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EXHIBIT 10.39
STOCK PURCHASE AGREEMENT
by and among
Physicians' Specialty Corp.
South Florida Otolaryngology, Inc.
and
Association A, Inc. (formerly known as Ear, Nose & Throat Associates
of Florida, Xxxx, P.A.)
Association B, Inc. (formerly known as Xxxxx X. Xxxxxxxx, M.D., P.A.)
Association C, Inc. (formerly known as Xxxxxxx X. Xxxxxx, M.D., P.A.)
Association D, Inc. (formerly known as Xxxx X. Xxxxxx, M.D., P.A.)
Association E, Inc. (formerly known as Xxxxxx X. Xxxxxxx, M.D., P.A.)
Association F, Inc. (formerly known as Drs. XxXxxxxxx & Xxxxxxxx, P.A.)
Xxxxxx Xxxx-Xxxxxxxx, M.D.
Xxxxx X. Xxxxxxxx, M.D.
Xxxxxxx X. Xxxxxx, M.D.
Xxxx X. Xxxxxx, M.D.
Xxxxxx X. Xxxxxxx, M.D.
Xxxxxxx X. XxXxxxxxx, M.D.
W. Xxxx Xxxxxxxx, M.D.
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TABLE OF CONTENTS
Page
SECTION 1. TERMS OF THE SALE AND PURCHASE OF THE STOCK............................................................2
1.1 PURCHASE AND SALE OF THE SHARES............................................................................2
1.2 BASE PURCHASE PRICES.......................................................................................2
1.3 CONTINGENT CONSIDERATION...................................................................................2
1.4 STOCK OPTIONS..............................................................................................2
1.5 NON-ASSUMPTION OF LIABILITIES..............................................................................3
1.6 EMPLOYMENT ARRANGEMENTS....................................................................................3
1.7 MANAGEMENT SERVICES AGREEMENT..............................................................................3
1.8 ASSOCIATIONS FINANCIAL INFORMATION.........................................................................3
1.9 EACH PARTY TO BEAR COSTS...................................................................................4
1.10 ASSIGNMENT OF CONTRACTS AND ASSETS; CONSENTS..............................................................4
1.11 COOPERATION WITH REGULATORY APPROVALS.....................................................................4
1.12 IRREVOCABLE GUARANTY BY PARENT............................................................................5
1.13 CLOSING...................................................................................................5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE CORPORATIONS.........................................7
2.1 OWNERSHIP OF SHARES........................................................................................7
2.2 ORGANIZATION...............................................................................................7
2.3 POWER AND AUTHORITY FOR TRANSACTIONS.......................................................................7
2.4 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS..........................................................8
2.5 SUBSIDIARIES AND AFFILIATES................................................................................9
2.6 OUTSTANDING CAPITAL STOCK..................................................................................9
2.7 OPTIONS, WARRANTS AND OTHER RIGHTS.........................................................................9
2.8 FINANCIAL INFORMATION......................................................................................9
2.9 NO UNDISCLOSED LIABILITIES.................................................................................9
2.10 LEASES....................................................................................................9
2.11 PERSONAL PROPERTY........................................................................................10
2.12 INVENTORIES..............................................................................................10
2.13 PRINCIPAL PLACE OF BUSINESS..............................................................................10
2.14 LOCATION OF ASSETS.......................................................................................10
2.15 INTELLECTUAL PROPERTY RIGHTS.............................................................................10
2.16 DIRECTORS AND OFFICERS; PAYROLL INFORMATION..............................................................10
2.17 LEGAL PROCEEDINGS........................................................................................10
2.18 CONTRACTS................................................................................................11
2.19 SUBSEQUENT EVENTS........................................................................................12
2.20 ACCOUNTS RECEIVABLE......................................................................................13
2.21 TAX RETURNS..............................................................................................13
2.22 COMMISSIONS AND FEES.....................................................................................13
2.23 MATERIAL LIABILITIES.....................................................................................13
2.24 INSURANCE POLICIES.......................................................................................14
2.25 EMPLOYEE BENEFIT PLANS...................................................................................14
2.26 COMPLIANCE WITH LAWS IN GENERAL..........................................................................14
2.27 FRAUD AND ABUSE..........................................................................................15
2.28 MEDICARE, MEDICAID, AND OTHER THIRD-PARTY PAYOR PAYMENT LIABILITIES......................................15
2.29 BILLING PRACTICES AND REFERRAL SOURCES...................................................................15
2.30 PHYSICIAN SELF-REFERRALS.................................................................................16
2.31 NO UNTRUE REPRESENTATIONS................................................................................16
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2.32 CASH ON HAND AT CLOSING..................................................................................17
2.33 CASH RECEIPTS ASSOCIATED WITH OUTSIDE ENGAGEMENTS........................................................17
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND SFO......................................................17
3.1 CORPORATE EXISTENCE; GOOD STANDING; QUALIFICATION.........................................................17
3.2 POWER AND AUTHORITY.......................................................................................17
3.3 COMMISSIONS AND FEES......................................................................................17
3.4 LEGAL PROCEEDINGS.........................................................................................18
3.5 CAPITALIZATION............................................................................................18
3.6 PARENT DOCUMENTS..........................................................................................18
SECTION 4. ACCESS TO INFORMATION AND DOCUMENTS PRIOR TO CLOSING..................................................18
4.1 ACCESS TO ASSOCIATIONS' INFORMATION.......................................................................18
4.2 ACCESS TO INFORMATION OF SFO AND PARENT...................................................................18
4.3 RETENTION OF RECORDS......................................................................................18
SECTION 5. CONDITIONS TO OBLIGATION OF PARENT AND SFO TO CLOSE...................................................19
5.1 REPRESENTATIONS AND WARRANTIES TRUE.......................................................................19
5.2 COVENANTS.................................................................................................19
5.3 NO SUIT OR PROCEEDING.....................................................................................19
5.4 ABSENCE OF MATERIAL ADVERSE CHANGE........................................................................19
5.5 CERTIFICATE...............................................................................................19
5.6 CONSENTS AND APPROVALS....................................................................................20
5.7 COUNSEL OPINION...........................................................................................20
5.8 OTHER AGREEMENTS EXECUTED.................................................................................20
5.9 RELEASE OF LIENS..........................................................................................20
5.10 CLOSING DATE FINANCIAL CERTIFICATE.......................................................................20
5.11 CORPORATE DOCUMENTS......................................................................................20
5.12 INSTRUMENTS OF CONVEYANCE................................................................................20
5.13 FORMATION OF NEWCO.......................................................................................21
5.14 INVESTOR LETTER AND FINANCIAL DATA SHEET.................................................................21
5.15 TERMINATION OF CORPORATION PLANS.........................................................................21
5.16 RESIGNATIONS.............................................................................................21
SECTION 6. CONDITIONS TO OBLIGATION OF SELLER AND THE CORPORATIONS...............................................21
6.1 REPRESENTATIONS AND WARRANTIES TRUE.......................................................................21
6.2 COVENANTS.................................................................................................21
6.3 NO SUIT OR PROCEEDING.....................................................................................21
6.4 CERTIFICATE...............................................................................................21
6.5 GOVERNMENT APPROVALS......................................................................................21
6.7 OTHER AGREEMENTS EXECUTED.................................................................................21
6.8 PURCHASE PRICE............................................................................................22
SECTION 7. CERTAIN ADDITIONAL COVENANTS..........................................................................22
7.1 CONDUCT OF PRACTICE PRIOR TO CLOSING......................................................................22
7.2 FUNDING OF ACCRUED EMPLOYEE BENEFITS......................................................................22
7.3 CREDITOR'S CLAIMS.........................................................................................23
7.4 COVENANT NOT TO COMPETE...................................................................................23
7.5 CONFIDENTIALITY...........................................................................................24
7.6 PREPARATION OF TAX RETURNS AND PAYMENT OF TAXES...........................................................24
7.7 SHORTFALL IN COLLECTIONS OF ACCOUNTS......................................................................24
7.8 TERMINATION OF CORPORATION PLANS..........................................................................24
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7.9 AMOUNTS OWED TO SELLERS...................................................................................24
SECTION 8. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION..................................................................................................25
8.1 NATURE AND SURVIVAL.......................................................................................25
8.2 INDEMNIFICATION BY SFO AND PARENT.........................................................................25
8.3 INDEMNIFICATION BY SELLERS AND THE ASSOCIATIONS...........................................................25
8.4 INDEMNIFICATION PROCEDURE.................................................................................26
8.5 LIMITATIONS UPON OBLIGATIONS..............................................................................26
8.6 RIGHT TO OFFSET...........................................................................................27
SECTION 9. TERMINATION...........................................................................................27
9.1 RIGHT TO TERMINATE........................................................................................27
9.2 EFFECT OF TERMINATION.....................................................................................28
SECTION 10. MISCELLANEOUS........................................................................................28
10.1 NOTICES..................................................................................................28
10.2 FURTHER ASSURANCES.......................................................................................29
10.3 PUBLIC DISCLOSURES.......................................................................................29
10.4 GOVERNING LAW............................................................................................29
10.5 INCLUDING................................................................................................29
10.6 KNOWLEDGE................................................................................................30
10.7 MATERIAL.................................................................................................30
10.8 MATERIAL ADVERSE CHANGE OR MATERIAL ADVERSE EFFECT.......................................................30
10.9 HAZARDOUS MATERIALS......................................................................................30
10.10 ENVIRONMENTAL LAWS......................................................................................30
10.11 APPOINTMENT OF ATTORNEY-IN-FACT.........................................................................30
10.12 CAPTIONS................................................................................................31
10.13 INTEGRATION OF EXHIBITS.................................................................................31
10.14 ENTIRE AGREEMENT........................................................................................31
10.15 COUNTERPARTS............................................................................................31
10.16 BINDING EFFECT..........................................................................................31
10.17 NO RULE OF CONSTRUCTION.................................................................................31
10.18 COSTS OF ENFORCEMENT. IN................................................................................31
10.19 TRANSFER OF ASSETS; ASSIGNMENT..........................................................................32
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of October 31,
1997, by and among SOUTH FLORIDA OTOLARYNGOLOGY, INC., a Delaware corporation
("SFO"); PHYSICIANS' SPECIALTY CORP., ("PARENT"); ASSOCIATION A, INC. (formerly
known as Ear, Nose & Throat Associates of Florida, Xxxx, P.A. and hereinafter
referred to as "Corporation A"), ASSOCIATION B, INC. (formerly known as Xxxxx X.
