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EXHIBIT 10.46
STOCK PURCHASE AGREEMENT
BY AND AMONG
PHYSICIANS' SPECIALTY CORP.
PSC ACQUISITION CORP.
AND
XXXXXX XXXXX, M.D.
XXX XXXXXXXXX, M.D.
XXXXXX XXXXX, M.D.
XXXXXX XXXXX, M.D.
XXXXXXX HAMBURG, M.D.
XXXX XXXXXX, M.D.
XXX XXXXXXXXXX, M.D.
XXXXX XXXXXX, M.D.
XXXXX XXXXXX, M.D.
XXX XXXXXXXXX, M.D.
XXXXXXX XXXXXXXXX, M.D.
XXXX XXXXXXX, M.D.
XXXXX XXXXXX, M.D.
XXXXX XXXXXXXXX, M.D.
XXXXXXX XXXXXXXXX, M.D.
XXXXXX XXXX, M.D.
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TABLE OF CONTENTS
PAGE
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SECTION 1. TERMS OF THE SALE AND PURCHASE OF THE STOCK........................................................... 3
1.1 PURCHASE AND SALE OF THE SHARES............................................................................3
1.2 ADDITIONAL PURCHASE PRICE CONSIDERATION....................................................................4
1.3 PAYMENT AND NON-ASSUMPTION OF LIABILITIES..................................................................5
1.4 EMPLOYMENT ARRANGEMENTS....................................................................................5
1.5 MANAGEMENT SERVICES AGREEMENT..............................................................................6
1.6 EACH PARTY TO BEAR COSTS...................................................................................6
1.7 ASSIGNMENT OF CONTRACTS AND ASSETS; CONSENTS...............................................................7
1.8 COOPERATION WITH REGULATORY APPROVALS......................................................................7
1.9 IRREVOCABLE GUARANTY BY PARENT.............................................................................7
1.10 CONSULTING AGREEMENT......................................................................................8
1.11 CLOSING...................................................................................................8
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLERS..............................................................9
2.1 OWNERSHIP OF SHARES.......................................................................................10
2.2 ORGANIZATION..............................................................................................10
2.3 POWER AND AUTHORITY FOR TRANSACTIONS......................................................................10
2.4 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS.........................................................11
2.5 SUBSIDIARIES AND AFFILIATES...............................................................................12
2.6 OUTSTANDING CAPITAL STOCK.................................................................................12
2.7 OPTIONS, WARRANTS AND OTHER RIGHTS........................................................................12
2.8 FINANCIAL INFORMATION.....................................................................................12
2.9 NO UNDISCLOSED LIABILITIES................................................................................12
2.10 LEASES...................................................................................................12
2.11 PERSONAL PROPERTY........................................................................................13
2.12 INVENTORIES..............................................................................................13
2.13 PRINCIPAL PLACE OF BUSINESS..............................................................................13
2.14 [RESERVED]...............................................................................................13
2.15 INTELLECTUAL PROPERTY RIGHTS.............................................................................13
2.16 DIRECTORS AND OFFICERS; PAYROLL INFORMATION..............................................................14
2.17 LEGAL PROCEEDINGS........................................................................................14
2.18 CONTRACTS................................................................................................14
2.19 SUBSEQUENT EVENTS........................................................................................15
2.20 ACCOUNTS RECEIVABLE......................................................................................16
2.21 TAX RETURNS..............................................................................................16
2.22 COMMISSIONS AND FEES.....................................................................................16
2.23 [RESERVED]...............................................................................................16
2.24 INSURANCE POLICIES.......................................................................................16
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2.25 EMPLOYEE BENEFIT PLANS...................................................................................16
2.26 COMPLIANCE WITH LAWS IN GENERAL..........................................................................17
2.27 FRAUD AND ABUSE..........................................................................................17
2.28 MEDICARE, MEDICAID, AND OTHER THIRD-PARTY PAYOR PAYMENT LIABILITIES......................................18
2.29 BILLING PRACTICES AND REFERRAL SOURCES...................................................................18
2.30 PHYSICIAN SELF-REFERRALS.................................................................................19
2.31 INVESTMENT INTENT........................................................................................19
2.32 NO UNTRUE REPRESENTATIONS................................................................................20
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND PSC......................................................20
3.1 CORPORATE EXISTENCE; GOOD STANDING; QUALIFICATION.........................................................20
3.2 POWER AND AUTHORITY.......................................................................................20
3.3 COMMISSIONS AND FEES......................................................................................21
3.4 PARENT DOCUMENTS..........................................................................................21
3.5 LEGAL PROCEEDINGS.........................................................................................21
3.6 COMPLIANCE WITH LAWS IN GENERAL...........................................................................21
3.7 BILLING PRACTICES IN GENERAL..............................................................................21
3.8 NO UNTRUE REPRESENTATIONS.................................................................................21
SECTION 4. ACCESS TO INFORMATION AND DOCUMENTS PRIOR TO CLOSING..................................................22
4.1 ACCESS TO SELLERS' INFORMATION............................................................................22
4.2 ACCESS TO INFORMATION OF PARENT...........................................................................22
4.3 RETENTION OF RECORDS......................................................................................22
SECTION 5. CONDITIONS TO OBLIGATION OF PARENT AND PSC TO CLOSE.................................................22
5.1 REPRESENTATIONS AND WARRANTIES TRUE.......................................................................22
5.2 COVENANTS.................................................................................................22
5.3 NO SUIT OR PROCEEDING.....................................................................................22
5.4 ABSENCE OF MATERIAL ADVERSE CHANGE........................................................................23
5.5 CERTIFICATE...............................................................................................23
5.6 APPROVAL OF PARENT'S SENIOR LENDER........................................................................23
5.7 RECEIPT OF FINANCIAL INFORMATION..........................................................................23
5.8 CONSENTS AND APPROVALS....................................................................................23
5.9 COUNSEL OPINION...........................................................................................23
5.10 OTHER AGREEMENTS EXECUTED................................................................................23
5.11 PURCHASE OF FIXED ASSETS, EQUIPMENT, AND TRADE NAME OF PHYSICIANS DOMAIN, INC............................24
5.12 RELEASE OF LIENS.........................................................................................24
5.13 NEW YORK NEWCO STOCK OPTIONS.............................................................................24
5.14 NEW JERSEY NEWCO STOCK OPTIONS...........................................................................24
5.15 CLOSING DATE FINANCIAL CERTIFICATE.......................................................................24
5.16 CLOSING NET WORTH AND ACCOUNTS RECEIVABLE................................................................24
5.17 CORPORATE DOCUMENTS......................................................................................24
5.18 ASSIGNMENT OF ASSUMPTION AGREEMENTS......................................................................25
5.19 FORMATION OF NEW YORK NEWCO AND NEW JERSEY NEWCO.........................................................25
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5.20 TERMINATION OF CORPORATION PLANS.........................................................................25
5.21 RESIGNATIONS.............................................................................................25
5.22 DUE DILIGENCE............................................................................................25
SECTION 6. CONDITIONS TO OBLIGATION OF SELLERS...................................................................25
6.1 REPRESENTATIONS AND WARRANTIES TRUE......................................................................25
6.2 COVENANTS................................................................................................25
6.3 NO SUIT OR PROCEEDING....................................................................................25
6.4 CERTIFICATE..............................................................................................26
6.5 GOVERNMENT APPROVALS.....................................................................................26
6.6 OTHER AGREEMENTS EXECUTED................................................................................26
6.7 PURCHASE PRICE...........................................................................................26
6.8 FINANCIAL CONDITION OF PARENT............................................................................26
6.9 CONSENT OF NATIONSBANK...................................................................................26
6.10 COUNSEL OPINION..........................................................................................26
6.11 PSC DEBENTURE............................................................................................26
6.12 SECURITY AGREEMENT.......................................................................................26
6.13 ASSIGNMENT AND ASSUMPTION AGREEMENT......................................................................26
SECTION 7. CERTAIN ADDITIONAL COVENANTS..........................................................................26
7.1 CONDUCT OF PRACTICE PRIOR TO CLOSING.....................................................................26
7.2 FUNDING OF ACCRUED EMPLOYEE BENEFITS.....................................................................27
7.3 [RESERVED]...............................................................................................27
7.4 COVENANT NOT TO COMPETE..................................................................................27
7.5 CONFIDENTIALITY..........................................................................................28
7.6 PREPARATION OF TAX RETURNS AND PAYMENT OF TAXES..........................................................29
7.7 COLLECTIONS OF ACCOUNTS..................................................................................30
7.8 TERMINATION OF CORPORATION PLANS.........................................................................30
7.9 REORGANIZATIONS PRIOR TO CLOSING.........................................................................30
7.10 SELLER'S NOMINATION OF DIRECTOR TO PARENT BOARD OF DIRECTORS.............................................31
7.11 PDI OFFICE LEASE DEPOSIT.................................................................................31
7.12 CERTAIN PRE-CLOSING CLAIMS...............................................................................31
7.13 REFUND OF MALPRACTICE PREMIUMS...........................................................................31
SECTION 8. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION................................31
8.1 NATURE AND SURVIVAL......................................................................................31
8.2 INDEMNIFICATION BY PSC AND PARENT........................................................................32
8.3 INDEMNIFICATION BY SELLERS...............................................................................32
8.4 INDEMNIFICATION PROCEDURE................................................................................36
8.5 LIMITATIONS UPON OBLIGATIONS.............................................................................37
8.6 RIGHT TO OFFSET..........................................................................................37
SECTION 9. TERMINATION...........................................................................................39
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9.1 RIGHT TO TERMINATE......................................................................................39
9.2 EFFECT OF TERMINATION...................................................................................40
SECTION 10. MISCELLANEOUS........................................................................................40
10.1 NOTICES.................................................................................................40
10.2 FURTHER ASSURANCES......................................................................................42
10.3 PUBLIC DISCLOSURES......................................................................................42
10.4 GOVERNING LAW...........................................................................................42
10.5 "INCLUDING".............................................................................................42
10.6 "KNOWLEDGE".............................................................................................42
10.7 "MATERIAL"..............................................................................................42
10.8 "MATERIAL ADVERSE CHANGE" OR "MATERIAL ADVERSE EFFECT"..................................................43
10.9 "HAZARDOUS MATERIALS"...................................................................................43
10.10 "ENVIRONMENTAL LAWS"....................................................................................43
10.11 CAPTIONS................................................................................................43
10.12 INTEGRATION OF EXHIBITS.................................................................................43
10.13 ENTIRE AGREEMENT........................................................................................43
10.14 COUNTERPARTS............................................................................................44
10.15 BINDING EFFECT..........................................................................................44
10.16 NO RULE OF CONSTRUCTION.................................................................................44
10.17 COSTS OF ENFORCEMENT....................................................................................44
10.18 ASSIGNMENT..............................................................................................44
10.19 PERIOD PRIOR TO CLOSING.................................................................................44
10.20 ARBITRATION.............................................................................................45
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is dated as of May 1,
1998, by and among PHYSICIANS' SPECIALTY CORP., a Delaware corporation
("PARENT"); PSC ACQUISITION CORP., a Delaware corporation and a wholly-owned
subsidiary of Parent ("PSC"); XXXXX XXXXXX, M.D., XXXXX XXXXXX, M.D., XXX
XXXXXXXXX, M.D., XXXXXXX XXXXXXXXX, M.D., XXXX XXXXXXX, M.D., XXXXX XXXXXX,
M.D., XXXXX XXXXXXXXX, M.D., XXXXXXX XXXXXXXXX, M.D. AND XXXXXX XXXX, M.D.,
(individually an "ENT SELLER" and collectively the "ENT SELLERS"); XXXXXX X.
XXXXX, M.D. ("ALB SELLER"); XXX XXXXXXXXX, M.D. ("CEA SELLER"); XXXXXX XXXXX,
M.D. and XXXXXX XXXXX, M.D. (individually a "RGSS SELLER" and collectively the
"RGSS SELLERS"); XXXXXXX HAMBURG, M.D. ("RH SELLER") and XXXX XXXXXX, M.D. AND
XXX XXXXXXXXXX, M.D. (individually an "LIA SELLER" and collectively the "XXX
XXXXXXX") (ENT Sellers, ALB Seller, CEA Seller, RGSS Sellers, RHI Seller and XXX
Xxxxxxx are sometimes referred to herein individually as a "SELLER" and
collectively as the "SELLERS");
W I T N E S S E T H:
WHEREAS, the ENT Sellers are the shareholders of Ear Nose & Throat
Associates, P.C., a New York professional corporation ("ENT Medical Practice"),
and operate a medical practice with locations at 00 Xxxx Xxxx Xxxx, Xxxxx
Xxxxxx, Xxx Xxxx; 000 Xxxxx Xxxxxx, Xxxxx 000, Xxxxx Xxxxxx, Xxx Xxxx;
Xxxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxx Xxxx; 0000 Xxxxxxxx Xxxx, Xxxxx 0,
Xxxxxxxxx, Xxx Xxxx; 000 Xxxxx Xxxxxxxx, Xxxxx 000, Xxxxxxxxx, Xxx Xxxx; 000
Xxxxx Xxxxxxxx, Xxxxx 000, Xxxxxxx, Xxx Xxxx; 0 Xxxxxxxxx Xxxxxx Xxxx, Xxxxxx
Xxxxxx, Xxx Xxxx; 0 Xxxxx Xxxx, Xxxxx 00, Xxxxxxxxx, Xxx Xxxx, Xxx Xxx
Xxxxxxxxxx Xxxx, Xxxxx Xxxxxx, Xxx Xxxx; and 000 Xxxxxxxxx Xxxxx, Xxxxxxxx, Xxx
Xxxx;
WHEREAS, ALB Seller is the sole shareholder of Xxxxxx X. Xxxxx, M.D.,
P.C., a New York professional corporation ("ALB Medical Practice"), and operates
a medical practice located at 000-00 00xx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxx Xxxx;
WHEREAS, CEA Seller is the sole shareholder of Chestnut ENT Associates,
P.A., a New Jersey professional association ("CEA Medical Practice"), and
operates a medical practice located at 000 Xxxxx Xxxx Xxxxxx, Xxxxxxxxx, Xxx
Xxxxxx;
WHEREAS, the RGSS Sellers are the shareholders of Xxxxxx Xxxxx, M.D.
and Xxxxxx Xxxxx, M.D., P.C., a New York professional corporation ("RGSS Medical
Practice"), and operate a medical practice located at 0000 0xx Xxxxxx, Xxx Xxxx,
Xxx Xxxx;
WHEREAS, RH Seller is the sole shareholder of Branch Surgical, M.D.,
P.C., a New York corporation ("RH-1 Corporation"), and operates as a sole
proprietorship a medical practice located at 000 Xxxxxx Xxxxxxx Xxxx, Xxxxxxxxx,
Xxx Xxxx ("RH Medical Practice");
WHEREAS, the XXX Xxxxxxx are the shareholders of Long Island ENT
Associates, P.C., a New York professional corporation ("LIA Medical Practice"),
and operate a medical practice
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located at 000 Xxx Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxx, Xxx Xxxx (ENT Medical
Practice, ALB Medical Practice, CEA Medical Practice, RGSS Medical Practice, RH
Medical Practice, and LIA Medical Practice are referred to individually as a
"Practice" and collectively as the "Practices".);
WHEREAS, Parent through its wholly-owned subsidiaries is engaged in the
business of acquiring and managing medical practices and PSC is a wholly-owned
subsidiary of Parent;
WHEREAS, the ENT Sellers wish to transfer, pursuant to a tax-free
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), substantially all of the assets of ENT Medical Practice to
a Delaware corporation to be named ENT Associates Acquisition Corp. ("ENT
Corporation") subject to the liabilities of ENT Medical Practice; ALB Seller
wishes to transfer, pursuant to a tax-free reorganization under Section 368 of
the Code, substantially all of the assets of ALB Medical Practice to a Delaware
corporation to be named Xxxxxx X. Xxxxx Acquisition Corp. ("ALB Corporation")
subject to the liabilities of ALB Medical Practice; CEA Seller wishes to
transfer, pursuant to a tax-free reorganization under Section 368 of the Code,
substantially all of the assets of CEA Medical Practice to a Delaware
corporation to be named Chestnut ENT Acquisition Corp. ("CEA Corporation")
subject to the liabilities of CEA Medical Practice; the RGSS Sellers wish to
transfer, pursuant to a tax-free reorganization under 368 of the Code,
substantially all of the assets of RGSS Medical Practice to a Delaware
corporation to be named Green & Sacks Acquisition Corp. ("RGSS Corporation")
subject to the liabilities of RGSS Medical Practice; RH Seller wishes to
transfer, pursuant to a tax-free reorganization under Section 368 of the Code,
substantially all of the assets of RH-1 Corporation to a Delaware corporation to
be named Xxxxxxx Hamburg Acquisition Corp. ("RH Corporation") subject to the
liabilities of RH-1 Corporation; and the XXX Xxxxxxx wish to transfer, pursuant
to a tax-free reorganization under Section 368 of the Code, substantially all of
the assets of LIA Medical Practice to a Delaware corporation to be named Long
Island ENT Acquisition Corp. ("LIA Corporation") subject to the liabilities of
LIA Medical Practice (ENT Corporation, ALB Corporation, CEA Corporation, RGSS
Corporation, RH Corporation, and LIA Corporation are referred to herein
individually as a "Corporation" and collectively as the "Corporations"); and
WHEREAS, the ENT Sellers wish to sell and convey to PSC and PSC wishes
to acquire from the ENT Sellers all of the issued and outstanding shares of
capital stock of ENT Corporation (the "ENT Shares"); ALB Seller wishes to sell
and convey to PSC and PSC wishes to acquire from ALB Seller all of the issued
and outstanding shares of capital stock of ALB Corporation (the "ALB Shares");
CEA Seller wishes to sell and convey to PSC and PSC wishes to acquire from CEA
Seller all of the issued and outstanding shares of capital stock of CEA
Corporation (the "CEA Shares"); the RGSS Sellers wish to sell and convey to PSC
and PSC wishes to acquire from the RGSS Sellers all of the issued and
outstanding shares of capital stock of RGSS Corporation (the "RGSS Shares"); RH
Seller wishes to sell and convey to PSC and PSC wishes to acquire from RH Seller
all of the issued and outstanding shares of capital stock of RH Corporation (the
"RH Shares"); and the XXX Xxxxxxx wish to sell and convey to PSC and PSC wishes
to acquire from the XXX Xxxxxxx all of the issued and outstanding shares of
capital stock of LIA Corporation (the "LIA Shares") (the ENT Shares, ALB Shares,
CEA Shares, RGSS Shares, RH Shares, and LIA Shares are referred to herein
collectively as the "Shares"), upon the terms and conditions set forth herein;
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NOW THEREFORE, in consideration of the premises, the mutual promises
and covenants hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto do hereby agree as follows:
SECTION 1. TERMS OF THE SALE AND PURCHASE OF THE STOCK. The sale of the Shares
by Sellers and the purchase thereof by PSC shall be made at the "Closing" (as
defined in Section 1.11) based on the respective representations, warranties and
agreements of the parties hereto and subject to the terms and conditions herein
stated.
