sellers for damages
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for breach of this Agreement, and Sellers shall have no rights to other
damages, specific performance or equitable relief, which are hereby
waived.
SECTION 10. MISCELLANEOUS.
10.1 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand delivery,
or by facsimile and reputable overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Parent or PSC:
PHYSICIANS SPECIALTY CORP.
0000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
with a copy of each notice directed to PSC or Parent to:
Xxxxxxx X. Xxxxx, Esq.
Xxxxxxxx Xxxxxxx LLP
0000 XxxxxxxXxxx Xxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
If to any Seller:
To Such Seller
c/o Xxxxxx Xxxxx, M.D.
0000 0xx Xxxxxx
Xxx Xxxx, X.X. 00000
with a copy to:
Xxxx Lever, Esq.
Xxxxxxx & Xxxxxxxxx, LLP
Xxx Xxxxx Xxxxxxxx, 00xx Xxxxx
Xxxxx Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
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If to the Paying Agent:
Xxxxxxx & Xxxxxxxxx, LLP
Xxx Xxxxx Xxxxxxxx
Xxxxx Xxxxxx, Xxx Xxxx 00000
All such communications shall be deemed to have been delivered on the date of
delivery or on the next business day following the deposit of such
communications with the overnight courier. Any party may change the address to
which notices are to be sent to such party by delivering written notice of such
change in accordance with the provisions of this Section 10.1.
10.2 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement. Sellers and the Corporations will
execute and deliver from time to time thereafter, at the request of PSC, all
such further instruments of conveyance, assignment and further assurance as may
reasonably be required in order to vest in and confirm to PSC each of Seller's
right, title and interest in and to the Shares.
10.3 PUBLIC DISCLOSURES. Except as otherwise required by law, no party to
this Agreement shall make any public or other disclosure of this Agreement or
the transactions contemplated hereby without the prior consent of the other
parties. The parties to this Agreement shall cooperate with respect to the form
and content of any such disclosures.
10.4 GOVERNING LAW. This Agreement shall be interpreted, construed and
enforced in accordance with the laws of the State of New York, applied without
giving effect to any conflict-of-laws principles.
10.5 "INCLUDING". The word "including," when following any general
statement, term or matter, shall not be construed to limit such statement, term
or matter to the specific terms or matters as provided immediately following the
word "including" or to similar items or matters, whether or not non-limiting
language (such as "without limitation," "but not limited to" or words of similar
import) is used with reference to the word "including" or the similar items or
matters, but rather shall be deemed to refer to all other items or matters that
could reasonably fall with the broadest possible scope of the general statement,
term or matter.
10.6 "KNOWLEDGE". "To the knowledge," "to the best knowledge, information
and belief" or any similar phrase, shall be deemed to include the actual
knowledge of the party making the representation and any information that such
party should have known after reasonable investigation, unless otherwise
expressly provided. Unless otherwise expressly provided herein, each Seller
shall be deemed to have knowledge of any facts known to the other Sellers of
such Sellers' respective Corporation or Practice. PSC and Parent shall be deemed
to have knowledge of each other and of PSC Management. Unless otherwise
expressly provided herein, any entity shall be deemed to have knowledge of any
facts known to its officers and directors.
10.7 "MATERIAL". An individual claim, obligation or liability shall be
deemed to be "material" if the amount thereof exceeds $5,000 or involves the
violation of any applicable federal, state or local statute, rule or regulation.
A contract or lease shall be deemed to be
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material if it requires a single payment in excess of $5,000 or payment for any
future 12-month period in excess of $5,000, except that no contract for the
acquisition of inventory items or consumable supplies shall be deemed material
unless such contract cannot be terminated without cause by a Seller on not more
than 30 days notice, or has, as of the Closing Date, an amount payable with
respect thereto of more than $5,000.
10.8 "MATERIAL ADVERSE CHANGE" OR "MATERIAL ADVERSE EFFECT". "Material
Adverse Change" or "Material Adverse Effect" means, when used in connection with
the parties to this Agreement, any change, effect, event or occurrence that has,
or is reasonably likely to have individually or in the aggregate, a material
adverse impact on the business or financial position of such party and its
subsidiaries taken as a whole; provided, however, that "Material Adverse Change"
and "Material Adverse Effect" shall be deemed to exclude the impact of (i)
changes in generally accepted accounting principles, (ii) changes in law
generally applicable to the industry, unless same materially adversely affects
reimbursement rules, and (iii) any changes resulting from any restructuring or
other similar charges or write-offs taken by Sellers or the Corporations with
the consent of PSC.