Xxxxxxxx, M.D., P.A. and hereinafter referred to as "Corporation B"),
ASSOCIATION C, INC. (formerly known as Xxxxxxx X. Xxxxxx, M.D., P.A.. and
hereinafter referred to as "Corporation C"), ASSOCIATION D, INC. (formerly known
as Xxxx X. Xxxxxx, M.D., P.A. and hereinafter referred to as "Corporation D"),
ASSOCIATION E, INC. (formerly known as Xxxxxx X. Xxxxxxx, M.D., P.A. and
hereinafter referred to as "Corporation E"), ASSOCIATION F, INC. ( formerly
known as Drs. XxXxxxxxx and Xxxxxxxx, P.A. and hereinafter referred to as
"Corporation F") (collectively, the "Corporations"); and XXXXXX XXXX-XXXXXXXX,
M.D., XXXXX X. XXXXXXXX, M.D., XXXXXXX X. XXXXXX, M.D., XXXX X. XXXXXX, M.D.,
XXXXXX X. XXXXXXX, M.D., XXXXXXX X. XXXXXXXXX, M.D., AND W. XXXX XXXXXXXX, M.D.,
all of whom are residents of Florida (jointly and severally the "Sellers").
W I T N E S S E T H:
WHEREAS, the Corporations operate medical practices which provide
otolaryngology and other medical and surgical services from offices located in
Pompano and Boca Raton, Florida (the "Practices");
WHEREAS, Xxxxxx Xxxx-Xxxxxxxx, M.D. ("Xxxx-Xxxxxxxx"), is the sole
shareholder of Corporation A;
WHEREAS, Xxxxx X. Xxxxxxxx, M.D. ("Xxxxxxxx"), is the sole shareholder
of Corporation B;
WHEREAS, Xxxxxxx X. Xxxxxx, M.D. ("Mellon") is the sole shareholder of
Corporation C;
WHEREAS, Xxxx X. Xxxxxx, M.D. ("Xxxxxx") is the sole shareholder of
Corporation D;
WHEREAS, Xxxxxx X. Xxxxxxx, M.D. ("Nachlas") is the sole shareholder of
Corporation E;
WHEREAS, Xxxxxxx X. XxXxxxxxx, M.D. ("XxXxxxxxx") and W. Xxxx Xxxxxxxx,
M.D. ("Xxxxxxxx") each own fifty percent (50%) of the issued and outstanding
shares of capital stock of Corporation F;
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WHEREAS, Parent through its wholly-owned subsidiaries is engaged in the
business of acquiring and managing medical practices;
WHEREAS, SFO is a wholly-owned subsidiary of Parent;
WHEREAS, each of the Sellers wishes to convey to SFO, and SFO wishes to
acquire from each of the Sellers all of the issued and outstanding shares of
capital stock of each of the Corporations (the "Shares"), subject to certain
liabilities set forth herein, all upon the terms and subject to the 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 sufficiency of which is 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
and the purchase thereof by SFO shall be made at the Closing (as defined in
Section 1.12) 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 to SFO, and SFO shall purchase the Shares from the appropriate
Seller or Sellers, for the base purchase prices set forth in Exhibit 1.2 ( with
respect to each Seller, his or her "Base Purchase Price" and collectively "Base
Purchase Prices") and subject to all other terms and conditions set forth in
this Agreement, including but not limited to, the transfer of the Shares to SFO
free and clear of all liabilities, liens, mortgages, encumbrances, debts,
obligations and security or other third-party interests of whatever nature.
1.2 BASE PURCHASE PRICES As consideration for the sale of the Shares to
SFO by the appropriate Seller, SFO shall provide the appropriate Seller with
consideration in the form of cash and a non-negotiable convertible note as set
forth in Exhibit 1.2. The non-negotiable convertible notes to be issued to each
Seller are in substantially the same forms as attached hereto as Exhibits 1.2A
through 1.2G.
1.3 CONTINGENT CONSIDERATION. Sellers shall receive additional
consideration if the number of Parent affiliated full-time equivalent ("FTE")
physicians (practicing in Palm Beach County or within a ten (10) mile radius of
any of Broward County office of Ear, Nose & Throat Associates of South Florida,
P.A.) exceeds stipulated benchmarks ("Contingent Consideration"). SFO's
obligation to pay this Contingent Consideration is set forth in a contingent
promissory note payable collectively to Sellers in the amount of $2,250,000 (the
"Contingent Promissory Note"). The Contingent Promissory Note to be issued to
Sellers is in substantially the same form as attached hereto as Exhibit 1.3.
1.4 STOCK OPTIONS. Sellers shall receive stock option grants pursuant
to the Parent Health Care Professionals Stock Option Plan upon affiliation (with
Parent within twenty-four (24)
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months following the Closing) by Florida based physicians who (1) are members of
the Florida ENT Independent Practice Association ("IPA") organized by Nachlas
and (2) have not entered into a Confidentiality Agreement with Parent on or
before Closing ("Parent Sourced Physicians"). A list of the IPA member
physicians and Parent Sourced Physicians is set forth in Exhibit 1.4. Options
will be granted to Sellers based upon the following scale:
ANNUAL AGGREGATE PRACTICE REVENUES
DERIVED BY AFFILIATED IPA
MEMBER PRACTICES JOINING PARENT* PARENT STOCK OPTIONS GRANTED
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$1.0 million - $5.0 million 2,500 shares per $1.0 million collections
$5.0 million - $10.0- million 5,000 shares per $1.0 million collections
$10.0 million + 7,500 shares per $1.0 million collections
*The annual aggregate practice revenues derived by IPA member practices relate
to the twelve (12) month period prior to affiliation with Parent.
1.5 NON-ASSUMPTION OF LIABILITIES SFO is not assuming any liabilities
under this Agreement.
1.6 EMPLOYMENT ARRANGEMENTS
(a) Following the Closing, all Sellers shall enter into
full-time employment agreements with Ear, Nose & Throat Associates of South
Florida, P.A. ("NewCo").
(b) As of the Closing Date, the Corporations will: (i)
terminate any employment agreements with all physicians, including Sellers, and
all other employees; (ii) terminate all Corporation Plans, such termination to
be effected in accordance with and to the extent permitted by applicable
provisions of the Internal Revenue Code of 1986, as amended, (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 ("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 or Corporations will provide to
SFO such copies of documents and other information related to the termination of
such employees' participation in the Corporations Plans as SFO may request.
1.7 MANAGEMENT SERVICES AGREEMENT. At Closing, NewCo shall execute and
deliver a Management Services Agreement substantially in the same form as
attached hereto as Exhibit 1.7, pursuant to which PSC Management Corp., a
wholly-owned subsidiary of Parent, will provide management services to NewCo
from and after the Closing Date (the "Management Services Agreement").
1.8 CORPORATIONS FINANCIAL INFORMATION. The agreement between the
parties evidenced by this Agreement has been reached based on financial
information about the
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individual Corporations and the Practices as of September 30, 1997, all provided
to SFO by Sellers. The unaudited balance sheets of all of the individual
Corporations as of September 30, 1997 ("Balance Sheet Date"), are attached
hereto as Exhibits 1.8A through 1.8F and are collectively referred to herein as
"Balance Sheets".