1.1 PURCHASE AND SALE OF THE SHARES At the Closing, Sellers shall sell
all the Shares, which shall be free and clear of all liens, security interests,
claims or encumbrances, to PSC, and PSC shall purchase the Shares from the
Sellers, for the aggregate purchase price (the "Purchase Price") of $22,500,000,
as adjusted, which Purchase Price shall be payable as set forth in this Section
1.1.
(a) Cash. At Closing, Parent or PSC shall pay Sellers collectively
an aggregate cash payment in the amount of $2,075,000, which amount
shall be subject to adjustment as set forth in Section 1.1(d)
hereinbelow.
(b) PSC Debenture. At Closing, PSC and PSC Management Corp., a
wholly-owned subsidiary of Parent ("PSC Management"), shall issue to a
paying and collateral agent (the "Paying Agent") on behalf of the
Sellers collectively a sixty (60) month debenture (the "PSC Debenture")
in the aggregate principal amount of $16,225,000.00, or such lesser
amount as provided in Section 1.1(d)(ii) hereinbelow. The PSC Debenture
shall bear simple interest at a rate of 6% per annum, payable
quarterly, shall be in substantially the same form as attached hereto
as Exhibit 1.1A. Contemporaneously with the Closing, PSC will cause
each Corporation to convey its furniture, fixtures and equipment to PSC
Management for good consideration, and PSC Management shall cause the
Debenture to be secured by a security interest in favor of the Paying
Agent for the benefit of the Sellers, in the furniture, fixtures, and
equipment so acquired by PSC Management from the Corporations at the
time of Closing, but not any after acquired property, all pursuant to a
security agreement to be entered into at Closing in substantially the
same form as attached hereto as Exhibit 1.1B (the "Security
Agreement"), and such security interest will be released by the Paying
Agent upon request of PSC or PSC Management with respect to items
replaced in the ordinary course of business. In the event of an
adjustment to the amount of the PSC Debenture pursuant to Section
1.1(d)(ii), the entire principal amount of the PSC Debenture shall be
due and payable on the fifth anniversary of the Closing Date.
(c) Liabilities to Be Discharged. At Closing, Parent or PSC shall
retire or discharge the debt set forth on Exhibit 1.1C (the "Discharged
Debt") on behalf of Sellers and the Corporations.
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(d) Adjustment of Cash Payment. At the Closing, the cash
payment set forth in Section 1.1(a) shall be adjusted, if applicable,
as follows:
(i) In the event the aggregate amount of the
liabilities to be discharged under Section 1.1(c) or otherwise
by PSC pursuant to this Agreement is less than $4,200,000 at
Closing, the amount of the cash payment under Section 1.1(a)
shall be increased by the difference between $4,200,000 and
the actual amount of the liabilities retired or discharged at
Closing, and if the amount of the liabilities to be discharged
under Section 1.1(c) or otherwise by PSC pursuant to this
Agreement is more than $4,200,000 at Closing, the amount of
the cash payment under Section 1.1(a) shall be decreased by
the difference between the actual amount of the liabilities
retired or discharged at Closing and $4,200,000.
(ii) The amount of the cash payment under Section
1.1(a) shall be increased, and the principal amount of the PSC
Debenture decreased, by $7,000,000 in the event that prior to
the Closing Date, Parent shall have consummated the public
equity financing of its common stock contemplated by its
registration statement on Form S-1 filed with the Securities
and Exchange Commission on April 17, 1998.
(iii) The amount of the cash payment under Section
1.1(a) shall be reduced by any shortfall in the amount of
aggregate accounts receivable of the Corporations at Closing
below the requirement of $5,425,000 set forth in Section 5.16
hereinbelow.
(e) Allocation of Purchase Price Among Sellers. The
Purchase Price shall be allocated among the individual Sellers as set
forth in Exhibit 1.1E.
1.2 ADDITIONAL PURCHASE PRICE CONSIDERATION. If within twenty-four
(24) months following the Closing, "New York NewCo" and "New Jersey NewCo" (as
hereinafter defined) collectively add ten (10) full-time physician-employees and
have an aggregate of thirty-five (35) full-time physician-employees who are
employed by New York NewCo or New Jersey NewCo pursuant to valid employment
agreements as required by the "MSAs" (as hereinafter defined in Section 1.5) or
other employment agreements consented to by PSC in writing hereunder, Parent
will pay to the Paying Agent for the benefit of Sellers bonus purchase price
consideration in the aggregate amount of $500,000, payable, at Parent's
election, in the form of cash or shares of Parent common stock. If Parent elects
to pay the bonus consideration in the form of Parent common stock, all shares of
stock issued shall be restricted stock under the Securities Act of 1933, as
amended, and shall be valued based on the average closing price of Parent common
stock on NASDAQ for the twenty (20) trading days ending on the trading day
preceding the date of delivery. Any such bonus consideration will be delivered
to the Paying Agent for the benefit of Sellers on the tenth business day
following the date that the condition giving rise to bonus consideration has
been achieved. For purposes of this Agreement, a full-time physician-employee
shall mean a physician whose sole employment as a practicing physician consists
of practicing medicine at least thirty (30) hours per week and at least 45 weeks
per year (to allow
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for 7 weeks of vacation and/or continuing medical education) with New York NewCo
or New Jersey NewCo. Such bonus consideration shall be divided among the Sellers
in the same proportions as the allocations set forth on Exhibit 1.1E. In
connection with and at the time of delivery of any shares of Parent common stock
pursuant to this Section 1.2, Sellers shall provide such investment
representations or investment letters as Parent may determine to be reasonably
necessary or appropriate under applicable securities laws. Parent shall deliver
any such common stock free and clear of all liens, claims, encumbrances or
restrictions (other than restrictions on transferability arising under
applicable securities laws and any liens, claims or encumbrances arising from
any Seller's actions). Parent represents and warrants to Sellers that any common
stock delivered as bonus consideration hereunder shall be duly and validly
authorized and issued, fully paid and nonassessable.
1.3 PAYMENT AND NON-ASSUMPTION OF LIABILITIES. Each Seller
covenants and agrees that such Seller's Shares shall be free and clear of all
security interests, liens, claims, encumbrances and restrictions at Closing.
Each Seller covenants and agrees that all of the creditors with respect to such
Seller's Practice or Corporation will be paid in full by such Seller or such
Seller's Practice or Corporation prior to the Closing Date, other than the
Discharged Debt to be discharged at Closing. Without limiting the generality of
the foregoing, any amounts owed to a Seller by any Corporation, whether or not
shown on the Balance Sheet of such Corporation, shall be (i) satisfied prior to
Closing, or (ii) deemed a contribution to capital of such Corporation and shall
be deemed discharged prior to Closing. If required by Parent or PSC, Sellers
shall furnish Parent with proof of payment of all other known creditors of each
Seller's respective Practice or Corporation. Sellers further acknowledge and
agree that Parent, PSC Management and PSC shall have no liability whatsoever now
or at any time in the future with respect to (1) any "Corporation Plan" (as
defined in Section 2.25) or (2) services performed prior to the Closing Date by
any employees or agents or similar persons or entities of such Seller, his
Corporation or Practice. The parties acknowledge that Sellers may direct a
portion of the Purchase Price to fund payment of any such liabilities
contemporaneously with the Closing. Except for the office and equipment leases
identified on Exhibits 2.10A through 2.10G and Exhibits 2.11A through 2.11G, and
subject to the condition precedent set forth in Section 5.18, neither Parent,
PSC Management nor PSC will assume pursuant to the transactions contemplated by
this Agreement, any liabilities or obligations of Sellers, the Corporations,
Physicians Domain, Inc. ("PDI") or the Practices, whether known or unknown,
liquidated or unliquidated, contingent or fixed, and whether or not disclosed in
this Agreement or any schedule or exhibit hereto.
1.4 EMPLOYMENT ARRANGEMENTS.
(a) At the Closing all Sellers practicing medicine at a New
York office listed on Exhibit 7.4 shall enter into full-time employment
agreements with ENT Associates, LLP ("New York NewCo"), and CEA Seller
shall enter into a full-time employment agreement with ENT Associates
of New Jersey, P.C. ("New Jersey NewCo"), in each case such employment
agreement to be in the form required by the applicable "MSA" (as
defined in Section 1.5). Sellers shall use best efforts to cause the
other employee physicians of the Practices identified on Exhibit 1.4 to
enter into prior to Closing employment agreements with New York NewCo
or New Jersey NewCo, as the case may
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be, in the form required by the applicable MSA, other than those
physician employees identified on Exhibit 1.4 whose current contracts
Seller may elect to let expire or who are expected by Sellers to become
partners of New York NewCo or New Jersey NewCo within six (6) months of
Closing. Sellers agree that any employee physician whose employment
will continue beyond the Closing Date will either sign such new
employment agreement or have a valid written employment agreement in
form reasonably acceptable to PSC Management properly assigned to New
York NewCo or New Jersey NewCo.
(b) Prior to the Closing Date, the Sellers will cause the
Corporations, the Practices, and PDI to: (i) terminate any employment
agreements with all physicians, including Sellers, and all other
employees except for assignment by the Practices of certain physician
employment contracts pursuant to Section 1.4(a) above, (ii) terminate
or, if termination is not reasonably achievable prior to Closing,
freeze all "Corporation Plans" (as defined hereinafter) such
termination to be effected in accordance with and to the extent
permitted by applicable provisions of the Code and the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and all
other applicable laws, rules, governmental orders, statutes, decrees,
and regulations (collectively, "Laws") and (iii) cause the Corporation
Plans to make timely and appropriate distributions, to the extent
required, to such employees in accordance with, and to the extent
permitted by the terms and conditions of such Corporation Plans, ERISA,
and the Code. Sellers will provide to PSC such copies of documents and
other information related to the termination or freezing of the
Corporation Plans as PSC may reasonably request. All costs and expenses
associated with administration, termination or freezing of the
Corporation Plans, whether incurred before or after Closing, shall be
the responsibility of Sellers, the Practices and PDI respectively.
1.5 MANAGEMENT SERVICES AGREEMENT. At Closing, New York NewCo, New
Jersey NewCo, Parent and PSC Management shall execute and deliver Management
Services Agreements (collectively the "MSAs" and individually an "MSA")
substantially in the same forms as attached hereto as Exhibit 1.5A ("New York
MSA") and Exhibit 1.5B ("New Jersey MSA") pursuant to which PSC Management will
provide management services to New York NewCo and New Jersey NewCo from and
after the Closing Date.
1.6 EACH PARTY TO BEAR COSTS. Each of the parties to this
Agreement shall pay all of the costs and expenses incurred by such party in
connection with the transactions contemplated by this Agreement, except as
otherwise provided herein. Without limiting the generality of the foregoing, and
whether or not such liabilities may be deemed to have been incurred in the
ordinary course of business, except as provided in Section 9.2(b) and (c),
neither party shall be liable for or required to pay, either directly or
indirectly, any of the following liabilities or expenses incurred by the other
party: (a) fees and expenses of any person for services as a finder, or for fees
and expenses of any persons for financial services rendered to such other party
in connection with negotiating and closing the sale contemplated by this
Agreement; (b) fees and expenses of legal counsel retained by such other party
for services rendered to such party in connection with negotiating and closing
the transactions contemplated by this Agreement; (c)
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fees and expenses of any auditors and accountants retained by such other party
for services rendered to such party in connection with negotiating and closing
the sale contemplated by this Agreement; (d) state and federal income taxes or
other similar charges on income incurred by such other party on any gain from
the purchase and sale of the Shares hereunder; and (e) expenses and fees
relating to feasibility studies, appraisals and similar valuation services
performed on behalf of such other party in connection with the transactions
contemplated hereby.
1.7 ASSIGNMENT OF CONTRACTS AND ASSETS; CONSENTS. Nothing in this
Agreement or delivered pursuant to this Agreement shall be construed as an
attempt to agree to assign any contract, certificate, license or other asset
which is in law or by agreement nonassignable without the consent of the other
party or parties thereto, or of any governmental authority, as the case may be,
unless such consent shall be given. Sellers will use their reasonable good faith
efforts to obtain all such necessary consents of the parties to any such
contracts prior to the Closing. In order, however, that the full value of every
such contract, certificate, license or other asset and all claims and demands in
such contracts may be realized, Sellers hereby covenant to PSC and Parent that
Sellers, or their agents, will, at the request and under the direction of PSC,
in the individual names of Sellers or otherwise, as PSC shall specify and as
shall be permitted by law, take all such reasonable actions and do or cause to
be done all such reasonable things as shall, in the opinion of PSC, be necessary
or proper (a) in order that the rights and obligations of Sellers under such
contracts, certificates, licenses and other assets shall be preserved, and (b)
for, and to facilitate, from and after the Closing, the collection of the moneys
due and payable, and to become due and payable, to Sellers in and under every
such contract and in respect of every such claim and demand, from and after the
Closing, and Sellers shall hold the same for the benefit of, and shall pay the
same over to, PSC.
1.8 COOPERATION WITH REGULATORY APPROVALS. Sellers shall cooperate
with and assist PSC, as PSC shall reasonably request, at no cost to Sellers, in
obtaining the approval of all regulatory agencies and officials whose approval
is required for the transfer of all licenses and other regulatory approvals
required to enable PSC to acquire the Shares.
1.9 IRREVOCABLE GUARANTY BY PARENT. To induce Sellers to execute
and deliver this Agreement, Parent hereby unconditionally and irrevocably
guarantees to Sellers the full, prompt and faithful performance by PSC of all
covenants and obligations to be performed by PSC under this Agreement,
including, but not limited to, the payment of all sums by PSC pursuant to this
Agreement and the PSC Debenture and PSC's obligation to indemnify the Sellers
pursuant to Section 8.2. This guaranty shall be a guaranty of payment, not
merely of collection, and shall be unaffected by any subsequent modification or
amendment of this Agreement whether or not Parent has knowledge of or consented
to such modification or amendment. In the event that PSC fails to fully perform
any such covenants or obligations in accordance with their terms or pay all or
any part of such sums when due, Parent will perform all such covenants and
obligations in accordance with their terms or immediately pay or deliver to
Sellers (or such other payee or transferee as may be provided in any such
agreement) the amount due and unpaid, as the case may be, by PSC. In the event
of bankruptcy, termination, liquidation or dissolution of PSC, this
unconditional guaranty shall continue in full force and effect. In the event of
any extension of time for payment or performance or other modification of any
guaranteed obligation or covenant,
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or any waiver thereof or other compromise or indulgence with respect thereto or
any release or impairment of any security for any such obligation or covenant,
or any other circumstance which might otherwise constitute a legal or equitable
discharge of a surety or guarantor, no notice to, or consent of, Parent shall be
required. Parent hereby waives (i) promptness and diligence in collection; (ii)
notice of acceptance and notice of the incurrence of any obligation by PSC;
(iii) all other notices, demands and protests of every kind in connection with
the enforcement of the obligations of Parent pursuant to this Section 1.9, the
omission of or delay of which, but for the provisions of this Section 1.9, might
constitute grounds for relieving Parent of its obligations under this Section
1.9; (v) the right to a trial by jury of any dispute arising under, or relating
to, the guaranty set forth in this Section 1.9; (vi) any right or claim of right
to cause a marshaling of PSC's assets or to cause the Sellers to proceed against
any security for the PSC Debenture before proceeding against Parent hereunder;
and (vii) any requirement that the Sellers protect, secure, perfect or insure
any security interest or lien in or on any property subject thereto or exhaust
any right or take any action against PSC or any other person or any collateral
as a precondition to the Sellers' right to enforce the guaranty set forth in
this Section 1.9 in accordance with its terms. Without limiting the generality
of the foregoing, Parent hereby waives any defense to the guaranty set forth in
this Section 1.9 which may arise by reason of (A) the incapacity, lack of
authority, death or disability of, or revocation hereof by, any person or
entity, (B) the failure of the Sellers to file or enforce any claim against the
estate (in probate, bankruptcy or any other proceedings) of any person or
entity, or (C) any defense based upon an election of remedies by Sellers.