10.9 "HAZARDOUS MATERIALS". The term "Hazardous Materials" means any
material which is or may potentially be hazardous to the health or safety of
human or animal life or vegetation, regardless of whether such material is found
on or below the surface of the ground, in any surface or underground water,
airborne in ambient air or in the air inside any structure built or located upon
or below the surface of the ground or in building materials or in improvements
of any structures, or in any personal property located or used in any such
structure, including, but not limited to, all hazardous substances, imminently
hazardous substances, hazardous wastes, toxic substances, infectious wastes,
pollutants and contaminants from time to time defined, listed, identified,
designated or classified as such under any Environmental Laws (as defined in
Section 10.10) regardless of the quantity of any such material.
10.10 "ENVIRONMENTAL LAWS". The term "Environmental Laws" means any
federal, state or local statute, regulation, rule or ordinance, and any judicial
or administrative interpretation thereof, regulating the use, generation,
handling, storage, transportation, discharge, emission, spillage or other
release of Hazardous Materials or medical waste or relating to the protection of
the environment or the disposal of medical waste.
10.11 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
10.12 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.
10.13 ENTIRE AGREEMENT. This instrument, including all Exhibits attached
hereto, contains the entire agreement of the parties and supersedes any and all
prior or contemporaneous
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agreements between the parties, written or oral, with respect to the
transactions contemplated hereby. It may not be changed or terminated orally,
but may only be changed by an agreement in writing signed by the party or
parties against whom enforcement of any waiver, change, modification, extension,
discharge or termination is sought.
10.14 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument.
10.15 BINDING EFFECT. This Agreement shall be binding on, and shall inure
to the benefit of, the parties hereto, and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement.
10.16 NO RULE OF CONSTRUCTION. The parties acknowledge that this
Agreement was initially prepared by PSC and that all parties have read and
negotiated the language used in this Agreement. The parties agree that, because
all parties participated in negotiating and drafting this Agreement, no rule of
construction shall apply to this Agreement which construes ambiguous language in
favor of or against any party by reason of that party's role in drafting this
Agreement.
10.17 COSTS OF ENFORCEMENT. In the event that PSC, PSC Management or
Parent on the one hand, or Sellers, on the other hand, file suit in any court
against any other party to enforce the terms of this Agreement against the other
party or to obtain performance by it hereunder, the prevailing party will be
entitled to recover all reasonable out of pocket costs, including reasonable
attorneys' fees and court costs, from the other party as part of any judgment in
such suit. The term "prevailing party" shall mean the party in whose favor final
judgment after appeal (if any) is rendered with respect to the claims asserted
in the complaint. "Reasonable attorneys' fees" include those attorneys' fees
reasonably incurred in obtaining a judgment in favor of the prevailing party and
all appeals.
10.18 ASSIGNMENT. The parties also hereby agree that this Agreement shall
not be assigned or transferred by either party without the prior written consent
of the other; provided, however, that this Agreement may be assigned, by PSC or
Parent, in its sole discretion, to any parent or subsidiary of PSC or Parent or
to any party acquiring all or substantially all PSC's or Parent's assets so long
as such assignee assumes in writing all of the obligations of the assigning
party hereunder. Any such assignment shall not affect Parent's or PSC's
obligations hereunder or under any documents executed by Parent or PSC pursuant
to this Agreement. Notwithstanding the foregoing, all Sellers agree and consent
to each of Parent, PSC and PSC Management granting to their factor(s) or
lender(s) who provide senior debt financing to Parent or any of its affiliates
for their general corporate needs (whether one or more, the "Lender") a security
interest in all of their respective right, title, and interest in and under this
Agreement and the other documents, instruments and agreements executed by the
parties in connection with this Agreement as security for each of Parent's and
such affiliate's indebtedness and other obligations owing to the Lender, whether
now existing or hereafter arising or incurred.