1.9 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, 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 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 sale 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.
1.10 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 SFO and Parent that
Sellers, or their agents, will, at the request and expense and under the
direction of SFO, in the individual names of Sellers or otherwise, as SFO 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
SFO, 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 Seller shall hold the same for the
benefit of, and shall pay the same over to, SFO.
1.11 COOPERATION WITH REGULATORY APPROVALS. Sellers shall cooperate
with and assist SFO, as SFO shall reasonably request, 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 SFO
to acquire the Shares and operate the Business.
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1.12 IRREVOCABLE GUARANTY BY PARENT. To induce Sellers to execute and
deliver this Agreement, Parent hereby unconditionally and irrevocably guarantees
the Sellers the full, prompt and faithful performance by SFO of all covenants
and obligations to be performed by SFO under this Agreement, including, but not
limited to, the payment of all sums by SFO pursuant to this Agreement and SFO's
obligation to indemnify the Sellers pursuant to Section 8.2. This guaranty shall
be a guaranty of payment, not merely 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
SFO fails to fully perform all such covenants and obligations in accordance with
their terms or pay all or any part of such sums or deliver all or any part of
such property 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 may be, by SFO. In the event of bankruptcy,
termination, liquidation or dissolution of SFO, 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.
1.13 CLOSING
(a) Closing. Subject to the fulfillment of the conditions
precedent specified in Sections 5 and 6, the transactions contemplated by this
Agreement shall be consummated at a closing (the "Closing") to be effective as
of October 31, 1997, at the offices of Xxxxx & Xxxxxxxx, P.A., 0000 Xxxxx
Xxxxxxx Xxxxxxx, Xxxxx 000-X, Xxxx Xxxxx, Xxxxxxx 00000, or at such other
location, as is mutually agreed upon by the Parties. 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 SFO 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, with the signatures
of Sellers guaranteed;
(ii) The certificate required to be delivered
pursuant to Section 5.5;
(iii) The legal opinion required to be delivered
pursuant to Section 5.7 of this Agreement;
(iv) The other agreements, documents and instruments
required by Sections 5.8 through 5.14;
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(v) Articles of Amendment to the Articles of
Incorporation of each professional association converting each
professional association into a corporation and all
resolutions of each professional association authorizing same;
(vi) Insurance policies providing professional
liability coverage for NewCo and all Sellers in amounts of not
less than $ 500,000 per occurrence and $ 1,500,000 aggregate
on a claims made basis and prior acts coverage ("tail
coverage") for all Corporations and Sellers providing
continuity of coverage until the expiration of the applicable
statute of limitations;
(vii) Sufficient documentation evidencing that the
Corporation Plans have been terminated in accordance with
Section 1.6;
(viii) Resignations of the officers and directors of
each of the Corporations in accordance with Section 5.16; and
(ix) Any other documentation required to be
delivered under this Agreement or otherwise requested to be
delivered by SFO that is necessary or appropriate to
consummate the transaction.
(c) Documents and Other Items to be Delivered by SFO. At
the Closing, SFO shall deliver to Sellers the following:
(i) The cash portion of the Base Purchase Prices
pursuant to Section 1.2;
(ii) The Convertible Notes payable to the
appropriate Sellers pursuant to Section 1.2;
(iii) The Contingent Promissory Note payable
collectively to Sellers pursuant to Section 1.3;
(iv) The certificate required to be delivered
pursuant to Sections 6.4 of this Agreement;
(v) The legal opinion required to be delivered
pursuant to Section 6.6 of this Agreement;
(vi) The other agreements, documents and instruments
required by Section 6.7, and 6.9;
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(vii) Any other documentation required to be
delivered under this Agreement or otherwise reasonably
requested to be delivered by Sellers that is necessary or
appropriate to consummate the transaction.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE CORPORATIONS
The Sellers and the Corporations jointly and severally
represent and warrant to SFO and Parent as follows:
2.1 OWNERSHIP OF SHARES. Sellers are the record and beneficial owners
of the Shares, free and clear of all liens, claims, and encumbrances. Schedule
2.1 sets forth a true and accurate list of the names and addresses of all
Sellers, together with the number of shares that each Seller owns in the
individual Corporations. The Shares constitute all of the issued and outstanding
capital stock of the individual Corporations. Upon delivery to SFO at closing of
the certificates representing the Shares, duly endorsed by the appropriate
Seller for transfer to SFO, SFO shall be the lawful owner of the Shares, free
and clear of all liens, security interests, claims or encumbrances. There are no
shareholders agreements, voting trusts, agreements, or proxies with respect to
the Shares.
2.2 ORGANIZATION. Each Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of Florida 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 the
Corporation. No Corporation owns, leases or operates real property, maintains an
office or employees or otherwise transacts business in any state other than
Florida. Each Corporation has the corporate power and authority to own, lease
and operate its assets, property and business and to carry on its business as
such business now is being conducted. Each Corporation has delivered to Parent
and SFO certified copies of its articles/certificate of incorporation and
bylaws, and all amendments thereto, all of which are true, correct and complete.
2.3 POWER AND AUTHORITY FOR TRANSACTIONS.
(a) Sellers and the Corporations have the power to execute,
deliver and perform their obligations under this Agreement and all agreements
and other documents executed and delivered by them pursuant to this Agreement,
and have taken all action required by law, the Articles of Incorporation and
Bylaws of each Corporation or otherwise, to authorize the execution and delivery
of and the performance of this Agreement and such related documents. 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 Articles
of Incorporation or Bylaws of any Corporation 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 an individual
Corporation is a
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party or by which an individual Corporation is bound, or violate any material
restrictions of any kind to which an individual Corporation is subject which
could have a Material Adverse Effect.
(b) The execution and delivery of this Agreement, and the
agreements related hereto executed and delivered pursuant to this Agreement, do
not, and the consummation of the transactions contemplated hereby will not,
violate 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 any Seller is a party or by which any Seller
is bound, or violate any material restrictions of any kind to which any Seller
is subject and which could have a Material Adverse Effect.
(c) This Agreement has been duly and validly executed and
delivered by Sellers and the Corporations and constitutes the valid and binding
agreement of Sellers and each of the Corporations enforceable against each of
them in accordance with its terms, and each other agreement to be executed and
delivered at the Closing by Sellers and/or the Corporations will upon such
execution and delivery constitute the valid and binding agreement of Sellers
and/or the Corporations enforceable against Sellers and/or the Corporations in
accordance with its terms.
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 Practices, or
waivers thereof, have been duly obtained and are in full force and effect. There
are no proceedings pending or, to the knowledge of Sellers and Corporations,
threatened which may result in the revocation, cancellation or suspension, or
any adverse modification, of any thereof. Any and all past litigation concerning
such building or other permits, certificates of occupancy, concessions, grants,
franchises, licenses, certificates of need and other governmental authorizations
and approvals, and all claims and causes of action raised therein, have been
finally adjudicated.
(b) Approvals. Each Seller holds in full force and effect all
approvals, authorizations, licenses, and certifications required by law (the
"Approvals") to practice medicine. Evidence of such Approvals has been delivered
to SFO and Parent. There has been no lapse, revocation, or suspension of any
Approval, or any formal allegation (including any complaint, indictment or
initiation of proceedings) made before a court of law, licensing or regulatory
authority, professional organization, or the medical staff or committee of a
hospital, regarding any 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. Each Seller holds a valid Medicare provider
number and valid uniform physician identification numbers. Evidence of such
numbers has been delivered to SFO and Parent.
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(d) Board Certification. Each Seller is certified by the American Board
of Otolaryngology and evidence of such board certification(s) has been delivered
to SFO and Parent.
(e) No Conviction. No Seller has ever been convicted of a criminal
offense relating to the 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 no contendere and 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 Corporations do not have any
subsidiaries or Affiliates.
2.6 OUTSTANDING CAPITAL STOCK. The Corporations are authorized to issue
the number of shares of common stock, at the par values which are set forth in
Schedule 2.6. As of the date of this Agreement, the Shares listed in Schedule
2.6 are the only shares issued and outstanding. No other class of capital stock
of any Corporation is authorized or outstanding. All of the Shares of each
Corporation are duly authorized, validly issued, fully paid and nonassessable.
2.7 OPTIONS, WARRANTS AND OTHER RIGHTS. There are, and on the Closing
Date there shall be, 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 any Corporation may be obligated to
issue or transfer any shares of its capital stock.