1.10 CONSULTING AGREEMENT. At Closing the Sellers and Parent shall
execute and deliver a letter agreement regarding consulting services
substantially in the form set forth on Exhibit 1.10 attached hereto.
1.11 CLOSING.
(a) Closing. Subject to the fulfillment of the conditions
precedent specified in Sections 5 and 6 of this Agreement, the
transactions contemplated by this Agreement shall be consummated at a
closing (the "Closing") to be held at the offices of Xxxxxxx &
Xxxxxxxxx, LLP, One North Broadway, White Plains, New York, or at such
other location as is mutually agreed upon by Parent and the Sellers, on
May 22, 1998 or such other date as the parties may agree. The date on
which the Closing occurs or is effective shall be referred to as the
"Closing Date."
(b) Documents to be Delivered by Sellers. At the Closing,
Sellers shall deliver, or cause to be delivered, to PSC the following:
(i) The certificates representing all of the Shares
of each of the Corporations, duly endorsed for transfer or
accompanied by duly executed stock powers, which certificates
or stock powers shall either be physically executed and
delivered by Sellers at Closing or shall have the signatures
of Sellers guaranteed or notarized;
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(ii) The other agreements, documents, certificates
and instruments required by Sections 5.7, 5.13, 5.14, 5.15,
5.17, 5.20(c) and 5.21;
(iii) Insurance policies providing professional
liability coverage for New York NewCo and New Jersey NewCo,
all Sellers and the Practices in amounts of not less than
$1,000,000 per occurrence and $3,000,000 aggregate on a claims
made basis and prior acts coverage ("tail coverage") if
required for the Practices and Sellers providing continuity of
coverage until the expiration of applicable statutes of
limitations; and
(iv) Any other documentation required to be
delivered under this Agreement or otherwise reasonably
requested by PSC as necessary or appropriate to consummate the
transactions contemplated hereby.
(c) Documents and Other Items to be Delivered by PSC. At
the Closing, PSC shall deliver or cause to be delivered to Sellers the
following:
(i) The cash portion of the Purchase Price
determined in accordance with the provisions of Section 1.1 by
wire transfer in accordance with the written instructions of
Sellers;
(ii) The executed PSC Debenture and Guaranty,
Security Agreement, and any UCC-1 Financing Statement
reasonably required by the Paying Agent to perfect the
security interest granted in the Security Agreement;
(iii) Certified copies of the resolutions of the
boards of directors of Parent, PSC and PSC Management
authorizing the transactions contemplated hereby; and
(iv) Any other documentation required to be
delivered under this Agreement or otherwise reasonably
requested by Sellers as necessary or appropriate to consummate
the transactions contemplated hereby.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLERS.
Except as set forth in the next sentence of this preamble to
Section 2, for purposes of the representations and warranties set forth in this
Section 2, ENT Sellers are jointly and severally representing and warranting
solely with respect to ENT Sellers, ENT Medical Practice and ENT Corporation;
ALB Seller is representing and warranting solely with respect to ALB Seller, ALB
Medical Practice and ALB Corporation; CEA Seller is representing and warranting
solely with respect to CEA Seller, CEA Medical Practice and CEA Corporation;
RGSS Sellers are jointly and severally representing and warranting solely with
respect to RGSS Sellers, RGSS Medical Practice and RGSS Corporation; RH Seller
is representing and warranting solely with respect to RH Seller, RH Medical
Practice, RH-1 Corporation and RH Corporation; and XXX Xxxxxxx are jointly and
severally representing and warranting solely with respect to XXX Xxxxxxx,
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LIA Medical Practice and LIA Corporation; and any references in this Agreement
to the Seller(s), the Corporation(s), the Practice(s) or the Shares and any
information set forth on the Exhibits hereto shall be construed in accordance
with the foregoing. Notwithstanding the foregoing, the representations and
warranties set forth in this Section 2 with respect to PDI are made jointly and
severally by all Sellers, and with regard to the representations and warranties
set forth in Sections 2.3(a), 2.3(c), 2.4(b), 2.4(d) and 2.4(e), each Seller is
representing and warranting severally but not jointly, with respect to such
Seller. In accordance with the foregoing, Sellers hereby represent and warrant
to Parent and PSC as follows:
2.1 OWNERSHIP OF SHARES. Sellers are the record and beneficial
owners of the Shares of their respective Corporation, free and clear of all
liens, claims, and encumbrances. Exhibits 2.1A through 2.1F set forth a true and
accurate list of the names and addresses of the shareholders of the Corporation,
together with the number of shares that each Seller owns in such Corporation.
The Shares constitute all of the issued and outstanding shares of capital stock
of any class of the Corporation. Upon delivery to PSC at Closing of the
certificates representing the Shares, duly endorsed by Sellers for transfer to
PSC, PSC shall be the lawful owner of the Shares, free and clear of all liens,
security interests, claims or encumbrances (other than those arising from PSC's
actions). There are no shareholders agreements, voting trusts, agreements, or
proxies with respect to the Shares.
2.2 ORGANIZATION. The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is qualified to transact business and is in good standing in all states in
which the failure to so qualify would have a Material Adverse Effect on such
Corporation. The Corporation owns, leases or operates real property, maintains
an office or employees or otherwise transacts business only in the state of New
York or New Jersey. The Corporation has the corporate power and authority to
own, lease and operate its assets, property and business. Certified copies of
the Corporation's articles/certificate of incorporation and bylaws, and all
amendments thereto, all of which are true, correct and complete, are attached
hereto on Exhibit 2.2.
2.3 POWER AND AUTHORITY FOR TRANSACTIONS.
(a) Seller has the power to execute, deliver and perform his
or her obligations under this Agreement and all agreements and other
documents executed and delivered by Seller pursuant to this Agreement,
and has taken all action required by law, to authorize the execution,
delivery and performance of this Agreement and such related documents.
(b) The execution and delivery of this Agreement, and the
agreements related hereto to be executed and delivered pursuant to this
Agreement, do not, and (subject to obtaining all necessary consents
from landlords or lessors to assignment of leases and contracts) the
consummation of the transactions contemplated hereby will not, violate
any provisions of the Articles of Incorporation or Bylaws of the
Corporation or any provisions of, or result in the acceleration of, any
obligation under any material mortgage, lien, lease, agreement,
instrument, order, arbitration award, judgment or decree to which the
Practice, Corporation,
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PDI or Seller is a party or by which the Practice, Corporation, PDI or
Seller is bound, or violate any material restrictions of any kind to
which the Practice, Corporation, PDI or Seller is subject.
(c) This Agreement has been duly and validly executed and
delivered by Seller and constitutes the valid and binding agreement of
Seller enforceable against Seller in accordance with its terms (subject
to applicable bankruptcy, insolvency, moratorium and similar laws
affecting creditors' rights generally and general principles of
equity), and each other agreement to be executed and delivered at the
Closing by Seller will, upon such execution and delivery, constitute
the valid and binding agreement of Seller enforceable against Seller in
accordance with its terms (subject to applicable bankruptcy,
insolvency, moratorium and similar laws affecting creditors' rights
generally and general principles of equity).
2.4 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS.
(a) All material building or other permits, certificates of
occupancy, concessions, grants, franchises, licenses, certificates of
need and other material governmental authorizations and approvals
necessary for the conduct of the business of the Practice and
Corporation, or waivers thereof, have been duly obtained and are in
full force and effect. Except as set forth on Exhibits 2.4A through
2.4F, there are no proceedings pending or, to the knowledge of Sellers,
threatened which may result in the revocation, cancellation or
suspension, or any adverse modification, of any of the foregoing.
(b) Approvals. Seller holds in full force and effect all
approvals, authorizations, licenses, and certifications required by law
(the "Approvals") to practice medicine in New York or New Jersey, as
applicable. Evidence of such Approvals has been delivered to Parent.
Except as set forth on Exhibits 2.4A through 2.4F, no revocation or
suspension of any Approval is now in effect, and no formal allegation
(including any complaint, indictment or initiation of proceedings) is
pending before a court of law, licensing or regulatory authority,
professional organization, or the medical staff or committee of a
hospital, regarding Seller's practice or fitness to practice medicine,
including any allegation of the following: alcohol abuse, a violation
of any law or regulation relating to controlled substances,
professional malpractice or misconduct, improper billing practices, or
a crime involving moral turpitude. The foregoing does not include any
action taken as a result of failure to timely complete medical records.
(c) Provider Numbers. The Practice and Seller holds a valid
Medicare provider number, and Seller has a valid uniform physician
identification number. Evidence of such numbers has been delivered to
Parent.
(d) Board Certification. Seller is certified by the American
Board of Otolaryngology and evidence of such board certification(s) has
been delivered to Parent.
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(e) No Conviction. Seller has never been convicted of a
criminal offense relating to Medicare or any federally-funded state
health care program. For purposes of this Agreement, the term
"conviction" includes the entry of a plea of guilty or nolo contendere
or participation in a first offender, deferred adjudication, or other
arrangement or program whereby a judgment of conviction has been
withheld.
2.5 SUBSIDIARIES AND AFFILIATES. The Corporation has no
subsidiaries.
2.6 OUTSTANDING CAPITAL STOCK. The Corporation is authorized to
issue the number of shares of common stock, at the par values set forth on
Exhibits 2.1A through 2.1F. The Shares listed in Exhibits 2.1A through 2.1F are
the only shares issued and outstanding. No other class of capital stock of the
Corporation is authorized or outstanding. All of the Shares of the Corporation
are duly authorized, validly issued, fully paid and nonassessable.
2.7 OPTIONS, WARRANTS AND OTHER RIGHTS. There are no authorized or
outstanding options, warrants, convertible securities, subscriptions or other
agreements or rights of any nature (other than pursuant to this Agreement) under
which the Corporation may be obligated to issue or transfer any shares of its
capital stock.
2.8 FINANCIAL INFORMATION. Seller has furnished Parent and PSC
with copies of financial information about the Practice for the years ending
December 31, 1997, 1996 and 1995, as included in Exhibits 2.8A through 2.8F
including, but not limited to, (as to the ENT Sellers) the audited balance
sheets of the ENT Medical Practice and (as to the other Sellers) the unaudited
balance sheets of all of the other Practices (collectively the "Balance Sheets")
as of December 31, 1997 (the "Balance Sheet Date"). Except with respect to the
ENT Medical Practice, all such financial statements of Seller's respective
Practice have been prepared on the cash basis of accounting consistently
followed throughout the periods indicated, reflect all assets and all known
liabilities of the Practice as of their respective dates, and present fairly the
cash basis financial position of the Practice as of such dates and the results
of operations for the period or periods reflected therein. In the case of ENT
Medical Practice, all such financial statements have been prepared on the
accrual basis of accounting consistently followed throughout the period or
periods indicated, reflect all assets and liabilities of the ENT Medical
Practice, as of their respective dates, and present fairly the financial
position of ENT Medical Practice as of such dates and the results of operation
for the period or periods reflected therein in accordance with generally
accepted accounting principles ("GAAP").
2.9 NO UNDISCLOSED LIABILITIES. Except as disclosed in Section 1.3
or as set forth in Exhibits 2.9A through 2.9F, Exhibits 2.10A through 2.10F and
Exhibits 2.11A through 2.11F, to Seller's knowledge the Practice did not have,
as of the Balance Sheet Date, and has not incurred since that date, and the
Corporation does not have any uninsured liabilities or obligations of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due which have not been or will not be satisfied or extinguished prior
to the Closing Date.
2.10 LEASES. Exhibits 2.10A through 2.10G list all leases, if any,
pursuant to which the Practice leases, as lessor or lessee, real property.
Except as indicated on Exhibits 2.10A
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through 2.10G, all such leases are valid and effective in accordance with their
respective terms, and there is not under any such lease any existing default and
there is no condition or event of which the Practice or the Sellers have
knowledge which with notice or lapse of time, or both, would constitute a
material default, in respect of which the Practice has not taken adequate steps
to cure such default or to prevent a default from occurring.
2.11 PERSONAL PROPERTY. Except the cash items retained by Seller
(subject nevertheless to the requirements of Section 5.16 below), as of the
Closing the Corporation will own substantially all of the personal property
reflected on the Balance Sheet of its predecessor, including, but not limited
to, all items of personal property identified on Exhibits 2.11A through 2.11G,
free and clear of any liens, claims, charges, exceptions or encumbrances, except
for those set forth in Exhibits 2.11A through 2.11F, including, without
limitation, in the case of RH-1 Corporation the assets of RH Medical Practice
identified on Exhibit 2.11E. As of the Closing ENT Corporation will own
substantially all of the personal property assets and trade name of PDI
(excluding the office leases, lease security deposits and leasehold
improvements) including, but not limited to, those items identified on Exhibit
2.11G, free and clear of any liens, charges, exceptions or encumbrances, except
for those set forth on Exhibit 2.11G. Exhibits 2.11A through 2.11G list all
leases, if any, pursuant to which the Practice, the Corporation or PDI leases,
as lessor or lessee, personal property. Except as indicated on Exhibits 2.11A
through 2.11G, all such leases are valid and effective in accordance with their
respective terms, and there is not under any such lease any existing default and
there is no condition or event of which the Practice or the Sellers have
knowledge (except any failure to obtain a required consent to assignment in
connection with this transaction) which with notice or lapse of time, or both,
would constitute a material default, in respect of which the Practice or PDI has
not taken adequate steps to cure such default or to prevent a default from
occurring.
2.12 INVENTORIES. The items of the Practice's (non-pharmaceutical)
inventory of medical supplies have been acquired in the ordinary course of
business and maintained at levels consistent with past practices and are in all
material respects adequate for the reasonable requirements of the Practice, and
will be transferred to the Corporation prior to the Closing, other than
pharmaceutical inventory and patient charts and records which will be
transferred to either New York NewCo or New Jersey NewCo, as appropriate, prior
to Closing.
2.13 PRINCIPAL PLACE OF BUSINESS. The locations of the Practice
are at those addresses and those counties listed in Exhibits 2.13A through
2.13G. The assets of the Corporation are located in those counties listed in
Exhibits 2.13A through 2.13G.
2.14 [RESERVED].
2.15 INTELLECTUAL PROPERTY RIGHTS. Except as set forth in Exhibits
2.15A through 2.15G, neither the Corporation nor the Practice has any right,
title or interest in or to any patents, patent rights, manufacturing processes,
trade names, trademarks, service marks, inventions, specialized treatment
protocols, copyrights, formulas or trade secrets. Except for off-the-shelf
software licenses, neither the Practice nor the Corporation is a licensee in
respect of any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing
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processes, formulas or trade secrets. The Corporation will as of Closing own and
possess adequate licenses or other rights to use all such patents, trademarks,
service marks, trade names, copyrights, manufacturing processes, inventions,
formulas and trade secrets necessary to conduct its business. There is no claim
pending to the effect that the operations of the Practice infringe upon or
conflict with the asserted rights of others to such patents, patent rights,
manufacturing processes, trade names, trademarks, service marks, inventions,
copyrights, formulas or trade secrets.
2.16 DIRECTORS AND OFFICERS; PAYROLL INFORMATION. Set forth on
Exhibits 2.16A through 2.16G are true and complete lists, as of the date of this
Agreement, of: (a) the name of each director and officer of the Corporation and
Practice; and (b) a list of all current employees of the Practice, Corporation
and PDI and their current levels of compensation other than bonuses and other
extraordinary compensation.
2.17 LEGAL PROCEEDINGS. Except as set forth in Exhibits 2.17A
through 2.17G, Seller has no knowledge of any pending, and has not received
written notice within 18 months of threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting the Sellers, the Practice, the Corporation, PDI, the Shares or the
transactions contemplated by this Agreement, including, but not limited to,
claims for medical malpractice or negligence, and, to the knowledge of Sellers,
no basis for any such action exists, nor is there any legal impediment of which
Seller has knowledge to the continued operation of the Practice and Corporation
in the ordinary course other than the consent of landlords and lessors to the
leases described on Exhibits 2.10A through 2.10G and Exhibits 2.11A through
2.11G.
2.18 CONTRACTS. To the best of Seller's knowledge, Seller has
delivered to Parent true copies of all written, and disclosed to Parent all
material oral, outstanding contracts, obligations and commitments of Seller, the
Practice and the Corporation, all of which are listed on Exhibits 2.10A through
2.10G (in the case of real property leases), Exhibits 2.11A through 2.11G (in
the case of personal property leases), Exhibits 2.18A through 2.18G (in the case
of managed care contracts, third party payor contracts and contracts other than
leases) and Exhibits 2.25A through 2.25G (in the case of Corporation Plans).
Except as otherwise indicated on such Exhibits, all of such contracts,
obligations and commitments are, to Seller's best knowledge, valid, binding and
enforceable in accordance with their terms and are in full force and effect,
subject to limitations on enforceability imposed by, bankruptcy, moratorium,
creditors' rights or similar laws and general equitable principles. Except as
set forth on such Exhibits, to Seller's knowledge, no default or alleged default
by the Seller or the Practice or Corporation exists thereunder. Except as listed
on Exhibits 2.10A through 2.10G, Exhibits 2.11A through 2.11G, Exhibits 2.18A
through 2.18G and Exhibits 2.25A through 2.25G, neither the Corporation,
Practice, or Seller is, or will be at Closing, a party to any material written
or oral agreement, contract, lease or plan of a type described as follows:
(a) Contract not made in the ordinary course of business,
other than this Agreement, the Partnership Agreement among Sellers and
documents executed pursuant to this Agreement.