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10.19 PERIOD PRIOR TO CLOSING. In consideration of the substantial
expenditures of time, effort and expense to be undertaken by Parent and PSC in
connection with the negotiation of the Agreement, and the related due diligence
investigations and reviews, each of the Sellers severally undertakes and agrees
that he or she shall not, and shall not permit such Seller's Practice to,
between the date of the execution of this Agreement and prior to termination of
this Agreement, directly or indirectly, provide any information to, or enter
into or conduct any discussions, negotiations or transactions of a similar
subject matter as the transactions contemplated by this Agreement with, any
other prospective purchaser or other party, including without limitation any
negotiations for a transaction relating to any sale of any of the capital stock
or substantially all the assets of the Practices or Corporations, or for the
entering into by the Practices or the Sellers, or any of them, of a management
services agreement with a physician practice management company, other than as
contemplated by this Agreement.
10.20 ARBITRATION. All disputes, controversies, differences or claims
arising out of, relating to or in connection with the exercise by Parent, PSC or
PSC Management of a right of offset pursuant to Section 7.7 or 8.6 of this
Agreement shall be finally settled by binding arbitration in New York, New York
pursuant to the arbitration rules of the American Arbitration Association.
Arbitration shall take place before one arbitrator appointed in accordance with
such rules. The governing law of the arbitration shall be the law of the State
of New York. Any award or decision rendered by the arbitrator shall clearly set
forth the factual and legal basis for such award or decision. Judgment on the
award or decision rendered by the arbitrator shall be nonappealable and
enforceable in any court having jurisdiction thereof. The costs of the
arbitration, including administrative, legal and arbitrator fees, shall be borne
by the losing party or according to the discretion of the arbitrator if the
parties disagree as to which party is the losing party under the award or
decision. Parent, PSC and PSC Management shall not be in breach or default of
their respective obligations under this Agreement, the PSC Debenture, Guaranty,
Security Agreement or either MSA by virtue of exercising any right of offset in
accordance with the procedure set forth in Section 7.7 or 8.6 of this Agreement
so long as any amounts that are offset but are found by the arbitrator to be due
and owing by Parent, PSC or PSC Management are paid to the Paying Agent not more
than ten (10) days after the rendering of the arbitration award or decision. Any
such arbitration award shall include interest at 6% per annum from the date of
any such wrongful offset on the amount which was wrongfully offset until the
date of the arbitration award. Any amounts not paid within such ten (10) day
period shall bear interest at the rate of interest announced or published from
time to time by NationsBank, N.A., plus four percent (4%) per annum from the
date of the award.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
"PSC"
PSC ACQUISITION CORP.
By /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------
Title: Vice President
----------------------------------
"PARENT"
PHYSICIANS' SPECIALTY CORP.
By /s/ Xxxxxxx X. Xxxxxxx
--------------------------------------
Title: Chief Executive Officer
----------------------------------
"SELLERS"
/s/ Xxx Xxxxxxxxx
----------------------------------------
XXX XXXXXXXXX, M.D.
/s/ Xxxxxx Xxxxx
----------------------------------------
XXXXXX XXXXX, M.D.
/s/ Xxxxxx Xxxxx
----------------------------------------
XXXXXX XXXXX, M.D.
/s/ Xxxxx Xxxxxx
----------------------------------------
XXXXX XXXXXX, M.D.
/s/ Xxxxx Xxxxxx
----------------------------------------
XXXXX XXXXXX, M.D.
/s/ Xxx Xxxxxxxxx
----------------------------------------
XXX XXXXXXXXX, M.D.
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
/s/ Xxxxxxx Xxxxxxxxx
----------------------------------------
XXXXXXX XXXXXXXXX, M.D.
/s/ Xxxx Xxxxxxx
----------------------------------------
XXXX XXXXXXX, M.D.
/s/ Xxxxx Xxxxxx
----------------------------------------
XXXXX XXXXXX, M.D.
/s/ Xxxxx Xxxxxxxxx
----------------------------------------
XXXXX XXXXXXXXX, M.D.
/s/ Xxxxxxx Xxxxxxxxx
----------------------------------------
XXXXXXX XXXXXXXXX, M.D.
/s/ Xxxxxx Xxxx
----------------------------------------
XXXXXX XXXX, M.D.