2.8 FINANCIAL INFORMATION. Sellers have heretofore furnished Parent and
SFO with copies of financial information about each Corporation for the periods
ending December 31, 1996, 1995 and 1994, as set forth in Exhibits 2.8A through
2.8F attached hereto, including, but not limited to, the Balance Sheets. All
such financial statements have been prepared on the cash basis of accounting
consistently followed throughout the periods indicated, reflect all assets and
monetary liabilities of the Corporations as of their respective dates, and
present fairly the cash basis financial position of each Corporation as of such
dates and the results of operations for the period or periods reflected therein.
2.9 NO UNDISCLOSED LIABILITIES. Except as set forth in Exhibits 2.9A
through 2.9F, the Corporations did not have, as of the Balance Sheet Date, and
have not incurred since that date, any, known or unknown, uninsured liabilities
or obligations of any nature, whether accrued, absolute, contingent or
otherwise, and whether due or to become due which have not been satisfied prior
to the Closing Date.
2.10 LEASES. Exhibits 2.10A through 2.10F attached hereto set forth
lists of all leases, if any, pursuant to which the Corporations lease, as lessor
or lessee, real or personal property used in operating the Business or
otherwise. Except as indicated on Exhibits 2.10A through 2.10F, all such leases
are valid and effective in accordance with their respective terms, and there is
not under any such lease any existing default by any Corporation, as lessor or
lessee, or any condition or event of which an Corporation or any Seller has
knowledge which with notice or
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lapse of time, or both, would constitute a default, in respect of which the
Corporation has not taken adequate steps to cure such default or to prevent a
default from occurring.
2.11 PERSONAL PROPERTY. Each Corporation owns all of the personal
property reflected on its Balance Sheet, including, but not limited to, all
items of personal property identified on Exhibits 2.11A through 2.11F attached
hereto, free and clear of any liens, claims, charges, exceptions or
encumbrances, except for those set forth in Exhibits 2.11A through 2.11F
attached hereto.
2.12 INVENTORIES. The items of each Corporation's inventory 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 Practices.
2.13 PRINCIPAL PLACE OF BUSINESS. The principal places of business of
the Corporations are, and have been for the previous five (5) years, at those
addresses in those counties listed in Exhibits 2.13A through 2.13F.
2.14 LOCATION OF ASSETS. Except as indicated in Exhibits 2.14A through
2.14F, all of the Corporations' assets are located in those counties listed in
Exhibits 2.13A through 2.13F.
2.15 INTELLECTUAL PROPERTY RIGHTS. Except as set forth in Exhibits
2.15A through 2.15F attached hereto, no Corporation has right, title or interest
in or to patents, patent rights, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets. Except for off-the-shelf software
licenses, No 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. Each Corporation owns and
possesses adequate licenses or other rights to use all such patents, trademarks,
service marks, trade names, copyrights, manufacturing processes, inventions,
specialized treatment protocols, formulas and trade secrets necessary to conduct
its business as now operated. No claim is pending or has been made to the effect
that the present or past operations of any Corporation infringe upon or conflict
with the asserted rights of others to such patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, specialized
treatment protocols, copyrights, formulas and trade secrets.
2.16 DIRECTORS AND OFFICERS; PAYROLL INFORMATION. Set forth on Exhibits
2.16A through 2.16F attached hereto are a true and complete lists, as of the
date of this Agreement, of: (a) the name of each Director and officer of each
Corporation; and (b) the most recent payroll report of each Corporation, showing
all current employees of each Corporation 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
2.17F attached hereto, neither any Corporation nor any Seller has knowledge of
any pending or threatened litigation, governmental investigation, condemnation
or other proceeding against or relating to or affecting any Corporation, any
Seller, the Practice, the Shares or the transactions contemplated by this
Agreement, including, but not limited to, claims for medical malpractice or
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negligence, and, to the knowledge of Sellers and the Corporations, no basis for
any such action exists, nor is there any legal impediment of which Sellers or
the Corporations have knowledge to the continued operation of the Practice in
the ordinary course.
2.18 CONTRACTS. To the best of their knowledge, the Corporations have
delivered to Parent and SFO true copies of all written, and disclosed to Parent
and SFO all Material oral, outstanding contracts, obligations and commitments of
each Corporation and each Seller entered into in connection with its Practice,
all of which are listed or incorporated by reference on Exhibits 2.10A through
2.10F (in the case of leases) and Exhibits 2.18A through 2.18F (in the case of
managed care contracts, third party payor contracts and contracts other than
leases) attached hereto. Except as otherwise indicated on such Exhibits, all of
such contracts, obligations and commitments are valid, binding and enforceable
against the Corporation 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. Except as set forth or
incorporated by reference on such Exhibits, to each Seller's and each
Corporation's knowledge no default or alleged default by any Seller or any
Corporation exists thereunder. Except as listed or incorporated by reference on
Exhibits 2.10A through 2.10F and Exhibit 2.18A through 2.18F, neither any
Corporation nor any Seller is a party to any Material written or oral agreement,
contract, lease or plan of a type described as follows:
(c) Contract related to the assets, not made in the
ordinary course of business, other than this Agreement.
(d) Employment contract which is not terminable
without cost or other liability to any Corporation, or any successors or assigns
thereof, upon notice of 30 days or less.
(e) Contract with any labor union.
(f) Bonus, pension, profit-sharing, retirement, stock
acquisition, hospitalization, insurance or similar plan providing for employee
benefits.
(g) Lease with respect to any property, real or
personal, whether as lessor or lessee.
(h) 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 any Corporation, or any successors or
assigns thereof, upon notice of 30 days or less.
(i) Insurance contract.
(j) Contract continuing for a period of more than six
months from the Closing Date.
(k) Loan agreement or other contract for money
borrowed.
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2.19 SUBSEQUENT EVENTS. Except as set forth on Exhibits 2.19A through
2.19F attached hereto, no Corporation has, since the date of the Balance Sheet:
(a) Incurred any material uninsured obligation or
liability (absolute, accrued, contingent or otherwise), or any material adverse
change except in connection with the performance of this Agreement, other than
in the ordinary course of business.
(b) Discharged or satisfied any material lien or
encumbrance, or paid or satisfied any material obligation or liability
(absolute, accrued, contingent or otherwise) other than (i) liabilities shown or
reflected on the Balance Sheets or (ii) liabilities incurred since the date of
the Balance Sheets in the ordinary course of business.
(c) 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 any Corporation.
(d) Mortgaged, pledged or subjected to any lien,
charge or other encumbrance any of the Shares.
(e) Sold or transferred any of the Shares.
(f) canceled any debts or claims or waived any
rights, except in the ordinary course of business.
(g) 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 any Corporation to any of its officers or employees,
consultants or agents (other than normal merit increases), or by means of any
bonus or pension plan, contract or other commitment, increased the compensation
of any of its officers, employees, consultant or agents.
(h) Authorized any capital expenditures in excess of
$1,000.00.
(i) Except for this Agreement and any other agreement
executed and delivered pursuant to this Agreement, entered into any material
transaction other than in the ordinary course of business or permitted under
other Sections hereof.
(j) Issued any stock, bonds or other securities.
(k) Experienced damage, destruction or loss (whether
or not covered by insurance) materially and adversely affecting any of its
properties, assets or business, or experienced any other material adverse change
in its financial condition, assets, liabilities or business.
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(l) Paid bonuses, distributions, or advanced loans to
any Seller or other employee outside of the ordinary course of business
consistent with past practices of each Corporation
2.20 ACCOUNTS RECEIVABLE. Exhibits 2.20A through 2.20F reflect the
amount of each Corporation's accounts receivable as of the date of the Balance
Sheet, net of allowances for uncollectible and doubtful accounts. Each
Corporation maintains its accounting records in sufficient detail to
substantiate the accounts receivable reflected on Exhibits 2.20A through 2.20F
and has given and will give to Parent and SFO full and complete access to those
records, including the right to make copies therefrom. Since the date of the
Balance Sheets, no Corporation has 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 of the knowledge of the Sellers and the Corporations, each
Corporation is in substantial compliance with the terms and conditions of such
third-party payor arrangements, and to each Seller's and each Corporation's
knowledge the reserves established by each Corporation are adequate to cover any
liability resulting from lack of compliance. The net realizable value of the
Corporations' accounts receivable (determined in accordance with generally
accepted accounting principles and net of contractual allowances and allowances
for uncollected or doubtful amounts) as of the Closing Date shall be at least
$500,000 (the "Closing Account Receivable"), and Corporations' annualized 1997
collections shall equal or exceed $5,000,000.
2.21 TAX RETURNS. The Corporations have filed all tax returns required
to be filed by them, and made all payments required to be made by them, 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 Corporations have no tax liability, except for taxes being contested in good
faith, as set forth on Exhibit 2.21, 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 Corporations' 1996, 1995 and 1994 federal and
state income tax returns have been attached hereto in Exhibit 2.21A through
2.21F.
2.22 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
SFO or Parent resulting from any action taken by any Corporation or any Seller
or its respective agents or employees, or any of them.