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(b) Employment contract which is not terminable without cost
or other liability (except for salary and benefits accrued as of the
date of termination) to the Corporation or Practice, or any successors
or assigns thereof, upon notice of 30 days or less.
(c) Contract with any labor union.
(d) Bonus, pension, profit-sharing, retirement, stock
acquisition, hospitalization, insurance or similar plan providing for
employee benefits.
(e) Lease with respect to any property, real or personal,
whether as lessor or lessee.
(f) Contract for the future acquisition of materials, supplies
or equipment (i) which is in excess of the requirements of the Practice
now booked or for normal operating inventories, or (ii) which is not
terminable without material cost or liability to the Corporation or
Practice, or any successors or assigns thereof, upon notice of 30 days
or less.
(g) Insurance contract.
(h) Contract continuing for a period of more than six months
from the Closing Date.
(i) Loan agreement or other contract for money borrowed.
2.19 SUBSEQUENT EVENTS. Except as set forth on Exhibits 2.19A
through 2.19F, neither the Practice nor the Corporation has since the Balance
Sheet Date:
(a) Increased or established any reserve for taxes or any
other liability on its books or otherwise provided therefor, except as
may have been required due to income or operations of the Practice.
(b) Sold or transferred any of the Shares except to another
Seller.
(c) Granted any general or uniform increase in the rates of
pay of employees or any substantial increase in salary payable or to
become payable by the Corporation or Practice to any of its officers or
employees (other than normal merit increases), or by means of any bonus
or pension plan, contract or other commitment, materially increased the
compensation of any of its officers or employees.
(d) Issued any stock, bonds or other securities except to a
Seller.
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(e) Experienced damage, destruction or loss (whether or not
covered by insurance) materially and adversely affecting any of its
material properties, assets or business, or experienced any other
material adverse change in its financial condition, assets, liabilities
or business.
2.20 ACCOUNTS RECEIVABLE. Exhibits 2.20A through 2.20F reflect
the Practice's accounts receivable as of the Balance Sheet Date, net of
allowances for uncollectible and doubtful accounts. The Practice maintains its
accounting records in sufficient detail to substantiate its respective accounts
receivable reflected on Exhibits 2.20A through 2.20F. Except with the written
consent of PSC, or as needed to restate ENT Corporation's balance sheet on a
GAAP basis, since the Balance Sheet Date, the Practice has not changed any
principle or practice with respect to the recordation of accounts receivable or
the calculation of reserves therefor, or any material collection, discount or
write-off policy or procedure. To the best knowledge of the Seller, the Practice
is in substantial compliance with the terms and conditions of its third-party
payor arrangements, and to Seller's knowledge the reserves established by the
Practice are adequate to cover any liability resulting from lack of compliance.
2.21 TAX RETURNS. The Practice has filed all tax returns (or
has obtained appropriate extensions), required to be filed by it, and made all
payments required to be made by it, with respect to income taxes, real property
taxes, sales taxes, use taxes, employment taxes and similar taxes due and
payable on or before the date of this Agreement. The Practice has no tax
liability or pending tax audits, except as set forth on Exhibits 2.21A through
2.21F, and sales, use, employment and similar taxes for periods as to which such
taxes have not yet become due and payable. True and correct copies of the
Practice's respective 1997, 1996 and 1995 federal and state income tax returns
have been attached hereto on Exhibits 2.21A through 2.21F or, as to 1997 returns
will be delivered as required by Section 7.6.
2.22 COMMISSIONS AND FEES. There are no valid claims, including
but not limited to, any claim or claims by CIBC Xxxxxxxxxxx & Co., for brokerage
commissions or finder's or similar fees in connection with the transactions
contemplated by this Agreement which may be now or hereafter asserted against
PSC, Parent or the Corporation resulting from any action taken by Sellers, the
Practice, PDI, New Jersey NewCo or New York NewCo or their respective agents or
employees.
2.23 [RESERVED].
2.24 INSURANCE POLICIES. The Seller and/or the Practice
maintain policies of comprehensive general liability and professional liability
insurance in amounts of not less than $1,000,000 per occurrence and $3,000,000
aggregate on a claims made basis and property damage insurance on the assets of
the Practice, and as of Closing, the Corporation. A description of all such
policies are attached on Exhibits 2.24A through 2.24G.
2.25 EMPLOYEE BENEFIT PLANS. Except as set forth on Exhibits
2.25A through 2.25G or Exhibits 2.16A through 2.16G and except for employment
arrangements terminated prior to Closing, neither PDI nor the Practice or the
Corporation has established, or maintains, or is
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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 2.25G (individually "Corporation Plan," and
collectively "Corporation Plans") have been (i) furnished to Parent along with a
copy of each material document prepared in connection with such Corporation
Plans and (ii) operated and administered in all material respects in accordance
with, as applicable, ERISA, the Code and any other applicable laws, and the
related rules and regulations adopted by those federal agencies responsible for
the administration of such laws. To the best of Seller's knowledge, no act or
failure to act by PDI or the Practice, Seller, or the Corporation has resulted
in a "prohibited transaction" (as defined in ERISA) with respect to the
Corporation Plans. No "reportable event" (as defined in ERISA) has occurred with
respect to the Corporation Plans. Neither PDI nor the Practice or Corporation
has made, is currently making, or is obligated in any way to make, any
contributions to any multi-employer plan within the meaning of Section 3(37) of
ERISA. None of the Corporation Plans are multiple employer welfare arrangements
within the meaning of Section 3(40) of ERISA. The Corporation Plans do not
provide for the payment of separation, severance, termination or similar-type
benefits to any person or obligate PDI or the Practice or Corporation to pay
such benefits solely as a result of any transaction contemplated by this
Agreement, or as a result of a "change of control" within the meaning of Section
280G of the Code. None of the Corporation Plans provides for or promises retiree
medical, retiree disability or retiree life insurance benefits to any current or
former employee of PDI or the Practice or Corporation. Each Corporation Plan
which is intended to be qualified under Section 401(a) of the Code has received
a favorable determination letter from the IRS dated on or after January 1, 1995
that it is so qualified and no fact or event has occurred since the date of such
determination letter to adversely affect the qualified status of any such
Corporation Plan.
2.26 COMPLIANCE WITH LAWS IN GENERAL. The Seller has no knowledge of
material violations of any federal, state or local laws, regulations or
ordinances relating to the operations of the Practice or PDI, including, without
limitation, the Federal Environmental Protection Act, the Occupational Safety
and Health Act, the Americans with Disabilities Act or any Environmental Laws.
2.27 FRAUD AND ABUSE. To Seller's knowledge, none of PDI, Seller, or
any persons or entities providing professional services for the Practice have
engaged in any activities which are prohibited under Section 1320a-7b of Title
42 of the United States Code or the regulations promulgated thereunder, or
related state or local statutes or regulations, or which are prohibited by rules
of professional conduct, including, but not limited to, the following: (a)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact for use in determining rights to any benefit
or payment; (b) knowingly and willfully making or causing to be made any false
statement or representations of a material fact for use in determining rights to
any benefit or payment; (c) any failure by a claimant to disclose knowledge of
the occurrence of any event affecting the initial or continued right to any
benefit or payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or
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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,
leasing or ordering any good, facility, service or item for which payment may be
made in whole or in part by Medicare or Medicaid; (e) engaging in any activity
which is a basis for exclusion from the Medicare, Medicaid and other
federally-funded programs under Section 1320a-7a of Title 42 of the United
States Code; (f) any violation of the Medicare or Medicaid requirements,
including and fraud and abuse provisions, except where such circumstances would
not have a Material Adverse Effect.
2.28 MEDICARE, MEDICAID, AND OTHER THIRD-PARTY PAYOR PAYMENT
LIABILITIES. To Seller's knowledge, except as described in Exhibits 2.28A
through 2.28F, none of PDI, Seller, the Practice or the Corporation has any
liabilities to any third party fiscal intermediary or carrier administering any
state Medicaid program or the federal Medicare program, or to any other third
party payor for the recoupment of any amounts previously paid to PDI, Seller,
the Practice (or any predecessor corporation) or the Corporation by any such
third-party fiscal intermediary, carrier, Medicaid program, Medicare program, or
third party payor. There are no pending or, to Seller's knowledge, threatened
actions by any third party fiscal intermediary or carrier administering any
state Medicaid or the federal Medicare program, by the Department of Health and
Human Services, any state Medicaid agency, or any third party payor to suspend
payments to the Practice, the Corporation or Seller.
2.29 BILLING PRACTICES AND REFERRAL SOURCES.
(a) Billing Practices Generally. All billing practices by PDI,
the Practice and Seller to all third party payors, including, but not
limited to, the federal Medicare program, state Medicaid programs and
private insurance companies, have been, to Seller's knowledge, true,
fair and correct and in material compliance with all applicable laws,
regulations and policies of all such third party payors, and, to
Seller's knowledge, none of PDI, Seller or the Practice have billed for
or received any payment or reimbursement in excess of amounts allowed
by law which have not been appropriately adjusted or refunded.
(b) Gratuitous Payments. Neither PDI, Seller nor any
shareholder, director, or officer of the Practice or Corporation, or
any employee or agent acting on behalf of or for the benefit of PDI,
the Practice or Seller, has, directly or indirectly, in violation of
applicable Laws: (i) offered or paid any remuneration, in cash or in
kind, to, or made any financial arrangements with, any past or present
customers, past or present patients, past or present suppliers,
contractors or third party payors of the Practice in order to obtain
business or payments from such persons; (ii) given or agreed to give,
or is aware that there has been made or that there is any agreement to
make, any gift or gratuitous payment of any kind, nature or description
(whether in money, property or services) to any customer or potential
customer, patient or potential patient, supplier or potential
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supplier, contractors, third party payor or any other person; (iii)
made or agreed to make, or is aware that there has been made or that
there is any agreement to make, any contribution, payment or gift of
funds or property to, or for the private use of, any governmental
official, employee or agent; (iv) established or maintained any
unrecorded fund or asset for any purpose or made any false or
artificial entries on any of its books or records for any reason; or
(v) made, or agreed to make, or is aware that there has been made or
that there is any agreement to make, any payment to any person with the
intention or understanding that any part of such payment would be used
for any purpose other than that described in the documents supporting
such payment.
(c) Transactions with Referral Sources. None of PDI, the
Seller, the Practice, nor to the knowledge of Seller, any officers,
directors or employees thereof, is a party to any contract, lease,
agreement or arrangement in violation of applicable Laws, including,
but not limited to, any joint venture or consulting agreement with any
physician, hospital, nursing facility, home health agency or other
person who makes or influences referrals to or otherwise generates
business for any Practice or any Seller in violation of applicable
Laws.
2.30 PHYSICIAN SELF-REFERRALS. Neither PDI nor the Practice or
Seller has submitted any claims in connection with any referrals which violated
any applicable self-referral law, including the Xxxxx Law (42 U.S.C. ss. 1395nn)
or any applicable state self-referral law as those laws were interpreted at the
time the claim was submitted.
2.31 INVESTMENT INTENT.
(a) The Seller is acquiring the PSC Debenture pursuant to this
Agreement for investment purposes only and not with a view to the sale
or distribution thereof. The Seller has such knowledge and expertise in
financial matters that Seller is capable of evaluating the merits and
risks of an investment in the PSC Debenture.
(b) The Seller acknowledges that since the PSC Debenture has
not been registered under the Securities Act of 1933, as amended (the
"1933 Act"), the PSC Debenture must be held indefinitely unless
subsequently registered under the 1933 Act or exemptions from such
registration under the 1933 Act are available. The Seller acknowledges
that PSC is under no obligation to register under the 1933 Act the
issuance of the PSC Debenture or to comply with any provision which
would entitle any such sale pursuant to any exemption from registration
under the 1993 Act.
(c) The Seller is an "accredited investor" within the meaning
of Regulation D under the 1993 Act.
(d) The PSC Debenture shall bear a legend in substantially the
following form and any other legend required by any other applicable
state securities or Blue Sky laws:
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This Debenture has not been registered or qualified
pursuant to the Securities Act of 1933, as amended (the "1933
Act"), or any other state securities law, and may not be sold,
pledged, transferred or otherwise disposed of unless the same
is registered and qualified in accordance with the 1933 Act
and any other applicable state securities laws, or after
receipt of an opinion of counsel satisfactory to the company
that an exemption from registration under the 1933 Act, and
any applicable state securities laws is then available."
2.32 NO UNTRUE REPRESENTATIONS. To the knowledge of Seller, no
representation or warranty by Seller in this Agreement, and no Exhibit or
certificate furnished or to be furnished to PSC or Parent pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained therein not
misleading. All information provided by the Seller in writing for valuation of
the Practices by PSC and Parent is true, accurate and complete in all material
respects, as the same may have been modified by the Exhibits and Schedules
hereto.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND PSC.
Parent and PSC hereby, jointly and severally, represent and warrant to
Sellers as follows:
3.1 CORPORATE EXISTENCE; GOOD STANDING; QUALIFICATION. Each of
PSC, PSC Management and Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Each of PSC, PSC
Management and Parent has all necessary corporate power and authority to own,
lease or operate its properties and assets and to carry on its business as
presently conducted and as contemplated by this Agreement and is duly qualified
to do business and is in good standing in all jurisdictions in which the
character of the property owned, leased or operated or the nature of the
business transacted by it makes qualification necessary, except where failure to
qualify would not have Material Adverse Effect on Parent, PSC or PSC Management.
3.2 POWER AND AUTHORITY. Each of PSC and Parent has corporate
power and authority to execute and deliver and perform its obligations under
this Agreement and all agreements and other documents to be executed and
delivered by it pursuant to this Agreement, and has taken all actions required
by law, its Certificate of Incorporation and its By-laws, to authorize the
execution, delivery and performance of this Agreement and such related
documents. PSC Management has the corporate power and authority to execute and
deliver and perform its obligations under the Debenture and Security Agreement
and has taken all action required by law, its Certificate of Incorporation and
By-laws to authorize the execution, delivery and performance of such
instruments. The execution and delivery of this Agreement, and the agreements
related hereto executed and delivered pursuant to this Agreement do not and,
subject to the receipt of consents to assignments of leases and other contracts
where required and the receipt of regulatory approvals where required, the
consummation of the transactions contemplated hereby will not, violate any
provision of the Certificate of Incorporation or Bylaws
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of either PSC, PSC Management or Parent or any provisions of, or result in the
acceleration of, any obligation under any mortgage, lien, lease, agreement,
instrument, order, arbitration award, judgment or decree to which PSC, PSC
Management or Parent is a party or by which either of them is bound, or violate
any restrictions of any kind to which PSC, PSC Management or Parent is subject.
The execution and delivery of this Agreement have been approved by the
respective Boards of Directors of PSC and Parent.
3.3 COMMISSIONS AND FEES. There are no valid claims for brokerage
commissions or finder's or similar fees in connection with the transactions
contemplated by this Agreement which may be now or hereafter asserted against
any Seller, Practice, or Corporation or PDI, New York NewCo or New Jersey NewCo
resulting from any brokers or agents engaged by PSC or Parent or their
respective agents or employees.
3.4 PARENT DOCUMENTS. Parent has heretofore made available to
Sellers or their representative its Prospectus dated March 20, 1997 with respect
to the offer and sale of 2,200,000 shares of Parent common stock; SEC Forms 10Q
of Parent for the quarters ended March 31, 1997, June 30, 1997, and September
30, 1997, filed with the Securities and Exchange Commission ("S.E.C."), and Form
10K of Parent for the year ended December 31, 1997 filed with the S.E.C. The
foregoing SEC filings were true and correct in all material respects as of their
respective dates and fairly present the financial position of Parent as of such
dates. There has been no material adverse change with respect to Parent since
December 31, 1997.
3.5 LEGAL PROCEEDINGS. There is no material litigation, governmental
investigation or other proceeding pending or, so far as is known to Parent or
PSC, threatened against or relating to or affecting PSC or Parent or PSC
Management or medical practices managed by Parent that would have a Material
Adverse Effect on Parent or PSC or the transactions contemplated hereby.
3.6 COMPLIANCE WITH LAWS IN GENERAL. Parent and PSC have no
knowledge of material violations of any federal, state or local laws,
regulations or ordinances relating to the operations of Parent, PSC and PSC
Management, including, without limitation, the Federal Environmental Protection
Act, the Occupational Safety and Health Act, the Americans with Disabilities Act
and any Environmental Laws.
3.7 BILLING PRACTICES IN GENERAL. All billing practices by Parent
and PSC Management to all third party payors, including, but not limited to, the
federal Medicare program, state Medicaid programs and private insurance
companies, have been, to Parent's knowledge, true, fair and correct and in
material compliance with all applicable laws, regulations and policies of all
such third party payors, and, to Parent's knowledge, neither Parent nor PSC
Management has billed for or received any payment or reimbursement in excess of
amounts allowed by law which have not been appropriately adjusted or refunded.