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EXHIBITS
Exhibit 1.1A Form of Debenture
Exhibit 1.1B Form of Security Agreement
Exhibit 1.1C Discharged Debt
Exhibit 1.1E Allocation of Purchase Price Among Sellers
Exhibit 1.4 Employment Arrangements
Exhibit 1.5A Form of New York Management Services Agreement
Exhibit 1.5B Form of New Jersey Management Services Agreement
Exhibit 1.10 Consulting Agreement
Exhibit 2.1A-2.1C Addresses and Share Ownership of Seller and
Authorized and Issued Capital Stock of Corporations
Exhibit 2.2A-2.1C Certified Articles/Certificates of Incorporation and Bylaws
Exhibit 2.4A-2.4C Permits, Licenses and Governmental Authorizations
Exhibit 2.8A-2.8D December 31, 1997, 1996 and 1995 Financial Statements of Practices
Exhibit 2.9A-2.9C Liabilities not Disclosed in Financial Statements of Practices
Exhibit 2.10A-2.10D Leases
Exhibit 2.11A-2.11D Personal Property of Practices
Exhibit 2.13A-2.13C Principal Places of Business of Practices and PDI
Exhibit 2.15A-2.15D Intellectual Property Rights
Exhibit 2.16A-2.16D Directors and Officers of Practices; Payroll Information
Exhibit 2.17A-2.17D Legal Proceedings
Exhibit 2.18A-2.18D Contracts (Other than Leases)
Exhibit 2.19A-2.19D Subsequent Events
Exhibit 2.20A-2.20C Accounts Receivable of Practices
Exhibit 2.21A-2.21C Tax Returns of Practices for 1997, 1996 and 1995
Exhibit 2.24A-2.24C Insurance Policies of Practices
Exhibit 2.25A-2.25D Employee Benefit Plans
Exhibit 2.28A-2.28D Medicare, Medicaid and Other Third Party Payor Payment Liabilities
Exhibit 5.9 Form of Legal Opinion for Seller's Counsel
Exhibit 5.12A-5.18C Release of Liens
Exhibit 5.13 Option for Shares of New York NewCo
Exhibit 5.14 Option for Shares of New Jersey NewCo
Exhibit 5.18A-5.18C Form of Lease Assignment
Exhibit 6.10 Form of Legal Opinion of Parent's Counsel
Exhibit 7.4 Practice's Office Locations and Restricted Territory for Covenant Not to Compete
Exhibit 8.6 Sellers' Respective Percentage Amounts for Purposes of Offset
51
EXHIBIT 7.4 RESTRICTED TERRITORIES
SELLER PRACTICE LOCATION RESTRICTED TERRITORY
------ ----------------- --------------------
Xxxxx Xxxxxx, M.D. 00 Xxxx Xxxx Xxxx Xxxxxxxxx within a ten (10) mile radius
Xxxxx Xxxxxx, M.D. Xxxxx Xxxxxx, XX 00000 of Practice Location
Xxx Xxxxxxxxx, M.D.
Xxxxxxx Xxxxxxxxx, M.D.
---------------------------------------------------------------------------------------------------------------------
Xxxx Xxxxxxx, M.D. The Xxxxxx Office Center Territory within a ten (10) mile radius
Xxxxx Xxxxxx, M.D. Stoneleigh Avenue of Practice Location
Xxxxx 000
Xxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxxxxx, M.D. 000 Xxxxx Xxxxxx Xxxxxxxxx within a ten (10) mile radius
Xxxxx Xxxxxx, XX 00000 of Practice Location
---------------------------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxxx, M.D. - 0000 Xxxxxxxxx Xxxx Xxxxxxxxx within a ten (10) mile radius
Suite 4 of Practice Location
Xxxxxxxxx, XX 00000
000 Xxxxx Xxxxxxxx Xxxxxxxxx within a ten (10) mile radius
Xxxxxxxxx, XX 00000 of Practice Location
---------------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxx, M.D. 0 Xxx Xxxxxxxxxx Xxxx Xxxxxxxxx within a ten (10) mile radius
Suite 1B of Practice Location
Xxxxx Xxxxxx, XX 00000
---------------------------------------------------------------------------------------------------------------------
Xxx Xxxxxxxxx, M.D. 000 Xxxxx Xxxx Xxxxxx Xxxxxxxxx within a ten (10) mile radius
Xxxxxxxxx, XX 00000 of Practice Location
---------------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxx, M.D. 0000 0xx Xxxxxx Xxxxxxxxx within a radius five avenues
Xxxxxx Xxxxx, M.D. Xxx Xxxx, XX 00000 east and west and thirty blocks north
and south of Practice location
---------------------------------------------------------------------------------------------------------------------