2.23 MATERIAL LIABILITIES. Except as set forth on Exhibits 2.23A
through 2.23F, no Seller or Corporation knows, or has reasonable grounds to
know, of any basis for the assertion against any Corporation as of the Balance
Sheet Date, of any material claim or liability of any nature in any amount not
fully reflected or reserved against on the Balance Sheets, or of any material
uninsured claim or liability of any nature arising since that date which would
have a Material Adverse Effect other than those incurred in the ordinary course
of business or contemplated by this Agreement.
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2.24 INSURANCE POLICIES. Each Seller or Corporation maintains policies
of comprehensive general liability and professional liability insurance in
amounts of not less than $500,000 per occurrence and $1,500,000 aggregate on a
claims made basis and property damage insurance on the assets of each
Corporation. Valid policies in such amounts are outstanding and duly in force
and will remain duly in force through the Closing Date. All such policies are
described in Exhibits 2.24A through 2.24F attached hereto.
2.25 EMPLOYEE BENEFIT PLANS. Except as set forth on Exhibit 2.25A
through 2.25F attached hereto, no 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 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 2.25F (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 Internal Revenue Code of 1986, as
amended, and any other applicable law including but not limited to Title VII of
the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended,
the Age Discrimination in Employment Act of 1967, as amended, and the related
rules and regulations adopted by those federal agencies responsible for the
administration of such laws. To the best of their knowledge, no act or failure
to act by any 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 any of the Corporation Plans. No
Corporation has previously made, is currently making, and is obligated in any
way to make, any contributions to any multi-employer plan within the meaning of
the Multi-Employer Pension Plan Amendments Act of 1980. None of the Corporation
Plans provides for the payment of separation, severance, termination or
similar-type benefits to any person or obligates any 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, disability or life insurance benefits to any current or former employee
of any 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 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. No Seller or any Corporation has
knowledge of material violations of any federal, state and local laws,
regulations and ordinances relating to the Shares or the operations of the
Practice, including, without limitation, the Federal Environmental Protection
Act, the Occupational Safety and Health Act, the Americans with Disabilities Act
and any Environmental Laws, and no notice of any pending inspection or violation
of any such law, regulation or ordinance has been received by any Seller or any
Corporation.
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2.27 FRAUD AND ABUSE. Sellers and the Corporations and all persons and
entities providing professional services for the Practice have not, to the
knowledge of Sellers and the Corporations, 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 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, lease 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. Except as described in Exhibits 2.28A through 2.28F, neither any
Seller nor any Corporation has, and as of the Closing Date, will have, 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 any Corporation
(or any predecessor corporation) or any Seller by any such third-party fiscal
intermediary, carrier, Medicaid program, Medicare program, or third party payor.
There are no pending or, to their 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 any
Corporation or any Seller.
2.29 BILLING PRACTICES AND REFERRAL SOURCES. (a) Billing Practices
Generally. All billing practices by each Corporation and each Seller to all
third party payors, including, but not limited to, the federal Medicare program,
state Medicaid programs and private insurance companies, have been true, fair
and correct and in compliance with all applicable laws, regulations and policies
of all such third party payors, and no Corporation nor any Seller has billed for
or received any payment or reimbursement in excess amounts allowed by law.
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(b) Gratuitous Payments. No Corporation nor any shareholder,
director, or officer of such Corporation, nor to such Corporation's knowledge
any employee or agent acting on behalf of or for the benefit of such Corporation
or any Seller, has directly or indirectly (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 any Corporation in order to obtain business
or payments from such persons, other than entertainment activities in the
ordinary and lawful course of business; (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 other than in connection with promotional or
entertainment activities in the ordinary and lawful course of business; (iii)
made or agreed to make, or is aware that there has been made or that there is
any agreement to make, any contribution, payment or gift of funds or property
to, or for the private use of, any governmental official, employee or agent
where either the contribution, payment or gift or the purpose of such
contribution, payment or gift is or was illegal under the laws of the United
States or under the laws of any state thereof or any other jurisdiction (foreign
or domestic) under which such payment, contribution or gift was made; (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. Except for lease
agreements with Dermatology Associates, MSG Partners, Ltd., and Xxxxxxx
Xxxxxxxx, M.D., no Seller or any Corporation, director, or officer thereof, nor
to any Corporation's knowledge any employee of any Corporation, is a party to
any contract, lease, agreement or arrangement, including, but not limited to,
any joint venture or consulting agreement with any physician, hospital, nursing
facility, home health agency or other person who is in a position to make or
influence referrals to or otherwise generate business for Corporation or any
Seller to provide services, lease space, lease equipment or engage in any other
venture activity.
2.30 PHYSICIAN SELF-REFERRALS. No Corporation nor 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 are currently interpreted.
2.31 NO UNTRUE REPRESENTATIONS. To the knowledge of the Corporations
and Sellers, no representation or warranty by any Corporation or any Seller in
this Agreement, and no Exhibit or certificate issued by officers or Directors of
any Corporation and furnished or to be furnished to SFO 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.
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All information and information provided by the Corporations or the Sellers for
valuation of the Practice by SFO and Parent is true, accurate and complete in
all material respects.
2.32 CASH ON HAND AT CLOSING. The Corporations collectively shall have
at least $335,000 in cash on hand at closing.
2.33 CASH RECEIPTS ASSOCIATED WITH OUTSIDE ENGAGEMENTS. Cash receipts
associated with the outside engagements of each Seller (as referred to on Part
Four of Exhibit A to Seller's Employment Agreement dated the 31st day of
October, 1997 by and between the Seller and NewCo) have not been included in the
1994, 1995, 1996 or 1997 books and records of the Corporations as set forth in
Exhibits 2.8A through 2.8F and Exhibits 1.8A through 1.8F.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND SFO.
SFO and Parent hereby jointly and severally represent and warrant
to Sellers and the Corporation as follows:
3.1 CORPORATE EXISTENCE; GOOD STANDING; QUALIFICATION. Each of SFO and
Parent is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each of SFO and Parent has all
necessary corporate power to own its properties and assets and to carry on its
business as presently conducted 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.
3.2 POWER AND AUTHORITY. Each of SFO and Parent has corporate power to
execute and deliver this Agreement and perform its obligations under this
Agreement and all agreements and other documents executed and delivered by it
pursuant to this Agreement, and has taken all actions required by law, its
Certificate of Incorporation, its By-laws or otherwise, to authorize the
execution, delivery and performance of this Agreement and such related
documents. 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 SFO 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 SFO or Parent is a party or by which either of them is bound,
or violate any restrictions of any kind to which SFO or Parent is subject. The
execution and delivery of this Agreement have been approved by the respective
Boards of Directors of SFO 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
Sellers or Corporations resulting from any action taken by SFO or Parent or
their respective officers, Directors or agents, or any of them.
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3.4 LEGAL PROCEEDINGS. Except as disclosed in Exhibit 4.4, there is no
material litigation, governmental investigation or other proceeding pending or,
so far as is known to Parent threatened against or relating to Parent, its
properties or business, or the transaction contemplated by this Agreement and,
so far as is known to Parent, no basis for any such action exists.
3.5 CAPITALIZATION. Parent has an authorized capitalization of 10,000
shares of Preferred Stock, par value $1.00 per share, of which no shares are
issued and outstanding, and no shares are held in treasury, and 50,000,000
shares of common stock, par value $.001 per share, of which 6,336,582 shares are
issued and outstanding, and no shares are held in treasury. All of the Parent
Common Stock to be issued pursuant to this Agreement will, when so delivered, be
duly and validly issued and fully paid and nonassessable.
3.6 PARENT DOCUMENTS. Parent has heretofore furnished Seller with its
Prospectus dated March 20, 1997 with respect to the offer and sale of 2,200,000
shares of Parent Common Stock (the "Prospectus"); SEC Forms 10Q of Parent for
the quarters ended March 31, 1997 and June 30, 1997; and all press releases
issued by Parent after June 30, 1997. To the knowledge of Parent and PSC, no
representation or warranty by Parent or PSC 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.
SECTION 4. ACCESS TO INFORMATION AND DOCUMENTS PRIOR TO CLOSING.
4.1 ACCESS TO CORPORATIONS' INFORMATION. The Sellers and the
Corporations shall give to Parent and SFO and its counsel, accountants,
engineers and other representatives full access to all the requested properties,
documents, contracts, personnel files and other records of each Corporation and
the Practice hereunder and shall furnish Parent and SFO with copies of such
requested documents and with such information with respect to the affairs of
Sellers and the Corporations as Parent and SFO shall from time to time
reasonably request. Sellers and the Corporations shall disclose and make
available to Parent, SFO, 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 Practices.