3.8 NO UNTRUE REPRESENTATIONS. To the knowledge of Parent and PSC,
no representation or warranty by Parent or PSC in this Agreement, and no Exhibit
or certificate furnished or to be furnished by Parent or PSC pursuant hereto, or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material
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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 SELLERS' INFORMATION. Each Seller shall give to
Parent and PSC and its counsel, accountants, engineers and other representatives
full access to all the requested properties, documents, contracts, personnel
files and other records of such Seller's Corporation and Practice and shall
furnish Parent and PSC with copies of such requested documents and with such
information with respect to the affairs of Seller, the Practice and the
Corporation as Parent and PSC shall from time to time reasonably request. Seller
shall disclose and make available to Parent, PSC, and their representatives all
requested books, contracts, accounts, personnel records, letters of intent
papers, records, communications with regulatory authorities and other documents
relating to the Shares and to the Practice.
4.2 ACCESS TO INFORMATION OF PARENT. Prior to Closing, Parent
shall give to Sellers and their respective counsel, accountants and other
representatives such access to the documents, contracts and other records of
Parent as Sellers shall from time to time reasonably request and shall furnish
copies of such documents as reasonably requested.
4.3 RETENTION OF RECORDS. PSC shall retain all books and records
of the Corporations ("Records") for the greater of four years from the Closing
Date or such longer periods of time as required by applicable statutes, rules
and regulations. For a period of four years after the Closing Date, and for such
longer period as the Records are maintained, each party will, during normal
business hours and so as not to unreasonably disrupt normal business, afford any
other party, its counsel, its accountants or other parties who have a reasonable
need for such access full access (and copying at the expense of the requesting
party, if desired) to the books and records in the possession of such party as
such other party may reasonably request.
SECTION 5. CONDITIONS TO OBLIGATION OF PARENT AND PSC TO CLOSE.
The obligation of PSC and Parent to consummate the transactions
contemplated by this Agreement is subject to satisfaction of the following
conditions precedent (any of which may be waived in writing by Parent at or
prior to the Closing):
5.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Sellers set forth in Article 2 shall be true and correct in all
material respects as of the date made and at and as of the Closing, except as a
result of changes expressly permitted by this Agreement.
5.2 COVENANTS. The Sellers shall have performed and complied with
all of their covenants and agreements under this Agreement in all material
respects through the Closing.
5.3 NO SUIT OR PROCEEDING. No action, suit, or proceeding shall be
pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction in which an unfavorable
injunction, judgment, order, decree, ruling, or charge would
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(i) prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation, or (iii) affect adversely PSC's receipt of
the Shares free of all liabilities, liens, mortgages, encumbrances, debts,
obligations or other third-party interests of whatever nature (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect).
5.4 ABSENCE OF MATERIAL ADVERSE CHANGE. There shall have been no
change in the condition (financial or otherwise), business, assets, or prospects
of any Corporation or Practice from the Balance Sheet Date which has had or
could reasonably be expected to have a Material Adverse Effect on any
Corporation or the business to be conducted by New York NewCo or New Jersey
NewCo.
5.5 CERTIFICATE. Each Seller shall have delivered to PSC a
certificate to the effect that each of the conditions specified in Sections
5.1-5.4 is satisfied in all respects as to such Seller's respective Corporation
and Practice.
5.6 APPROVAL OF PARENT'S SENIOR LENDER. Parent shall have received
written approval from Parent's senior lender, NationsBank, N.A., of the
transactions contemplated by this Agreement including, without limitation, the
issuance of the PSC Debenture and Guaranty and the grant of the first lien
security interest provided for in the Security Agreement; provided, however,
that such consent is not conditioned on the Sellers signing a subordination
agreement that contains a standstill period in excess of that provided in the
PSC Debenture.
5.7 RECEIPT OF FINANCIAL INFORMATION. ENT Medical Practice shall
have delivered to Parent accrual basis financial statements and work papers
suitable for audit for the years ended December 31, 1997, and December 31, 1996.
The Practices shall have delivered to Parent unaudited financial statements and
federal income tax returns for the years ended December 31, 1997, December 31,
1996, and December 1995, and the Practices shall have delivered to Parent
unaudited financial statements for the quarter ended March 31, 1998.
Notwithstanding the foregoing, the Practices' returns for the year ended
December 31, 1997 may be delivered in accordance with Section 7.6.
5.8 CONSENTS AND APPROVALS. PSC and Parent shall have received all
authorizations, consents, and approvals of third parties and of governments and
governmental agencies, if any, that may be required for the purchase of the
Shares by PSC.
5.9 COUNSEL OPINION. Parent and PSC shall have received from
counsel to the Sellers and the Corporations an opinion dated as of the Closing
Date, in substantially the form attached hereto as Exhibit 5.9.
5.10 OTHER AGREEMENTS EXECUTED. The employment agreements required
by Section 1.4(a) shall have been executed and delivered or, in the case of
certain physician employees, assigned in accordance with Section 1.4, and each
of New York NewCo and New Jersey NewCo shall have executed and delivered the
respective MSA with PSC Management and Parent; provided that notwithstanding the
foregoing, each of the ten associate physicians at the Practices
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shall have either (1) been admitted as a partner of New York NewCo, (2) signed a
new employment agreement with New York NewCo in accordance with the New York
MSA, or (3) consented in writing to assignment of his existing employment
agreement to New York NewCo.
5.11 PURCHASE OF FIXED ASSETS, EQUIPMENT, AND TRADE NAME OF
PHYSICIANS DOMAIN, INC. ENT Corporation shall have acquired the furniture,
fixtures, equipment and trade name of PDI as set forth on Exhibit 2.11G and any
applicable equipment leases of PDI assumed by ENT Corporation as set forth on
Exhibit 2.11G.
5.12 RELEASE OF LIENS. Except as set forth on Exhibits 5.12A-5.12F,
all liens encumbering the assets of any Practice or Corporation shall be duly
released at Closing by the secured parties and other lien holders.
5.13 NEW YORK NEWCO STOCK OPTIONS. Parent or its designee shall
receive an option to acquire the shares of New York NewCo from the Sellers who
are shareholders in New York NewCo substantially in the form attached hereto as
Exhibit 5.13.
5.14 NEW JERSEY NEWCO STOCK OPTIONS. Parent or its designee shall
receive an option to acquire the shares of New Jersey NewCo from the Sellers who
are shareholders in New Jersey NewCo substantially in the form attached hereto
as Exhibit 5.14.
5.15 CLOSING DATE FINANCIAL CERTIFICATE. Each Seller shall have
delivered to Parent and PSC a closing date financial certificate which shall
certify the March 31, 1998 unaudited balance sheets of each such Seller's
Practice and for the period ended as of such date statements of operations of
the Practice, along with detailed accounts receivable aging analysis of the
Practice as of the close of business on the date prior to Closing acceptable to
Parent, all prepared in accordance with prior practice, provided that goodwill
and capitalized intangible assets may be written off such balance sheets as
provided in Section 7.1(a) below. Each Seller shall have delivered to Parent a
computation of each such Seller's Corporation's net worth (as defined in Section
5.16 below) as of the Closing.
5.16 CLOSING NET WORTH AND ACCOUNTS RECEIVABLE. The Corporations'
combined net worth at Closing (defined as GAAP basis of assets acquired in
excess of liabilities existing or to be discharged or to which assets are
subject, including assets acquired from PDI) shall equal or exceed $3,625,000
and the net realizable value (measured in accordance with GAAP) of the
Corporations' aggregate accounts receivable at Closing (the "Closing Accounts
Receivable") shall equal or exceed $5,425,000, provided, however, that if the
aggregate accounts receivables at Closing are at least 90% of such amount the
condition of this Section 5.16 with respect to the amount of accounts receivable
will be deemed satisfied. Any known Medicare/Medicaid or other patient or third
party payor refunds due at Closing shall reduce the amount of Closing Accounts
Receivable (and correspondingly the Corporations' net worth at Closing).
5.17 CORPORATE DOCUMENTS. Sellers shall have furnished PSC with
copies of the following documents: the Articles of Incorporation and all
amendments thereto of each Corporation, duly certified by the Secretary of State
of the State of Delaware; and certificates,
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executed by the proper officials of the State of Delaware, as to the valid
existence and good standing of each Corporation in the State of Delaware.
5.18 ASSIGNMENT OF ASSUMPTION AGREEMENTS. Each of the landlords and
tenants under the leases for the medical offices listed on Exhibits 5.18-5.18F
shall have executed and delivered an assignment and assumption agreement
substantially in the form of Exhibit 5.18 (each a "Lease Assignment") with
respect to each such lease, or other arrangements satisfactory to PSC Management
with respect thereto shall have been made.
5.19 FORMATION OF NEW YORK NEWCO AND NEW JERSEY NEWCO. Sellers who
practice at the New York offices listed in Exhibits 2.13A through 2.13G shall
have formed ENT Associates, LLP, and Seller who practices at the New Jersey
office listed in Exhibits 2.13A through 2.13G shall have formed ENT Associates
of New Jersey, P.C.
5.20 TERMINATION OF CORPORATION PLANS. The Sellers and Corporations
shall have (a) terminated or frozen all Corporation Plans as required under
Section 1.4(b); (b) performed and complied with all of their other covenants
contained in Section 1.4; and (c) furnished Parent or PSC with documentation
sufficient to evidence such termination or freezing of the Corporation Plans.
5.21 RESIGNATIONS. There shall have been delivered to Parent and
PSC the signed resignations of the officers and directors of each of the
Corporations.
5.22 DUE DILIGENCE. PSC shall have been satisfied with its due
diligence of Sellers, Practices and the Corporations and shall have such
information related thereto as it shall have in good faith requested.
SECTION 6. CONDITIONS TO OBLIGATION OF SELLERS
The obligation of Sellers to consummate the transactions contemplated
by this Agreement is subject to satisfaction of the following conditions (any
one of which may be waived in writing by Sellers at or prior to the Closing):
6.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Parent and PSC set forth in Article 3 above shall be true and
correct in all material respects on the date of this Agreement and at and as of
the Closing.
6.2 COVENANTS. Parent and PSC shall have performed and complied
with all of their covenants and agreements under this Agreement in all material
respects through the Closing.
6.3 NO SUIT OR PROCEEDING. No action, suit or proceeding shall be
pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (a) prevent
consummation of any of the transactions contemplated by this Agreement or (b)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect), or (c) have a Material Adverse Effect on Parent
or PSC.
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6.4 CERTIFICATE. Parent and PSC shall have delivered to Sellers a
certificate to the effect that each of the conditions specified in Sections 6.1,
6.2, 6.3 and 6.8 is satisfied in all respects.
6.5 GOVERNMENT APPROVALS. Sellers shall have received all
authorizations, consents, and approvals of governments and governmental
agencies, if any, that may be required.
6.6 OTHER AGREEMENTS EXECUTED. PSC Management, PSC and Parent
shall have executed and delivered the MSAs.
6.7 PURCHASE PRICE. At the Closing, the cash consideration
required under Section 1.1 shall be delivered by wire transfer in accordance
with the written instructions of Sellers.
6.8 FINANCIAL CONDITION OF PARENT. There shall not have occurred
any Material Adverse Change with respect to Parent from the date of Parent's
Form 10K filed with the S.E.C. for the year ended December 31, 1997.
6.9 CONSENT OF NATIONSBANK. Seller shall have received a copy of
the written approval from Parent's senior lender, NationsBank, N.A. to the
transactions contemplated by this Agreement including, without limitation, the
issuance of the PSC Debenture and Guaranty and the grant of the first lien
security interest provided for in the Security Agreement; provided, however,
that such consent shall not be conditioned on the Sellers signing a
subordination agreement that contains a standstill period in excess of that
provided in the PSC Debenture.
6.10 COUNSEL OPINION. Sellers shall have received from counsel to
Parent, PSC Management and PSC an opinion dated as of the Closing Date, in
substantially the form attached hereto as Exhibit 6.10.
6.11 PSC DEBENTURE. PSC, PSC Management and Parent shall have
delivered the PSC Debenture and Guaranty to the Paying Agent for Sellers.
6.12 SECURITY AGREEMENT. PSC Management shall have executed and
delivered the Security Agreement.
6.13 ASSIGNMENT AND ASSUMPTION AGREEMENT. PSC Management shall have
executed and delivered a Lease Assignment with respect to each of the real
property leases for the medical offices listed on Exhibits 5.18A-5.18F.
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:
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(a) Sellers will each carry on their respective Practice in
substantially the same manner as heretofore carried on and will not
make any purchase or sale, incur any indebtedness or liens, or
introduce any method of management or operation in respect to such
Practice or otherwise engage in any transaction except in the ordinary
course of business and in the manner not inconsistent with prior
practice and the terms of this Agreement, other than with the prior
written consent of PSC and, subject to the requirements of Section
5.16, the write-off of goodwill and certain capitalized intangibles
from their respective balance sheets.
(b) Sellers shall cause their respective Practice to transfer
the physician employment agreements, patient charts and records and
pharmaceutical inventory of such Practice to New York NewCo or New
Jersey NewCo as appropriate.
(c) No Practice or Corporation will acquire or dispose of any
capital assets having a current value in excess of $1,000 other than
with the prior written consent of PSC, or except in connection with the
replacement or elimination of obsolete or damaged equipment in the
ordinary course of business.
7.2 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Other than with respect
to salaries or bonuses payable to physician employees of the Practices based on
the amount of collected accounts receivable, all of which will be paid by
Sellers or the Practices when due and payable consistent with past practice,
Sellers hereby covenant and agree that Sellers will take whatever steps are
necessary to pay or fund completely at or prior to Closing any accrued benefits,
where applicable, or vested accrued benefits for which such Sellers, PDI or such
Sellers' Practice or Corporation might have any liability whatsoever arising
from any salary, wage, benefit, bonus, vacation pay, sick leave, insurance,
employment tax or similar liability to any employee or other person or entity
(including, without limitation, any Corporation Plan and any liability under
employment contracts with PDI, Sellers, Practice or Corporation) attributable to
services performed prior to the Closing Date.
7.3 [RESERVED].
7.4 COVENANT NOT TO COMPETE.
(a) Except as provided in Section 7.4(b) below, for a period
of five (5) years from and after the Closing Date, each of the Sellers
agrees that, he or she will not (i) directly or indirectly, engage in,
manage, operate, control, conduct, consult for or be employed in a
management capacity by, provide services to or invest in any business
or venture in competition (as of the Closing Date) with the Practices,
the Corporations, PSC, PSC Management, Parent, or either NewCo in his
or her Restricted Territory (as defined below); provided however, that
ownership of less than 1% of the outstanding stock of any publicly
traded corporation shall not be deemed to violate this clause, (ii)
within his or her Restricted Territory, directly or indirectly, solicit
or attempt to solicit any customer or client of PSC, PSC Management,
Parent or patient of either NewCo other than in the
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course of a Seller's performance of services and duties for the
applicable NewCo as a physician-shareholder thereof; or (iii) solicit
or employ or attempt to solicit or hire away or employ any employee of
PSC, PSC Management, Parent, any Corporation or NewCo. Notwithstanding
the foregoing, general advertising by a Seller in newspapers,
magazines, radio, television or similar media that is not directly
targeted at patients, customers or employees of any Corporation, NewCo,
Practice, PSC, PSC Management or Parent shall not, by itself, be deemed
a violation of this Section 7.4(a). If the final judgment of a court of
competent jurisdiction declares that any term or provision of this
Section is invalid or unenforceable, the Sellers and PSC agree that the
court making the determination of invalidity or unenforceability shall
have the power to reduce the scope, duration, or area, to delete
specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified. As used herein, the "Restricted Territory"
for each of the Sellers is set forth in Exhibit 7.4. The parties agree
that the restraints set forth above in this Section 7.4(a) and Exhibit
7.4 are reasonable in respect to subject matter, length of time and
geographic area. Each of the Sellers agrees that the restrictions on
their activities contained in this Section are reasonable and necessary
to protect the goodwill and relationships, economic advantage and other
legitimate interests of PSC, PSC Management, Parent and each NewCo, and
that, were it, he or she to breach any of the covenants contained in
this Section 7.4(a), PSC, PSC Management, Parent and each NewCo would
be harmed and the damage to PSC, PSC Management, Parent and each NewCo
would be irreparable. Accordingly, Sellers acknowledge and agree that,
as PSC's, PSC Management's, Parent's and each NewCo's and Corporation's
legal remedies would be inadequate in the event of a breach of the
covenants in this Section 7.4(a), in addition to damages and other
remedies available, such covenants may be enforced by injunction or
other equitable remedies.
(b) Parent and PSC agree that the Sellers who are partners in
the New York NewCo shall be released from the restrictive covenants set
forth in Section 7.4(a) in the event of termination of the New York MSA
by New York NewCo due to the occurrence of a "Manager Event of Default"
thereunder (as such term is defined therein), and Parent and PSC agree
that CEA Seller shall be released from the restrictive covenants set
forth in Section 7.4(a) in the event of termination of the New Jersey
MSA by New Jersey NewCo due to the occurrence of a "Manager Event of
Default" thereunder (as such term is defined therein).