4.2 ACCESS TO INFORMATION OF SFO AND PARENT. Prior to Closing, SFO and
Parent shall give to Sellers and the Corporations and their respective counsel,
accountants and other representatives such access to the documents, contracts
and other records of SFO, Parent and SFO and shall furnish Sellers and the
Corporations with copies of such documents and with such information with
respect to the affairs of SFO, Parent and SFO as Sellers and SFO shall from time
to time reasonably request.
4.3 RETENTION OF RECORDS. Without cost to the Corporations, SFO shall
retain all books and records of the Corporations ("Records") transferred to it
pursuant to this Agreement 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
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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 SFO TO CLOSE
The obligation of SFO and Parent to consummate the transactions to be
performed by them in connection with this Agreement is subject to satisfaction
of the following conditions precedent (any of which may be waived in writing by
SFO or Parent):
5.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties 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 Corporations and all Sellers shall have performed
and complied with all of their covenants and agreements 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, (iii) affect adversely SFO's receipt of the Shares free
of all liabilities, liens, mortgages, 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.
(i) There shall have been no change in the condition
(financial or otherwise), business, assets, or prospects of any
Corporation or the Practices from the Balance Sheet Date which has
had or could reasonably be expected to have a Material Adverse
Effect on any Corporation, the Practices, or the Shares.
(ii) No Corporation has been, and shall not be
seriously threatened to be materially adversely affected in any
way as a result of fire, explosion, disaster, accident, labor
dispute, any action by the United States or any other government or
government authority, domestic or foreign, riot, act of war, civil
disturbance or Act of God.
5.5 CERTIFICATE. The Sellers shall have delivered to SFO a certificate
to the effect that each of the conditions specified in Sections 5.1-5.4 is
satisfied in all respects.
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5.6 CONSENTS AND APPROVALS. SFO 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 SFO.
5.7 COUNSEL OPINION. Parent and SFO shall have received from counsel
to the Sellers and the Corporations an opinion dated as of the Closing Date, in
form and substance reasonably satisfactory to Parent and SFO.
5.8 OTHER AGREEMENTS EXECUTED. Each Seller shall have executed and
delivered an Employment Agreement with NewCo in the form required by the
Management Services Agreement; NewCo shall have executed and delivered the
Management Services Agreement; and the Corporations and the Sellers shall have
executed, delivered and consummated the transactions contained in an acquisition
agreement regarding the sale of their partnership interests in HMFM Partnership
to PSC Management Corp (the "Partnership Acquisition Agreement").
5.9 RELEASE OF LIENS All liens encumbering the Shares shall be duly
released by the secured parties and other lien holders.
5.10 CLOSING DATE FINANCIAL CERTIFICATE Sellers shall have delivered to
SFO closing date financial certificates which shall certify as of the last day
of the month prior to the Closing Date an unaudited cash basis balance sheet of
each Corporation and for the period ended as of such date a statement of
operations of each Corporation, along with a detailed accounts receivable aging
analysis of each Corporation as of the close of business on the date prior to
Closing. The aggregate net realizable value of all Corporations' accounts
receivable at Closing ("Closing Accounts Receivable") shall equal or exceed
$500,000, and the Corporations' annualized 1997 collections shall equal or
exceed $5,000,000.
5.11 CORPORATE DOCUMENTS. Each Corporation shall have furnished SFO
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 Florida; certificates, executed by the proper officials of the
State of Florida, as to the valid existence and good standing of each
Corporation in the State of Florida; resolutions authorizing this Agreement and
the transactions provided for herein, duly adopted by the Board of Directors or
other governing body of each Corporation and duly adopted by the appropriate
Seller, all as duly certified by the Secretary of each Corporation.
5.12 INSTRUMENTS OF CONVEYANCE. Simultaneously with the execution of
this Agreement and in order to effect the conveyance, transfer and assignment of
the Shares and the assumption of certain liabilities, each Seller shall have
executed and delivered to SFO certificates representing the Shares, and other
documents or instruments of conveyance, transfer or assignment as shall be
necessary or appropriate to vest in or confirm to SFO the Sellers' right, title
and interest in and to the Shares, free and clear of all obligations, security
interests, liens and encumbrances whatsoever.
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5.13 FORMATION OF NEWCO. Sellers shall have formed Ear, Nose & Throat
of South Florida, P.A. ("NewCo").
5.14 INVESTOR LETTER AND FINANCIAL DATA SHEET. Sellers shall have
provided to Parent prior to the Closing Date a fully completed and executed
Investor Letter and Financial Data Sheet in form and substance reasonably
satisfactory to Parent.
5.15 TERMINATION OF CORPORATION PLANS. The Sellers and Corporations
shall have (a) terminated all Corporation Plans as required under Section
1.6(b); (b) performed and complied with all of their other covenants contained
in Section 1.6; and (c) furnished Parent or SFO with documentation sufficient to
evidence such termination of the Corporation Plans.
5.16 RESIGNATIONS. There shall have been delivered to Parent and SFO
the signed resignations of the officers and directors of each of the
Corporations.
SECTION 6. CONDITIONS TO OBLIGATION OF SELLER AND THE CORPORATIONS
The obligation of Sellers and the Corporations to consummate the
transactions to be performed by them in connection with this Agreement is
subject to satisfaction of the following conditions (any one of which may be
waived in writing by Sellers or the Corporations);
6.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties set forth in Article 3 above shall be true and correct in all
material respects at and as of the Closing;
6.2 COVENANTS. Parent and SFO shall have performed and complied with
all of their covenants and agreements 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);
6.4 CERTIFICATE. SFO shall have delivered to Sellers a certificate to
the effect that each of the conditions specified in Sections 6.1-6.3 is
satisfied in all respects;
6.5 GOVERNMENT APPROVALS. Sellers, Corporations, Parent and SFO shall
have received all authorizations, consents, and approvals of governments and
governmental agencies, if any, that may be required;
6.7 OTHER AGREEMENTS EXECUTED. PSC Management Corp. shall have
executed and delivered the Management Services Agreement; and PSC Management
Corp. shall have executed, delivered and consummated the transactions contained
in the Partnership Acquisition Agreement.
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6.8 PURCHASE PRICE. Parent or SFO shall have delivered at the closing
the consideration required under Section 1.2.
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:
(d) Sellers and the Corporations will carry on the
Practices in substantially the same manner as heretofore carried on and will not
make any purchase or sale, incur any 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 SFO;
(e) No Seller or Corporation will permit any change
to be made in the articles of incorporation or by-laws or, if applicable,
shareholder agreement of any Corporation, other than with the prior written
consent of SFO.
(f) No Seller or Corporation will acquire or dispose
of any capital assets having an initial cost or current value in excess of
$1,000 other than with the prior written consent of SFO;
(g) No Seller or Corporation will increase the
compensation payable or to become payable to any of its employees or agents
other than (a) with the prior written consent of SFO or (b) cash bonuses by any
Corporation to any physician employee consistent with the past practice of the
Corporation;
(h) No Seller or Corporation will take, or permit or
suffer to be taken, any action which is represented and warranted in Section
2.19 not to have occurred since the Balance Sheet Date other than with the prior
written consent of SFO.
7.2 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Except as set forth on
Exhibits 7.2A through 7.2F, Sellers and the Corporations hereby covenant and
agree that they will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
such Seller or any Corporation might have any liability whatsoever arising from
any salary, wage, benefit, bonus, vacation pay, sick leave, insurance,
employment tax or similar liability of any Corporation to any employee or other
person or entity (including, without limitation, any Corporation Plan and any
liability under employment contracts with any Corporation) attributable to
services performed prior to the Closing Date. Each Corporation acknowledges and
agrees that SFO shall have no liability whatsoever now or at any time in the
future with respect to (1) any Corporation Plan or (2) services performed prior
to the Closing Date by any Corporation's employees or similar persons or
entities except as indicated on Exhibits 7.2A through 7.2F.
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7.3 CREDITOR'S CLAIMS. Sellers and the Corporations represent, covenant
and agree that all of the creditors with respect to the Practice will be paid in
full by the Corporations prior to the Closing Date. If required by SFO, Sellers
and the Corporations shall furnish SFO with proof of payment of all other
creditors. Notwithstanding the foregoing, Sellers or the Corporation may dispute
the amount or validity of any such creditor's claim without being deemed to be
in violation of this Section 7.3, provided that such dispute is in good faith.
7.4 COVENANT NOT TO COMPETE. 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 with the Practice or SFO or Parent in the
Geographic 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 the Geographic Territory,
directly or indirectly, solicit or attempt to solicit any customer or client of
SFO or Parent or patient of NewCo other than in the course of a Seller's normal
performance of services and duties for NewCo as a physician-shareholder thereof;
or (iii) solicit or employ or attempt to solicit or hire away or employ any
employee of SFO or Parent or NewCo. 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 SFO 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. The parties agree that the Practice currently serves
territories each with greater than a ten (10) mile radius of the Corporations'
various office locations. The parties also agree that the Practice currently
serves the cities of Boca Raton, Delray Beach, Pompano Beach, Deerfield Beach,
Coconut Creek, Parkland, Gulfstream, Florida, and unincorporated Palm Beach
County, Florida (west of Delray Beach and Boca Raton). Accordingly, as used
herein, the term "Geographic Territory" shall mean each area within a ten (10)
mile radius of each of the office locations of the Corporations from which the
Seller rendered services during the preceding twelve (12) months, and the cities
of Boca Raton, Delray Beach, Pompano Beach, Deerfield Beach, Coconut Creek,
Parkland, and Gulfstream, Florida, and unincorporated Palm Beach County, Florida
(West of Delray Beach and Boca Raton). The parties agree that the restraints set
forth above in this Section 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 SFO and Parent, and that, were it, he or she to
breach any of the covenants contained in this Section 7.4, SFO would be harmed
and the damage to SFO would be irreparable. Accordingly, Sellers acknowledge and
agree that, as SFO's legal remedies may be inadequate in the event of a breach
of the covenants in this Section 7.4, in addition to damages and other remedies
available to SFO, such covenants may be enforced by injunction or other
equitable remedies.
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7.5 CONFIDENTIALITY.
(a) The Sellers shall, for a period of five (5) years
after the Closing, hold in confidence all financial information about the
Corporations, the Practice and the Shares, except such disclosure as may be
required by law or governmental order or regulation, or by subpoena or other
legal process (provided SFO will be provided advance notice of such disclosure
in order to afford it the opportunity to seek an appropriate protective order).
(b) The Sellers further agree to keep confidential
for a period of five (5) years after the Closing, any and all information
relating to services, products, marketing information, sources of supply,
pricing and patients of the Corporations on the date hereof or developed by or
for the Corporations, except such disclosure as may be required by law or
governmental order or regulation, or by subpoena or other legal process
(provided SFO will be provided advance notice of such disclosure in order to
seek an appropriate protective order).
(c) The restrictions in this Section 7.5 shall not
apply to any information that comes into the public domain through no fault of
Sellers.
7.6 PREPARATION OF TAX RETURNS AND PAYMENT OF TAXES. Sellers shall file
all Corporations' tax returns and make all payments required to be made by the
Corporations, with respect to income taxes, real estate taxes, sales taxes, use
taxes, employment taxes for the period ending with the Closing date. Sellers
shall provide Parent and/or SFO with copies of such tax returns within 120 days
of Closing.
7.7 COLLECTIONS OF ACCOUNTS. In the event that during the twelve-month
period following the Closing the amount realized from collection of the Closing
Accounts Receivable is less than 500,000, then in addition to and not in lieu of
any other rights it may have under this Agreement or any other agreement with
Sellers or the Corporations or under law, the Sellers shall pay Parent upon
demand cash in an amount equal to the shortfall, or, at Parent's election any
such shortfall may be offset against the amounts payable by Parent to the
Sellers under the Convertible Notes or the Contingent Promissory Note. Following
any such payment or offset and immediately upon receipt by Parent or its
affiliates of $500,000, Parent and SFO shall assign to the Sellers the remaining
uncollected Closing Accounts Receivable. Parent or SFO shall immediately remit
to Sellers any collections received within the twelve-month period following the
Closing with respect to the Closing Accounts Receivable in excess of $500,000.
7.8 TERMINATION OF CORPORATION PLANS. Within thirty (30) days after the
Closing Date, the Sellers shall provide to Parent or SFO a copy of Form 5310 as
filed with the Internal Revenue Service ("IRS"). The Sellers shall provide to
Parent or SFO a copy of any correspondence between the Sellers and the IRS
regarding such filing upon receipt of any such correspondence.
7.9 AMOUNTS OWED TO SELLERS. Any amounts owed to a Seller by any
Corporation, as shown on the Balance Sheets of such Corporation, shall be deemed
a contribution to capital of such Corporation and shall be deemed discharged
prior to Closing.
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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 of Sellers and the
Corporations, jointly and severally, or of SFO and Parent, jointly and
severally, as the case may be. All such representations and warranties, all
representations and warranties expressly labeled as such in this Agreement and
the obligations of the parties to indemnify any other party pursuant to Section
8.2 or 8.3, shall survive the date of this Agreement and the Closing Date for
the period of the applicable statute of limitations. Each party covenants with
the other parties not to make any claim with respect to such representations or
warranties against any party after the date on which such survival period shall
terminate. No party shall be entitled to bring suit against any other party
pursuant to Section 8.2 or 8.3 hereof, unless such party has timely given the
notice required in Section 8.4 hereof. Each party hereby releases, acquits and
discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect to
which the notice required by Section 8.4 is not timely provided.
8.2 INDEMNIFICATION BY SFO AND PARENT. SFO 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 the
Corporations, and their respective agents, employees, legal representatives,
successors and assigns (each of the foregoing, including Sellers and the
Corporations, 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) and
each document, certificate or other instrument furnished or to be furnished by
Indemnitor hereunder, excluding, however, any and all liabilities of Sellers or
the Corporations which are not expressly assumed by SFO under this Agreement.
8.3 INDEMNIFICATION BY SELLERS AND THE CORPORATIONS. (a) Sellers (for
purposes of this Section 8.3 and, to the extent applicable, Section 8.4,
"Indemnitor"), shall jointly and severally indemnify and hold SFO and Parent and
their respective officers, directors, shareholders, affiliates, agents,
employees, legal representatives, successors and assigns (each of the foregoing,
including SFO and Parent, for purposes of this Section 8.3(a) 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), (a) 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)
and each document, certificate or other instrument furnished or to be furnished
by any Seller or Corporation hereunder, it being understood and agreed that for
purposes of this Section 8.3 and,
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to the extent applicable, Section 8.4, all representations and warranties of the
Indemnitor and the Corporations shall be construed by disregarding and giving no
effect whatsoever to any and all knowledge qualifications or limitations (such
as "to Sellers' and Corporations' best knowledge" or "to their knowledge") as if
such knowledge qualifications or limitations were stricken from such
representations and warranties, and (b) with respect to all times prior to the
Closing Date, arising from or by reason of or resulting from the Indemnitor's
management and conduct of the ownership or operation of the Practices or
ownership of the Shares and from any alleged act of negligence of Indemnitor or
its employees, agents and independent contractors in or about the Practice or
the Shares. Additionally, Sellers shall jointly and severally indemnify SFO and
Parent from and against any and all liabilities of Sellers or Corporations
whatsoever existing prior to Closing and from and against any and all
liabilities of the Sellers or Corporations arising or resulting from any events
or acts occurring at or prior to Closing.
8.4 INDEMNIFICATION PROCEDURE. Within 60 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. If any
such action or other proceeding shall be brought against any Indemnified Person,
Indemnitor shall, upon written notice given within a reasonable time following
receipt by Indemnitor of such notice from Indemnified Person, 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 or to other Indemnified Persons
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; 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 reason of such claim, action or proceeding.
8.5 LIMITATIONS UPON OBLIGATIONS. Anything in this Section 8 to the
contrary notwithstanding, it is expressly acknowledged and agreed that no
payment shall be made hereunder by SFO or Parent (individually and collectively
a "Parent Party") to Sellers or, by Sellers to a Parent Party, on claims for
indemnification under Sections 8.2 or 8.3 until the aggregate of all such claims
of a Parent Party against Sellers under Section 8.3, or by Sellers against a
Parent Party under Section 8.2, shall exceed $5,000, in which event the Party
holding such claim shall be entitled to indemnification with respect to all such
claims in the aggregate
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exceeding $5,000. In the event that such claims do not aggregate in excess of
$5,000, then neither the Parent Parties nor the Sellers shall have any claim for
indemnification against the other under Section 8.2 or Section 8.3. None of the
Sellers individually shall be obligated to make indemnification payments
pursuant to this Agreement which in the aggregate exceeds such Seller's Base
Purchase Price plus the pro-rata amount of Contingent Consideration paid to such
Seller.
8.6 RIGHT TO OFFSET. In the event that during the three year period
following the Closing, Parent Party has a claim for indemnification from Sellers
under Section 8.3, then such Parent Party may elect to offset the amount of any
such claim for indemnification against the amounts payable by Parent to the
Sellers under the Convertible Notes or the Contingent Promissory Note.
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, SFO and Sellers;
(b) by either SFO, 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 December 31, 1997 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 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 SFO or Parent, upon prior written notice to Sellers, if
any of the conditions specified in Section 5 have not been met or waived prior
to the Closing Date (or any extension thereof pursuant to Section 9.1(b)(ii)
above);
(d) by Sellers, upon prior written notice to SFO, if any of
the conditions specified in Section 6 shall not have been met or waived prior to
the Closing Date (or any extension thereof pursuant to Section 9.1(b)(ii)
above).