7.5 CONFIDENTIALITY.
(a) Sellers shall, for a period of three (3) years after the
Closing, hold in confidence all financial information about the
Corporation, Practice and Shares, except such disclosure as may be
required by law or governmental order or regulation, or by subpoena or
other legal process (provided Parent will be provided advance notice of
such disclosure in order to afford it the opportunity to seek an
appropriate protective order). Sellers further agree to keep
confidential for a period of three (3) years after the Closing,
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any and all information relating to services, products, marketing
information, sources of supply, pricing and patients of the Practice on
the date hereof or developed by or for the Practice, except such
disclosure as may be required by law or governmental order or
regulation, or by subpoena or other legal process (provided Parent will
be provided advance notice of such disclosure in order to seek an
appropriate protective order). The restrictions in this Section 7.5(a)
shall not apply to any information that comes into the public domain
through no fault of Sellers. Nothing in this Section 7.5(a) shall
prohibit Sellers from (i) producing information compelled to be
produced by law, governmental regulation, or in a legal proceeding or
investigation provided that Parent is provided advance notice of such
disclosure to provide an opportunity to seek a protective order to
prevent such disclosure, or (ii) providing information to their
accountants, consultants or attorneys in connection with a tax audit,
third party payor audit, governmental agency review or malpractice
suits, or (iii) in a legal proceeding between any Seller and PSC,
Parent or PSC Management.
(b) Regardless of whether the Closing shall occur, Parent and
PSC shall, for a period of three (3) years from the date hereof, hold
in confidence all financial information about the Sellers and the
Practices, except such disclosure as may be required by law or
governmental order or regulation, or by subpoena or other legal process
(provided the Sellers will be provided advance notice of such
disclosure in order to afford Sellers the opportunity to seek an
appropriate protective order), except that no such advance notice shall
be required with respect to Parent's disclosure requirements under
applicable securities laws. Regardless of whether the Closing shall
occur, Parent and PSC further agree to keep confidential for a period
of three (3) years from the date hereof, any and all information
relating to services, products, marketing information, sources of
supply, pricing and patients of the Practices disclosed to Parent and
PSC hereunder, except such disclosure as may be required by law or
governmental order or regulation, or by subpoena or other legal process
(provided the Sellers will be provided advance notice of such
disclosure in order to afford Sellers the opportunity to seek an
appropriate protective order), except that no such advance notice shall
be required with respect to Parent's disclosure requirements under
applicable securities laws. The restrictions in this Section 7.5(b)
shall not apply to any information that comes into the public domain
through no fault of Parent or PSC. Nothing in this Section 7.5(b) shall
prohibit Parent or PSC from (i) producing information compelled to be
produced by law, governmental regulation or in a legal proceeding or
investigation provided that Sellers' counsel is provided advance notice
of such disclosure in order that Sellers are provided an opportunity to
seek a protective order to prevent such disclosure, or (ii) providing
information to their accountants, consultants or attorneys in
connection with a tax audit, third party payor audit, governmental
agency review, or malpractice suits, or (iii) in a legal proceeding
between any Seller and PSC, Parent or PSC Management.
7.6 PREPARATION OF TAX RETURNS AND PAYMENT OF TAXES. Sellers shall
file all tax returns for their respective Practices and Corporations and make
all payments required to be made by their respective Practices and Corporations,
with respect to income taxes, real estate taxes, sales taxes, use taxes,
employment taxes for the period ending with the Closing Date and
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prior periods. Each Seller shall provide Parent and/or PSC with copies of such
tax returns within ninety (90) days of Closing, including specifically the
Practice's tax returns for 1997 and 1998 (short-period) federal and state income
taxes. Sellers shall be entitled to any tax refunds of the Corporations for tax
periods ending on or prior to the Closing Date, and subject to the right of
offset hereinafter provided, the Corporations shall remit any such refunds
received by them to the Paying Agent promptly after receipt.
7.7 COLLECTIONS OF ACCOUNTS. In the event that at the end of the
six-month period following the Closing the aggregate amount realized from
collection of the Closing Accounts Receivable is less than $5,425,000,
notwithstanding reasonable diligence consistent with industry practice to
collect such accounts by PSC Management under the MSAs, Sellers (jointly and
severally) shall pay Parent upon delivery to the Paying Agent of notice of the
amount of such shortfall and a reconciliation with respect thereto, cash in an
amount equal to the shortfall. If not paid within one (1) day of delivery, at
PSC's election any such shortfall may be offset (without regard to the
limitations set forth in Section 8.5(a) or 8.6) against the amounts payable by
Parent, PSC, or PSC Management to the Sellers under (i) any MSA and/or (ii) the
PSC Debenture. Following any such payment or offset, Parent, PSC and PSC
Management shall assign to the Paying Agent for the benefit of the Sellers the
remaining uncollected Closing Accounts Receivable. Following any such offset
pursuant to Section 7.7, in the event the Sellers dispute such offset, the
dispute shall be resolved in accordance with Section 10.20 hereof.
7.8 TERMINATION OF CORPORATION PLANS. For those Corporation Plans
being terminated, within thirty (30) days after the Closing Date, Sellers
terminating such Corporation Plans shall provide to Parent a copy of Form 5310
as filed with the Internal Revenue Service ("IRS"). Sellers shall provide to
Parent a copy of any correspondence between Sellers and the IRS regarding such
filing or freezing of Corporation Plans upon receipt of any such correspondence.
7.9 REORGANIZATIONS PRIOR TO CLOSING. ENT Sellers will cause ENT
Medical Practice to transfer substantially all its assets subject to its
liabilities to ENT Corporation pursuant to a tax-free reorganization under the
Code; ALB Seller will cause ALB Medical Practice to transfer substantially all
its assets subject to its liabilities to ALB Corporation pursuant to a tax-free
reorganization under the Code; CEA Seller will cause CEA Medical Practice to
transfer substantially all its assets subject to its liabilities to CEA
Corporation pursuant to a tax-free reorganization under the Code; RGSS Sellers
will cause RGSS Medical Practice to transfer substantially all its assets
subject to its liabilities to RGSS Corporation pursuant to a tax-free
reorganization under the Code; RH Seller will cause RH Medical Practice to
transfer substantially all its assets subject to its liabilities to RH-1
Corporation pursuant to a tax-free reorganization under the Code; and XXX
Xxxxxxx will cause LIA Medical Practice to transfer substantially all of its
assets subject to its liabilities to LIA Corporation pursuant to a tax-free
reorganization under the Code. In connection with such reorganizations, each
Corporation will assume the contractual obligations and liabilities of the
respective Practice transferring its assets to such Corporation.
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7.10 SELLERS' NOMINATION OF DIRECTOR TO PARENT BOARD OF DIRECTORS.
Sellers shall have the right to nominate one director to Parent's Board of
Directors to serve for the same term as existing Parent directors.
7.11 PDI OFFICE LEASE DEPOSIT. Prior to Closing, Sellers shall
determine whether to assign to PSC Management the office lease of PDI at White
Plains, New York (the "PDI Office Lease") or to request PSC Management to find
other office space for the central billing office of the manager under the MSAs.
In the event that Sellers determine to assign the PDI Office Lease to PSC
Management, and the landlord and tenant consent thereto, PSC Management shall
assume such lease pursuant to a Lease Assignment, and PSC Management shall also
agree to pay to the Paying Agent on behalf of Sellers an amount equal to the
security deposit for such PDI Office Lease when and if such security deposit is
released or surrendered to PSC Management by the landlord at or prior to
expiration of the PDI Office Lease or any extension or renewal thereof, or in
the event the security deposit is applied by the landlord to pay rent that
arises from and after the date of the Lease Assignment that is not paid by PSC
Management in default of its obligations thereunder.
7.12 CERTAIN PRE-CLOSING CLAIMS. From time to time following
Closing, as and when reasonably requested by Sellers, PSC agrees to permit such
Sellers to assert on behalf of the Corporations and one or more Sellers, at the
Sellers' expense, any counterclaims in any litigation brought by a third party
against a Seller, Practice or Corporation, provided that such Sellers provide
indemnification of such Corporation and other "Indemnified Persons" in respect
thereof in accordance with the provisions of Section 8 hereinbelow. In such
event, the Corporation will assign any recovery (net of expenses) on such
counterclaim to such Seller.
7.13 REFUND OF MALPRACTICE PREMIUMS In the event that following
Closing any Corporation shall receive a refund of a malpractice insurance
premium paid by a Practice prior to Closing for a period after Closing, such
Corporation shall return to the appropriate Seller such refund provided that if
the prepaid premium were not treated as an asset for the purpose of the net
worth requirement of Section 5.16 the test would have been satisfied.
SECTION 8. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
8.1 NATURE AND SURVIVAL. All statements contained in this
Agreement or in any Exhibit attached hereto, any agreement executed pursuant
hereto, and any certificate executed and delivered by any party pursuant to the
terms of this Agreement, shall constitute representations and warranties: (a) of
all Sellers, jointly and severally, as they relate to PDI; (b) of all ENT
Sellers, jointly and severally, as they relate to ENT Sellers, ENT Medical
Practice or ENT Corporation; (c) of ALB Seller, as they relate to ALB Seller,
ALB Medical Practice or ALB Corporation; (d) of CEA Seller, as they relate to
CEA Seller, CEA Medical Practice or CEA Corporation; (e) of all RGSS Sellers,
jointly and severally, as they relate to RGSS Sellers, RGSS Medical Practice or
RGSS Corporation; (f) of RH Seller, as they relate to RH Seller, RH Medical
Practice RH-1 Corporation or RH Corporation; (g) of all XXX Xxxxxxx, jointly and
severally, as they relate to XXX Xxxxxxx, LIA Medical Practice or LIA
Corporation; or (h) of PSC and Parent, jointly and severally, as they relate to
PSC or Parent. All such representations and warranties
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and all representations and warranties expressly labeled as such in this
Agreement shall survive the date of this Agreement and the Closing Date for a
period of five (5) years. Notwithstanding the foregoing, the representations and
warranties set forth in Sections 2.21, 2.25, 2.26, 2.27, 2.28, 2.29 and 2.30 and
3.6 and 3.7 shall survive the date of this Agreement and the Closing Date for
the greater of (i) a period of five (5) years, or (ii) until the expiration of
all applicable statutory periods of limitation with respect to the subject
matter of such respective Sections (after giving effect to any waiver,
mitigation or extension of any such statutory periods of limitations). Any claim
for indemnification for breach of a representation or warranty shall be deemed
waived if not asserted within the applicable survival period.
8.2 INDEMNIFICATION BY PSC AND PARENT. PSC and Parent, jointly and
severally, (for purposes of this Section 8.2 and, to the extent applicable,
Section 8.4, "Indemnitor"), shall indemnify and hold Sellers, and their
respective agents, employees, legal representatives, successors and assigns
(each of the foregoing, including Sellers, for purposes of this Section 8.2 and,
to the extent applicable, Section 8.4, an "Indemnified Person"), harmless from
and against any and all liabilities, losses, claims, damages, actions, suits,
costs, deficiencies and expenses (including, but not limited to, reasonable fees
and disbursements of counsel through appeal) arising from or by reason of or
resulting from any breach by Indemnitor of any representation, warranty,
agreement or covenant made by Indemnitor contained in this Agreement (including
the Exhibits hereto).
8.3 INDEMNIFICATION BY SELLERS.
(a) Indemnification with respect to PDI. Sellers (for purposes
of this Section 8.3(a) and, to the extent applicable, Section 8.4,
"Indemnitor"), shall jointly and severally indemnify and hold Parent,
PSC, PSC Management and their respective officers, directors,
shareholders, affiliates, agents, employees, legal representatives,
successors and assigns (each of the foregoing, for purposes of this
Section 8.3 and, to the extent applicable, Section 8.4, an "Indemnified
Person") harmless from and against any and all liabilities, losses,
claims, damages, actions, suits, costs, deficiencies and expenses
(including, but not limited to, reasonable fees and disbursements of
counsel through appeal), (i) arising from or by reason of or resulting
from any breach by Indemnitor (or any of them) of any representation,
warranty or covenant contained in this Agreement (including the
Exhibits hereto) with respect to PDI, it being understood and agreed
that for purposes of this Section 8.3(a) and, to the extent applicable,
Section 8.4, all representations and warranties of the Indemnitor shall
be construed by disregarding and giving no effect whatsoever to any and
all knowledge qualifications or limitations (such as "to Sellers' best
knowledge" or "to their knowledge") as if such knowledge qualifications
or limitations were stricken from such representations and warranties,
and (ii) arising out of or with respect to all liabilities of PDI,
known or unknown, fixed or contingent, other than the PDI Bank Debt to
be discharged at Closing, whether now existing or hereafter arising,
and any and all taxes at any time owed by PDI.
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(b) Indemnification with respect to the ENT Medical Practice.
The ENT Sellers (for purposes of this Section 8.3(b) and, to the extent
applicable, Section 8.4, "Indemnitor") shall jointly and severally
indemnify and hold PSC, Parent, ENT Corporation and any other
Indemnified Person harmless from and against any and all liabilities,
losses, claims, damages, actions, suits, costs, deficiencies, and
expenses (including, but not limited to, reasonable fees and
disbursements of counsel through appeal) (i) arising from or by reason
of or resulting from any breach by Indemnitor (or any of them) of any
representation, warranty or covenant contained in this Agreement
(including the Exhibits hereto) with respect to the Indemnitor, ENT
Medical Practice or ENT Corporation, it being understood and agreed
that for the purposes of this Section 8.3(b) and, to the extent
applicable, 8.4, all representations and warranties of the Indemnitor
shall be construed by disregarding and giving no effect whatsoever to
any and all knowledge qualifications or limitations (such as "to
Sellers' best knowledge" or "to their knowledge") as if such knowledge
qualifications or limitations were stricken from such representations
and warranties, and (ii) arising out of or with respect to any
liabilities of the Indemnitor, ENT Medical Practice or ENT Corporation,
known or unknown, fixed or contingent (other than the ENT Bank Debt to
be discharged at Closing pursuant to Section 1.1) whatsoever existing
at or prior to Closing, and (iii) for or with respect to taxes of ENT
Medical Practice for any period or periods ending on or prior to the
Closing Date, and (iv) arising out of or resulting from any events or
acts occurring on or prior to the Closing Date in the ENT Medical
Practice, including, but not limited to, any alleged act of negligence
of Indemnitor (or any of them) or any employees, agents, and
independent contractors, of the ENT Practice or the ENT Corporation.
(c) Indemnification with respect to the ALB Medical Practice.
The ALB Seller (for purposes of this Section 8.3(c) and, to the extent
applicable, Section 8.4, "Indemnitor") shall jointly and severally
indemnify and hold PSC, Parent, ALB Corporation and any other
Indemnified Person harmless from and against any and all liabilities,
losses, claims, damages, actions, suits, costs, deficiencies, and
expenses (including, but not limited to, reasonable fees and
disbursements of counsel through appeal) (i) arising from or by reason
of or resulting from any breach by Indemnitor of any representation,
warranty or covenant contained in this Agreement (including the
Exhibits hereto) with respect to the Indemnitor, ALB Medical Practice
or ALB Corporation, it being understood and agreed that for the
purposes of this Section 8.3(c) and, to the extent applicable, 8.4, all
representations and warranties of the Indemnitor shall be construed by
disregarding and giving no effect whatsoever to any and all knowledge
qualifications or limitations (such as "to Seller's best knowledge" or
"to his knowledge") as if such knowledge qualifications or limitations
were stricken from such representations and warranties, and (ii)
arising out of or with respect to any liabilities of the Indemnitor,
ALB Medical Practice or ALB Corporation, known or unknown, fixed or
contingent, whatsoever existing at or prior to Closing, and (iii) for
or with respect to taxes of ALB Medical Practice for any period or
periods ending on or prior to the Closing Date, and (iv) arising out of
or resulting from any events or acts occurring on or prior to the
Closing Date in the ALB Medical Practice, including, but not limited
to, any alleged act of negligence of the Indemnitor or any employees,
agents, and independent contractors, of the ALB Medical Practice or the
ALB Corporation.
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(d) Indemnification with respect to the CEA Medical Practice.
The CEA Seller (for purposes of this Section 8.3(d) and, to the extent
applicable, Section 8.4, "Indemnitor") shall jointly and severally
indemnify and hold PSC, Parent, CEA Corporation and any other
Indemnified Person harmless from and against any and all liabilities,
losses, claims, damages, actions, suits, costs, deficiencies, and
expenses (including, but not limited to, reasonable fees and
disbursements of counsel through appeal) (i) arising from or by reason
of or resulting from any breach by Indemnitor of any representation,
warranty or covenant contained in this Agreement (including the
Exhibits hereto) with respect to the Indemnitor, CEA Medical Practice
or CEA Corporation, it being understood and agreed that for the
purposes of this Section 8.3(d) and, to the extent applicable, 8.4, all
representations and warranties of the Indemnitor shall be construed by
disregarding and giving no effect whatsoever to any and all knowledge
qualifications or limitations (such as "to Seller's best knowledge" or
"to his knowledge") as if such knowledge qualifications or limitations
were stricken from such representations and warranties, and (ii)
arising out of or with respect to any liabilities of the Indemnitor,
CEA Medical Practice or CEA Corporation, known or unknown, fixed or
contingent, whatsoever existing at or prior to Closing, and (iii) for
or with respect to taxes of CEA Medical Practice for any period or
periods ending on or prior to the Closing Date, and (iv) arising out of
or resulting from any events or acts occurring on or prior to the
Closing Date in the CEA Medical Practice, including, but not limited
to, any alleged act of negligence of the Indemnitor or any employees,
agents, and independent contractors, of the CEA Practice or the CEA
Corporation.
(e) Indemnification with respect to the RGSS Medical Practice.