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9.2 EFFECT OF TERMINATION. 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 or directors with respect to this Agreement,
except for Section 1.7 which shall remain in full force and effect after any
such termination of this Agreement, and except that nothing herein shall relieve
any party from liability for a breach of this Agreement prior to the termination
thereof.
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 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 SFO:
South Florida Otolaryngology, Inc.
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
If to Parent:
PHYSICIANS SPECIALTY CORP.
0000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
with a copy of each notice directed to SFO or Parent to:
Xxxxxxx X. Xxxxx
Xxxxxxxx Xxxxxxx LLP
0000 XxxxxxxXxxx Xxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000-0000
Facsimile: (000) 000-0000
If to the Corporations or Sellers:
ENT Associates of South Florida, Inc.
Xxxxx X. Xxxxxxxx, M.D., Inc.
Xxxxxxx X. Xxxxxx, M.D., Inc.
Xxxx X. Xxxxxx, M.D., Inc.
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Xxxxxx X. Xxxxxxx, M.D., Inc
Drs. McClerkin & Xxxxxxxx, Inc.
Xxxxxx Xxxx-Xxxxxxxx, M.D.
Xxxxx X. Xxxxxxxx, M.D.
Xxxxxxx X. Xxxxxx, M.D.
Xxxx X. Xxxxxx, M.D.
Xxxxxx X. Xxxxxxx, M.D.
Xxxxxxx X. XxXxxxxxx, M.D.
W. Xxxx Xxxxxxxx, M.D.
000 X.X. 00xx Xxxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
with a copy to:
Xxxxx X. Xxxxxxxx
Xxxxx & Xxxxxxxx, P.A.
0000 X. Xxxxxxx Xxxxxxx, Xxxxx 000-X
Xxxx Xxxxx, Xxxxxxx 00000
Facsimile No.: (000) 000-0000
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.
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 SFO, all such further instruments of conveyance, assignment and
further assurance as may reasonably be required in order to vest in and confirm
to SFO 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 Florida, 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.
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10.6 "KNOWLEDGE"."To the knowledge," "to the best knowledge,
information and belief' or any similar phrase, shall be deemed to include the
assurance that such knowledge is based upon a reasonable investigation, unless
otherwise expressly provided. Unless otherwise expressly provided herein,
Sellers shall be deemed to have knowledge of any facts known to any Corporation.
10.7 "MATERIAL".An individual claim, obligation or liability shall be
deemed to be "material" if the amount thereof exceeds $2,500 or involves the
violation of any federal, state or local statute, rule or regulation. A contract
or lease shall be deemed to be material if it requires a single payment in
excess of $2,500 or payment for any future 12-month period in excess of $2,500,
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 $2,500.
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 (iii)
changes in generally accepted accounting principles, (iv) changes in applicable
law, and (v) any changes resulting from any restructuring or other similar
charges or write-offs taken by Sellers or the Corporations with the consent of
SFO.
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 APPOINTMENT OF ATTORNEY-IN-FACT. Effective at the Closing,
Sellers hereby constitute and appoint SFO, and its successors and assigns, the
true and lawful attorneys for
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Sellers, with full power of substitution, in the name of Sellers, but on behalf
of and for the benefit of and at the expense of SFO, to institute and prosecute,
in the name of Sellers or otherwise, all proceedings which SFO may deem proper
in order to collect, assert or enforce any claim, right or title of any kind in
or to the Shares, to defend and compromise any and all actions, suits or
proceedings in respect of any such Shares, and to do all such acts and things in
relation thereto as SFO shall deem advisable, subject to applicable laws and
regulations. Sellers agree that the foregoing powers shall be coupled with an
interest and shall be irrevocable by Sellers. SFO shall retain for its own
account any amounts collected pursuant to the foregoing powers, including any
sums payable in respect thereof, and Sellers shall pay to SFO, when received,
any amounts which shall be received by Sellers in respect of any Shares.
10.12 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.
10.13 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.
10.14 ENTIRE AGREEMENT. This instrument, including all Exhibits
attached hereto, contains the entire agreement of the parties and supersedes any
and all prior or contemporaneous 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.
10.15 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.
10.16 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. No party may assign any right or obligation hereunder without
the prior written consent of the other parties
10.17 NO RULE OF CONSTRUCTION. The parties acknowledge that this
Agreement was initially prepared by SFO 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.
10.18 COSTS OF ENFORCEMENT. In the event that SFO 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
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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, 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" are those
attorneys' fees actually incurred in obtaining a judgment in favor of the
prevailing party.
10.19 TRANSFER OF ASSETS; 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, in whole or in part, by SFO or Parent, in its sole discretion,
to any parent, subsidiary or affiliate of SFO or Parent or to any party
acquiring all or substantially all SFO's or Parent's assets. Any such assignment
shall not affect Parent's obligations hereunder or under any documents executed
by Parent pursuant to this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
"SFO"
SOUTH FLORIDA
OTOLARYNGOLOGY, INC.
By /s/ Xxxxxxx X. Xxxxxxx
-------------------------------------
Title: President
---------------------------------
"PARENT"
PHYSICIANS' SPECIALTY CORP.
By /s/ Xxxxxx X. Xxxxxxxx
-------------------------------------
Title: Vice Chairman & Secretary
---------------------------------
"SELLERS"
/s/ Xxxxxx Xxxx-Xxxxxxxx, M.D.
---------------------------------------
Xxxxxx Xxxx-Xxxxxxxx, M.D.
/s/ Xxxxx X. Xxxxxxxx, M.D.
---------------------------------------
Xxxxx X. Xxxxxxxx, M.D.
/s/ Xxxxxxx X. Xxxxxx, M.D.
---------------------------------------
Xxxxxxx X. Xxxxxx, M.D.
/s/ Xxxx X. Xxxxxx, M.D.
---------------------------------------
Xxxx X. Xxxxxx, M.D.
/s/ Xxxxxx X. Xxxxxxx, M.D.
---------------------------------------
Xxxxxx X. Xxxxxxx, M.D.
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/s/ Xxxxxxx X. XxXxxxxxx, M.D.
---------------------------------------
Xxxxxxx X. XxXxxxxxx, M.D.
/s/ W. Xxxx Xxxxxxxx, M.D.
---------------------------------------
W. Xxxx Xxxxxxxx, M.D.
"CORPORATIONS"
ASSOCIATION A, INC.
By /s/ Xxxxxx Xxxx-Xxxxxxxx, M.D.
------------------------------------
Title: President
--------------------------------
ASSOCIATION B, INC.
By /s/ Xxxxx X. Xxxxxxxx, M.D.
------------------------------------
Title: President
--------------------------------
ASSOCIATION C, INC.
By /s/ Xxxxxxx X. Xxxxxx, M.D.
------------------------------------
Title: President
--------------------------------
ASSOCIATION D, INC.
By /s/ Xxxx X. Xxxxxx, M.D.
------------------------------------
Title: President
--------------------------------
ASSOCIATION E, INC.
By /s/ Xxxxxx X. Xxxxxxx, M.D.
------------------------------------
Title: President
--------------------------------
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ASSOCIATION F, INC.
By: /s/ W. Xxxx Xxxxxxxx, M.D.
-----------------------------------
Title: President
--------------------------------
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EXHIBIT 1.2
BASE PURCHASE PRICE
PRINCIPAL
AMOUNT OF BASE
CORPORA- CONVERTIBLE PURCHASE
TION SELLER CASH NOTE PRICE
-------- ------ ---- ------------ ------------
A Xxxx-Xxxxxxxx $342,429 $114,143 $456,572
B Xxxxxxxx $414,429 $138,143 $552,572
C Mellon $360,429 $120,143 $480,572
X Xxxxxx $285,429 $ 95,143 $380,572
E Nachlas $714,429 $238,143 $952,572
F Xxxxxxxx $441,429 $147,143 $588,572
McClerkin $441,426* $147,142* $588,568
*Xx. XxXxxxxxx shall not receive the entire portion of his cash consideration at
closing. Rather, Xx. XxXxxxxxx shall receive $176,570.40 on the Closing Date.
The remaining $264,855.60 shall be payable as set forth below upon Xx.
XxXxxxxxx'x exercise of one or all of his successive one (1) year options to
extend the term of his employment agreement with Ear, Nose & Throat Associates
of South Florida, P.A. beyond its original two year term.
OPTION 1 OPTION 2 OPTION 3
-------- -------- --------
$88,285.20 $88,285.20 $88,285.20
**A portion of the principal amount of the convertible note issued to Xx.
XxXxxxxxx is contingent upon Xx. XxXxxxxxx exercising his options to renew his
employment contract for additional one year terms.