The RGSS Sellers (for purposes of this Section 8.3(e) and, to the
extent applicable, Section 8.4, "Indemnitor") shall jointly and
severally indemnify and hold PSC, Parent, RGSS Corporation and any
other Indemnified Person harmless from and against any and all
liabilities, losses, claims, damages, actions, suits, costs,
deficiencies, and expenses (including, but not limited to, reasonable
fees and disbursements of counsel through appeal) (i) arising from or
by reason of or resulting from any breach by Indemnitor (or any of
them) of any representation, warranty or covenant contained in this
Agreement (including the Exhibits hereto) with respect to the
Indemnitor, RGSS Medical Practice or RGSS Corporation, it being
understood and agreed that for the purposes of this Section 8.3(e) and,
to the extent applicable, 8.4, all representations and warranties of
the Indemnitor shall be construed by disregarding and giving no effect
whatsoever to any and all knowledge qualifications or limitations (such
as "to Sellers' best knowledge" or "to their knowledge") as if such
knowledge qualifications or limitations were stricken from such
representations and warranties, and (ii) arising out of or with respect
to any liabilities of the Indemnitor, RGSS Medical Practice or RGSS
Corporation, known or unknown, fixed or contingent, whatsoever existing
at or prior to Closing, and (iii) for or with respect to taxes of RGSS
Medical Practice for any period or periods ending on or prior to the
Closing Date and (iv) arising out of or resulting from any events or
acts occurring on or prior to the Closing Date in the RGSS Medical
Practice, including, but not limited to, any alleged act of negligence
of Indemnitor (or any of them) or any employees, agents, and
independent contractors, of the RGSS Practice or the RGSS Corporation.
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(f) Indemnification with respect to the RH Medical Practice.
The RH Seller (for purposes of this Section 8.3(f) and, to the extent
applicable, Section 8.4, "Indemnitor") shall jointly and severally
indemnify and hold PSC, Parent, RH Corporation and any other
Indemnified Person harmless from and against any and all liabilities,
losses, claims, damages, actions, suits, costs, deficiencies, and
expenses (including, but not limited to, reasonable fees and
disbursements of counsel through appeal) (i) arising from or by reason
of or resulting from any breach by Indemnitor of any representation,
warranty or covenant contained in this Agreement (including the
Exhibits hereto) with respect to the Indemnitor, RH Medical Practice or
RH Corporation, it being understood and agreed that for the purposes of
this Section 8.3(f) and, to the extent applicable, 8.4, all
representations and warranties of the Indemnitor shall be construed by
disregarding and giving no effect whatsoever to any and all knowledge
qualifications or limitations (such as "to Seller's best knowledge" or
"to his knowledge") as if such knowledge qualifications or limitations
were stricken from such representations and warranties, and (ii)
arising out of or with respect to any liabilities of the Indemnitor, RH
Medical Practice or RH Corporation, known or unknown, fixed or
contingent, whatsoever existing at or prior to Closing, and (iii) for
or with respect to taxes of RH Medical Practice for any period or
periods ending on or prior to the Closing Date and (iv) arising out of
or resulting from any events or acts occurring on or prior to the
Closing Date in the RH Medical Practice, including, but not limited to,
any alleged act of negligence of the Indemnitor or any employees,
agents, and independent contractors, of the RH Practice or the RH
Corporation.
(g) Indemnification with respect to the LIA Medical Practice.
The XXX Xxxxxxx (for purposes of this Section 8.3(g) and, to the extent
applicable, Section 8.4, "Indemnitor") shall jointly and severally
indemnify and hold PSC, Parent, LIA Corporation and any other
Indemnified Person harmless from and against any and all liabilities,
losses, claims, damages, actions, suits, costs, deficiencies, and
expenses (including, but not limited to, reasonable fees and
disbursements of counsel through appeal) (i) arising from or by reason
of or resulting from any breach by Indemnitor (or any of them) of any
representation, warranty or covenant contained in this Agreement
(including the Exhibits hereto) with respect to the Indemnitor, LIA
Medical Practice or LIA Corporation, it being understood and agreed
that for the purposes of this Section 8.3(g) and, to the extent
applicable, 8.4, all representations and warranties of the Indemnitor
shall be construed by disregarding and giving no effect whatsoever to
any and all knowledge qualifications or limitations (such as "to
Sellers' best knowledge" or "to their knowledge") as if such knowledge
qualifications or limitations were stricken from such representations
and warranties, and (ii) arising out of or with respect to any
liabilities of the Indemnitor, LIA Medical Practice or LIA Corporation,
known or unknown, fixed or contingent, whatsoever existing at or prior
to Closing, and (iii) for or with respect to taxes of LIA Medical
Practice for any period or periods ending on or prior to the Closing
Date and (iv) arising out of or resulting from any events or acts
occurring
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on or prior to the Closing Date in the LIA Medical Practice, including,
but not limited to, any alleged act of negligence of Indemnitor (or any
of them) or any employees, agents, and independent contractors, of the
LIA Practice or the LIA Corporation.
8.4 INDEMNIFICATION PROCEDURE.
(a) Within 30 days after Indemnified Person receives written
notice of the commencement of any action or other proceeding, or
otherwise becomes aware of any claim or other circumstance, in respect
of which indemnification or reimbursement may be sought under Section
8.2 or Section 8.3, such Indemnified Person shall notify Indemnitor
thereof in a writing which encloses a copy of any relevant pleadings or
written notice of claim served upon the Indemnified Person. Any failure
to provide such notice shall not affect an Indemnitor's obligation to
provide indemnification hereunder except to the extent of actual
prejudice suffered from such failure to provide notice. If any such
action or other proceeding shall be brought against any Indemnified
Person, Indemnitor shall be entitled to assume the defense of such
action or proceeding with counsel chosen by Indemnitor and reasonably
satisfactory to Indemnified Person; provided, however, that any
Indemnified Person may at its own expense retain separate counsel to
participate in such defense. Notwithstanding the foregoing, Indemnified
Person shall have the right to employ separate counsel at Indemnitor's
expense and to control its own defense of such action or proceeding if,
in the reasonable opinion of counsel to such Indemnified Person, (a)
there are or may be legal defenses available to such Indemnified Person
that are different from or additional to those available to Indemnitor
and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between
Indemnitor and such Indemnified Person that would make such separate
representation advisable, or (c) injunctive or criminal relief is
sought, or (d) such action or proceeding threatens loss of or adverse
effect on the Indemnified Person's license to practice medicine or to
participate in government or third party payor reimbursement programs
or loss of hospital privileges; provided, however, that in no event
shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys in any jurisdiction in any one action
or proceeding or group of related actions or proceedings. Indemnitor
shall not, without the prior written consent of any Indemnified Person,
settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such
Indemnified Person is a party unless such settlement, compromise or
consent includes an unconditional release of such Indemnified Person
from all liability arising or potentially arising from or by reason of
such claim, action or proceeding and does not provide for any
non-monetary relief or remedy against such Indemnified Person.
(b) If the Indemnitor fails to defend any action or proceeding
hereunder, or having commenced to defend such action or proceeding
hereunder, fails to continue such defense, the Indemnified Person may
conduct the defense of any such action or proceeding, subject to its
right of indemnification hereunder, and any settlement, compromise or
final judgment made or entered into in connection with such action or
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proceeding shall be binding upon the Indemnitor as fully as though such
Indemnitor had conducted such defense as required hereby.
(c) The Indemnified Person shall cooperate fully with the
Indemnitor in connection with the litigation, arbitration, contest,
compromise and settlement of all actions and proceedings hereunder and
shall make available to Indemnitor and its agents all books, records
and other information reasonably necessary to defend, settle and
investigate such actions and proceedings, provided that at the expense
of Indemnitor an appropriate protective order for any confidential or
proprietary information shall be sought in any such proceeding at the
request of Indemnified Person.
(d) The procedure set within this Section 8.4 shall be
applicable to third party claims against an Indemnified Person if such
Indemnified Person seeks indemnification hereunder or asserts a claim
for damages based on breach of covenant, representation or warranty
hereunder with respect to the underlying event.
8.5 LIMITATIONS UPON OBLIGATIONS.
(a) Anything in this Section 8 to the contrary
notwithstanding, it is expressly acknowledged and agreed that no
payment shall be made hereunder by PSC, PSC Management or Parent
(individually and collectively a "Parent Party") to Sellers or any
other Indemnified Person described in Section 8.2 or, by a Seller or
Sellers to a Parent Party or any other Indemnified Person described in
Section 8.3, on claims for indemnification under Sections 8.2 or 8.3 or
based on breach of any covenant, representation or warranty, until the
aggregate of all such claims against Sellers under Section 8.3, or
against a Parent Party under Section 8.2, shall exceed $10,000, in
which event the Indemnified Person or Persons holding such claim shall
be entitled to indemnification or to damages with respect to all
amounts in excess of such $10,000.
(b) The amount of the Indemnitor's liability under this
Article 8 or for breach of representation or warranty shall be
determined taking into account any applicable insurance proceeds
actually received by the Indemnified Person with respect to the
underlying event that triggers the indemnification obligation.
(c) OTHER THAN FOR CLAIMS BASED ON FRAUD, WILLFUL MISCONDUCT
OR BAD FAITH, NO PARTY SHALL BE LIABLE TO ANY OTHER PARTY UNDER ANY
PROVISION OF THIS AGREEMENT FOR INDIRECT, PUNITIVE OR CONSEQUENTIAL
LOSSES OR DAMAGES (INCLUDING ANY LOSS OF REVENUE OR PROFIT) ARISING OUT
OF THIS AGREEMENT.
8.6 RIGHT TO OFFSET.
(a) Subject to the limitations set forth in Section 8.5 and
this Section 8.6, in the event that following the Closing a Parent
Party (or an Indemnified Person defined in
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Section 8.3) has a claim for indemnification against a Seller under
Section 8.3 (a "PSC Claim"), which either (A) remains unpaid for more
than ten (10) days after it has been "finally resolved" (as defined
below), or (B) results from damage suffered by a Parent Party (or an
Indemnified Person defined in Section 8.3) without a claim being
asserted by a third party, then such Parent Party may, upon not less
than ten (10) days written notice (an "Offset Notice") to such Seller,
elect to offset an amount equal to the damages suffered by such Parent
Party (or an Indemnified Person defined in Section 8.3) as a result of
such PSC Claim, against
(i) the portion of any amounts payable under the
PSC Debenture or Guaranty to the Paying Agent on behalf of
such Seller, as determined by multiplying (1) the percentage
set forth next to such Seller's name on Exhibit 8.6 by (2) the
amount of the payment then due and payable under the PSC
Debenture or Guaranty;
(ii) any other amounts owed to such Seller pursuant
to this Agreement; and/or
(iii) the portion of any amounts due or owing by
Parent or PSC Management to New York NewCo or New Jersey NewCo
pursuant to Section 5.1(a) of the applicable MSA that is
attributable to such Seller, as determined by multiplying (1)
the percentage set forth next to such Seller's name on Exhibit
8.6 by (2) the "Amounts Available for Offset" (as defined in
Section 5.1(b) of each MSA) of the MSA with the NewCo which
employs such Seller, subject to the limitations contained in
Section 5.1(b) of the MSA with the NewCo which employs such
Seller;
(b) Notwithstanding anything contained in this Section
8.6 to the contrary, if a PSC Claim arises from the claim of a third
party and such claim has not been "finally resolved" (as defined
below), and Seller notifies the Parent Party (or an Indemnified Person
defined in Section 8.3) asserting the claim for indemnification and
offset within ten (10) days after receipt of the Offset Notice that
such Seller objects to the exercise of such right of offset and elects
to undertake the defense of such PSC Claim in accordance with the
provisions of Article 8.4 (including payment of attorney's fees, court
costs and the cost of posting any bond required during the litigation,
arbitration or other adjudication of the claim and any appeal thereof),
then no Parent Party or other Person shall be entitled to offset any
amount with respect to such PSC Claim against any moneys owing to any
Seller under the PSC Debenture, Guaranty, either MSA or any other
agreement until such PSC Claim is "finally resolved".
If the Seller against whom the PSC Claim is asserted does not
notify the Parent Party who sent the Offset Notice that he objects to
the right of offset within such ten (10) day period, or having assumed
the defense of the PSC Claim, fails to continue such defense in
accordance with this Article 8, Seller shall be deemed to have waived
any
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objection thereto and the Parent Party shall be free to exercise such
offset as provided in Section 8.6(a).
(c) For purposes hereof, a PSC Claim shall be deemed to be
"finally resolved" upon (1) the final determination of a court,
arbitrator or regulatory or other governmental authority having
jurisdiction which is subject to no further appeal, or (2) the
settlement or compromise of the PSC Claim, or consent thereto, by such
Seller.
(d) Each "Offset Notice" (other than pursuant to Section 7.7)
shall specify (i) the basis for asserting the offset, (ii) the amount
of the offset and the method used to calculate such amount, and (iii) a
copy of any pleadings, or written notice of claim served upon the
Parent Party or other Indemnified Person evidencing the factual dispute
underlying such PSC Claim.
(e) Any dispute as to the exercise of a right of offset by a
Parent Party with respect to a PSC Claim shall be determined in
accordance with Section 10.20 hereinbelow.
SECTION 9. TERMINATION.
9.1 RIGHT TO TERMINATE. This Agreement may be terminated at any
time prior to the Closing Date:
(a) by the mutual written consent of Parent, PSC and Sellers;
(b) by either PSC, Parent or Sellers upon prior written notice
to the other party
(i) if any court or governmental or regulatory agency,
authority or body shall have enacted, promulgated or issued
any statute, rule, regulation, ruling, writ or injunction, or
taken any other action, restraining, enjoining or otherwise
prohibiting the transactions contemplated hereby and all
appeals and means of appeal therefrom have been exhausted; or
(ii) if the Closing shall not have occurred on or before
May 31, 1998 or such later date as the parties may agree to;
provided, however, that the right to terminate this Agreement
pursuant to this Section 9.1(b)(ii) shall not be available to
any party whose breach of any representation or warranty or
failure to perform or comply with any obligation or condition
under this Agreement has been the cause of, or resulted in,
the failure of the Closing to occur on or before such date;
(c) by PSC or Parent, upon prior written notice to Sellers, if
any of the conditions specified in Section 5 have not been met, or
waived in writing by Parent, prior to June 1, 1998 (or any extension
thereof agreed upon by the parties in writing);
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(d) by Sellers, upon prior written notice to Parent, if any of
the conditions specified in Section 6 shall not have been met, or
waived in writing by Sellers, prior to June 1, 1998 (or any extension
thereof agreed upon by the parties in writing).
9.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement pursuant to
this Section 9, this Agreement shall forthwith become null and void and
there shall be no liability on the part of any of the parties hereto or
their respective officers, directors or affiliates with respect to this
Agreement, except as provided in 9.2(b) and 9.2(c) below, and except as
may arise under Sections 1.6, 2.22, 3.3, and 7.5 which shall remain in
full force and effect in accordance with their terms after any such
termination of this Agreement.
(b) If the transactions contemplated by this Agreement are not
consummated on or before June 1, 1998, for any reason other than (i)
the Sellers' decision not to proceed with the transactions due to a
Material Adverse Change in the financial condition of Parent since
December 31, 1997, (ii) Parent's decision not to proceed with the
transactions as a result of its due diligence unless such decision is
due to the current per annum revenue "run rate" from all Practices
being less than $23,350,000 in the aggregate measured on an accrual
basis, or (iii) the inability of Parent to obtain the consent of its
senior lender, NationsBank, to this Agreement, in accordance with the
provisions of Section 6.9, Sellers, jointly and severally, agree to pay
Parent upon demand a "break-up" fee equal to $250,000, which shall
constitute Sellers' total liability to PSC and Parent for damages and
PSC and Parent shall have no right to other damages, specific
performance or equitable relief as a result of any breach by Sellers of
their obligations under this Agreement, which rights are hereby
expressly waived. Notwithstanding the foregoing, no break-up fee shall
be payable by Sellers to PSC or Parent if an alternative transaction,
as contemplated by that certain letter agreement between Parent and
certain of the Sellers dated March 26, 1998 (the terms of which are
hereby incorporated by reference), is consummated on or before June 1,
1998.
(c) In the event that all conditions precedent specified in
Section 5 to PSC's and Parent's obligation to consummate the
transactions contemplated by this Agreement have been satisfied in
full, and Parent and PSC nevertheless refuse to consummate the
transactions contemplated by this Agreement in breach hereof, PSC and
Parent jointly and severally agree to pay Sellers a break-up fee of
$250,000 which break-up fee shall constitute PSC's, PSC Management's
and Parent's total liability to Sellers for damages for breach of this
Agreement, and Sellers shall have no rights to other damages, specific
performance or equitable relief, which are hereby waived.
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SECTION 10. MISCELLANEOUS.
10.1 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand delivery,
or by facsimile and reputable overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:
If to Parent or PSC:
PHYSICIANS SPECIALTY CORP.
0000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
with a copy of each notice directed to PSC or Parent to:
Xxxxxxx X. Xxxxx, Esq.
Xxxxxxxx Xxxxxxx LLP
0000 XxxxxxxXxxx Xxxxx
000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, Xxxxxxx 00000-0000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
If to any Seller:
To Such Seller
c/o Xxxxxx Xxxxx, M.D.
0000 0xx Xxxxxx
Xxx Xxxx, X.X. 00000
with a copy to:
Xxxx Lever, Esq.
Xxxxxxx & Xxxxxxxxx, LLP
Xxx Xxxxx Xxxxxxxx, 00xx Xxxxx
Xxxxx Xxxxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
If to the Paying Agent:
[address to be provided
by Sellers in writing
prior to the Closing]
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All such communications shall be deemed to have been delivered on the date of
delivery or on the next business day following the deposit of such
communications with the overnight courier. Any party may change the address to
which notices are to be sent to such party by delivering written notice of such
change in accordance with the provisions of this Section 10.1.
10.2 FURTHER ASSURANCES. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement. Sellers and the
Corporations will execute and deliver from time to time thereafter, at the
request of PSC, all such further instruments of conveyance, assignment and
further assurance as may reasonably be required in order to vest in and confirm
to PSC each of Seller's right, title and interest in and to the Shares.
10.3 PUBLIC DISCLOSURES. Except as otherwise required by law, no
party to this Agreement shall make any public or other disclosure of this
Agreement or the transactions contemplated hereby without the prior consent of
the other parties. The parties to this Agreement shall cooperate with respect to
the form and content of any such disclosures.
10.4 GOVERNING LAW. This Agreement shall be interpreted, construed
and enforced in accordance with the laws of the State of New York, applied
without giving effect to any conflict-of-laws principles.
10.5 "INCLUDING". The word "including," when following any general
statement, term or matter, shall not be construed to limit such statement, term
or matter to the specific terms or matters as provided immediately following the
word "including" or to similar items or matters, whether or not non-limiting
language (such as "without limitation," "but not limited to" or words of similar
import) is used with reference to the word "including" or the similar items or
matters, but rather shall be deemed to refer to all other items or matters that
could reasonably fall with the broadest possible scope of the general statement,
term or matter.
10.6 "KNOWLEDGE". "To the knowledge," "to the best knowledge,
information and belief" or any similar phrase, shall be deemed to include the
actual knowledge of the party making the representation and any information that
such party should have known after reasonable investigation, unless otherwise
expressly provided. Unless otherwise expressly provided herein, each Seller
shall be deemed to have knowledge of any facts known to the other Sellers of
such Sellers' respective Corporation or Practice. PSC and Parent shall be deemed
to have knowledge of each other and of PSC Management. Unless otherwise
expressly provided herein, any entity shall be deemed to have knowledge of any
facts known to its officers and directors.
10.7 "MATERIAL". An individual claim, obligation or liability shall
be deemed to be "material" if the amount thereof exceeds $5,000 or involves the
violation of any applicable federal, state or local statute, rule or regulation.
A contract or lease shall be deemed to be material if it requires a single
payment in excess of $5,000 or payment for any future 12-month period in excess
of $5,000, except that no contract for the acquisition of inventory items or
consumable supplies shall be deemed material unless such contract cannot be
terminated without
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cause by a Seller on not more than 30 days notice, or has, as of the Closing
Date, an amount payable with respect thereto of more than $5,000.
10.8 "MATERIAL ADVERSE CHANGE" OR "MATERIAL ADVERSE EFFECT".
"Material Adverse Change" or "Material Adverse Effect" means, when used in
connection with the parties to this Agreement, any change, effect, event or
occurrence that has, or is reasonably likely to have individually or in the
aggregate, a material adverse impact on the business or financial position of
such party and its subsidiaries taken as a whole; provided, however, that
"Material Adverse Change" and "Material Adverse Effect" shall be deemed to
exclude the impact of (i) changes in generally accepted accounting principles,
(ii) changes in law generally applicable to the industry, unless same materially
adversely affects reimbursement rules, and (iii) any changes resulting from any
restructuring or other similar charges or write-offs taken by Sellers or the
Corporations with the consent of PSC.
10.9 "HAZARDOUS MATERIALS". The term "Hazardous Materials" means any
material which is or may potentially be hazardous to the health or safety of
human or animal life or vegetation, regardless of whether such material is found
on or below the surface of the ground, in any surface or underground water,
airborne in ambient air or in the air inside any structure built or located upon
or below the surface of the ground or in building materials or in improvements
of any structures, or in any personal property located or used in any such
structure, including, but not limited to, all hazardous substances, imminently
hazardous substances, hazardous wastes, toxic substances, infectious wastes,
pollutants and contaminants from time to time defined, listed, identified,
designated or classified as such under any Environmental Laws (as defined in
Section 10.10) regardless of the quantity of any such material.
10.10 "ENVIRONMENTAL LAWS". The term "Environmental Laws" means any
federal, state or local statute, regulation, rule or ordinance, and any judicial
or administrative interpretation thereof, regulating the use, generation,
handling, storage, transportation, discharge, emission, spillage or other
release of Hazardous Materials or medical waste or relating to the protection of
the environment or the disposal of medical waste.
10.11 CAPTIONS. The captions or headings in this Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
10.12 INTEGRATION OF EXHIBITS. All Exhibits attached to this
Agreement are integral parts of this Agreement as if fully set forth herein, and
all statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.
10.13 ENTIRE AGREEMENT. This instrument, including all Exhibits
attached hereto, contains the entire agreement of the parties and supersedes any
and all prior or contemporaneous 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
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writing signed by the party or parties against whom enforcement of any waiver,
change, modification, extension, discharge or termination is sought.
10.14 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument.
10.15 BINDING EFFECT. This Agreement shall be binding on, and shall
inure to the benefit of, the parties hereto, and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement.
10.16 NO RULE OF CONSTRUCTION. The parties acknowledge that this
Agreement was initially prepared by PSC and that all parties have read and
negotiated the language used in this Agreement. The parties agree that, because
all parties participated in negotiating and drafting this Agreement, no rule of
construction shall apply to this Agreement which construes ambiguous language in
favor of or against any party by reason of that party's role in drafting this
Agreement.
10.17 COSTS OF ENFORCEMENT. In the event that PSC, PSC Management or
Parent on the one hand, or Sellers, on the other hand, file suit in any court
against any other party to enforce the terms of this Agreement against the other
party or to obtain performance by it hereunder, the prevailing party will be
entitled to recover all reasonable out of pocket costs, including reasonable
attorneys' fees and court costs, from the other party as part of any judgment in
such suit. The term "prevailing party" shall mean the party in whose favor final
judgment after appeal (if any) is rendered with respect to the claims asserted
in the complaint. "Reasonable attorneys' fees" include those attorneys' fees
reasonably incurred in obtaining a judgment in favor of the prevailing party and
all appeals.
10.18 ASSIGNMENT. The parties also hereby agree that this Agreement
shall not be assigned or transferred by either party without the prior written
consent of the other; provided, however, that this Agreement may be assigned, by
PSC or Parent, in its sole discretion, to any parent or subsidiary of PSC or
Parent or to any party acquiring all or substantially all PSC's or Parent's
assets so long as such assignee assumes in writing all of the obligations of the
assigning party hereunder. Any such assignment shall not affect Parent's or
PSC's obligations hereunder or under any documents executed by Parent or PSC
pursuant to this Agreement. Notwithstanding the foregoing, all Sellers agree and
consent to each of Parent, PSC and PSC Management granting to their factor(s) or
lender(s) who provide senior debt financing to Parent or any of its affiliates
for their general corporate needs (whether one or more, the "Lender") a security
interest in all of their respective right, title, and interest in and under this
Agreement and the other documents, instruments and agreements executed by the
parties in connection with this Agreement as security for each of Parent's and
such affiliate's indebtedness and other obligations owing to the Lender, whether
now existing or hereafter arising or incurred.
10.19 PERIOD PRIOR TO CLOSING. In consideration of the substantial
expenditures of time, effort and expense to be undertaken by Parent and PSC in
connection with the negotiation of the
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Agreement, and the related due diligence investigations and reviews, each of the
Sellers severally undertakes and agrees that he or she shall not, and shall not
permit such Seller's Practice to, between the date of the execution of this
Agreement and prior to termination of this Agreement, directly or indirectly,
provide any information to, or enter into or conduct any discussions,
negotiations or transactions of a similar subject matter as the transactions
contemplated by this Agreement with, any other prospective purchaser or other
party, including without limitation any negotiations for a transaction relating
to any sale of any of the capital stock or substantially all the assets of the
Practices or Corporations, or for the entering into by the Practices or the
Sellers, or any of them, of a management services agreement with a physician
practice management company, other than as contemplated by this Agreement.
10.20 ARBITRATION. All disputes, controversies, differences or claims
arising out of, relating to or in connection with the exercise by Parent, PSC or
PSC Management of a right of offset pursuant to Section 7.7 or 8.6 of this
Agreement shall be finally settled by binding arbitration in New York, New York
pursuant to the arbitration rules of the American Arbitration Association.
Arbitration shall take place before one arbitrator appointed in accordance with
such rules. The governing law of the arbitration shall be the law of the State
of New York. Any award or decision rendered by the arbitrator shall clearly set
forth the factual and legal basis for such award or decision. Judgment on the
award or decision rendered by the arbitrator shall be nonappealable and
enforceable in any court having jurisdiction thereof. The costs of the
arbitration, including administrative, legal and arbitrator fees, shall be borne
by the losing party or according to the discretion of the arbitrator if the
parties disagree as to which party is the losing party under the award or
decision. Parent, PSC and PSC Management shall not be in breach or default of
their respective obligations under this Agreement, the PSC Debenture, Guaranty,
Security Agreement or either MSA by virtue of exercising any right of offset in
accordance with the procedure set forth in Section 7.7 or 8.6 of this Agreement
so long as any amounts that are offset but are found by the arbitrator to be due
and owing by Parent, PSC or PSC Management are paid to the Paying Agent not more
than ten (10) days after the rendering of the arbitration award or decision. Any
such arbitration award shall include interest at 6% per annum from the date of
any such wrongful offset on the amount which was wrongfully offset until the
date of the arbitration award. Any amounts not paid within such ten (10) day
period shall bear interest at the rate of interest announced or published from
time to time by NationsBank, N.A., plus four percent (4%) per annum from the
date of the award.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
"PSC"
PSC ACQUISITION CORP.
By /s/ XXXXXXX X. XXXXXXX
--------------------------------
Title: Chief Executive Officer
--------------------------------
"PARENT"
PHYSICIANS' SPECIALTY CORP.
By: /s/ XXXXXXX X. XXXXXXX
--------------------------------
Title: Chief Executive Officer
--------------------------------
"SELLERS"
/s/ XXXXXX XXXXX, M.D.
--------------------------------------
XXXXXX XXXXX, M.D.
/s/ XXX XXXXXXXXX, M.D.
--------------------------------------
XXX XXXXXXXXX, M.D.
/s/ XXXXXX XXXXX, M.D.
--------------------------------------
XXXXXX XXXXX, M.D.
/s/ XXXXXX XXXXX, M.D.
--------------------------------------
XXXXXX XXXXX, M.D.
--------------------------------------
/s/ XXXXXXX XXXXXXX, M.D.
--------------------------------------
XXXXXXX XXXXXXX, M.D.
/s/ XXXX XXXXXX, M.D.
--------------------------------------
XXXX XXXXXX, M.D.
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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\
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
/s/ XXX XXXXXXXXXX, M.D.
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XXX XXXXXXXXXX, M.D.
/s/ XXXXX XXXXXX, M.D.
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XXXXX XXXXXX, M.D.
/s/ XXXXX XXXXXX, M.D.
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XXXXX XXXXXX, M.D.
/s/ XXX XXXXXXXXX, M.D.
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XXX XXXXXXXXX, M.D.
/s/ XXXXXXX XXXXXXXXX, M.D.
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XXXXXXX XXXXXXXXX, M.D.
/s/ XXXX XXXXXXX, M.D.
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XXXX XXXXXXX, M.D.
/s/ XXXXX XXXXXX, M.D.
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XXXXX XXXXXX, M.D.
/s/ XXXXX XXXXXXXXX, M.D.
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XXXXX XXXXXXXXX, M.D.
/s/ XXXXXXX XXXXXXXXX, M.D.
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XXXXXXX XXXXXXXXX, M.D.
/s/ XXXXXX XXXX, M.D.
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XXXXXX XXXX, M.D.
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EXHIBIT 7.4 RESTRICTED TERRITORIES
========================================================================================================================
SELLER PRACTICE LOCATION RESTRICTED TERRITORY
========================================================================================================================
Xxxxx Xxxxxx, M.D. 00 Xxxx Xxxx Xxxx Xxxxxxxxx within a ten (10) mile radius
Xxxxx Xxxxxx, M.D. Xxxxx Xxxxxx, XX 00000 of Practice Location
Xxx Xxxxxxxxx, M.D.
Xxxxxxx Xxxxxxxxx, M.D.
========================================================================================================================
Xxxx Xxxxxxx, M.D. The Xxxxxx Information Center Territory within a ten (10) mile radius
Xxxxx Xxxxxx, M.D. Stoneleigh Avenue of Practice Location
Xxxxx 000
Xxxxxx, XX 00000
========================================================================================================================
Xxxxx Xxxxxxxxx, M.D. 000 Xxxxx Xxxxxx Xxxxxxxxx within a ten (10) mile radius
Xxxxx Xxxxxx, XX 00000 of Practice Location
========================================================================================================================
Xxxxxxx Xxxxxxxxx, M.D. _ 0000 Xxxxxxxxx Xxxx Xxxxxxxxx within a ten (10) mile radius
Suite 4 of Practice Location
Xxxxxxxxx, XX 00000
, 000 Xxxxx Xxxxxxxx Xxxxxxxxx within a ten (10) mile radius
Xxxxxxxxx, XX 00000 of Practice Location
========================================================================================================================
Xxxxxx Xxxx, M.D. 0 Xxx Xxxxxxxxxx Xxxx Xxxxxxxxx within a ten (10) mile radius
Suite 1B of Practice Location
Xxxxx Xxxxxx, XX 00000
========================================================================================================================
Xxxxxx Xxxxx, M.D. 000-00 00xx Xxxxxx Xxxxxxxxx within a six (6) mile radius
Suite 100 of Practice Location
Xxxxxxx, XX 00000
========================================================================================================================
Xxx Xxxxxxxxx, M.D. 000 Xxxxx Xxxx Xxxxxx Xxxxxxxxx within a ten (10) mile radius
Xxxxxxxxx, XX 00000 of Practice Location
========================================================================================================================
Xxxxxx Xxxxx, M.D. 0000 0xx Xxxxxx Xxxxxxxxx within a radius five avenues
Xxxxxx Xxxxx, M.D. Xxx Xxxx, XX 00000 east and west and thirty blocks north
and south of Practice location
========================================================================================================================
Xxxxxxx Hamburg, M.D. 000 Xxxxxx Xxxxxxx Xxxx Xxxxxxxxx within a ten (10) mile radius
Xxxxxxxxx, XX 00000 of Practice Location
========================================================================================================================
Xxxx Xxxxxx, M.D. 000 Xxx Xxxxxxx Xxxx Xxxxxxxxx within a ten (10) mile radius
Xxx Xxxxxxxxxx, M.D. Suite 100 of Practice Location
Xxxxxxxxx, XX 00000
========================================================================================================================
54
EXHIBITS
Exhibit 1.1A Form of Debenture
Exhibit 1.1B Form of Security Agreement
Exhibit 1.1C Discharged Debt
Exhibit 1.1E Allocation of Purchase Price Among Sellers
Exhibit 1.4 Employment Arrangements
Exhibit 1.5A Form of New York Management Services Agreement
Exhibit 1.5B Form of New Jersey Management Services Agreement
Exhibit 1.10 Consulting Agreement
Exhibit 2.1A-2.1F Addresses and Share Ownership of Seller and
Authorized and Issued Capital Stock of Corporations
Exhibit 2.2A-2.1F Certified Articles/Certificates of Incorporation and Bylaws
Exhibit 2.4A-2.4F Permits, Licenses and Governmental Authorizations
Exhibit 2.8A-2.8G December 31, 1997, 1996 and 1995 Financial Statements of Practices
Exhibit 2.9A-2.9F Liabilities not Disclosed in Financial Statements of Practices
Exhibit 2.10A-2.10G Leases
Exhibit 2.11A-2.11G Personal Property of Practices
Exhibit 2.13A-2.13F Principal Places of Business of Practices and PDI
Exhibit 2.15A-2.15G Intellectual Property Rights
Exhibit 2.16A-2.16G Directors and Officers of Practices; Payroll Information
Exhibit 2.17A-2.17G Legal Proceedings
Exhibit 2.18A-2.18G Contracts (Other than Leases)
Exhibit 2.19A-2.19G Subsequent Events
Exhibit 2.20A-2.20F Accounts Receivable of Practices
Exhibit 2.21A-2.21F Tax Returns of Practices for 1997, 1996 and 1995
Exhibit 2.24A-2.24F Insurance Policies of Practices
Exhibit 2.25A-2.25G Employee Benefit Plans
Exhibit 2.28A-2.28G Medicare, Medicaid and Other Third Party Payor Payment Liabilities
Exhibit 5.9 Form of Legal Opinion for Seller's Counsel
Exhibit 5.12A-5.18F Release of Liens
Exhibit 5.13 Option for Shares of New York NewCo
Exhibit 5.14 Option for Shares of New Jersey NewCo
Exhibit 5.18A-5.18F Form of Lease Assignment
Exhibit 6.10 Form of Legal Opinion of Parent's Counsel
Exhibit 7.4 Practice's Office Locations and Restricted Territory for Covenant Not to
Compete
Exhibit 8.6 Sellers' Respective Percentage Amounts for Purposes of Offset
