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EXHIBIT 10.28
ASSET ACQUISITION AGREEMENT
by and among
Physicians' Specialty Corp.
PSC Management Corp.
and
▇.▇. ▇▇▇▇▇▇, III, M.D., P.C.
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ASSET ACQUISITION AGREEMENT
ASSET ACQUISITION AGREEMENT (this "Agreement"), dated as of February
20, 1997, by and among PSC MANAGEMENT CORP., a Delaware corporation ("PSC");
PHYSICIANS' SPECIALTY CORP., a Delaware corporation ("PARENT"); ▇.▇. ▇▇▇▇▇▇,
III, M.D., P.C., an Alabama professional corporation ("Seller"); ▇.▇. ▇▇▇▇▇▇,
III, M.D. and ▇▇▇▇ ▇▇▇▇▇▇▇, M.D. both individual residents of the State of
Alabama (individually a "Shareholder," and collectively the "Shareholders").
W I T N E S S E T H:
WHEREAS, Seller operates a medical practice which provides
otolaryngology and other medical and surgical services from offices located in
the metropolitan Birmingham, Alabama area ("Business");
WHEREAS, Shareholders are the only shareholders of Seller;
WHEREAS, Parent through its wholly-owned subsidiaries is engaged in
the business of acquiring the assets of and managing medical practices;
WHEREAS, PSC is a wholly-owned subsidiary of Parent;
WHEREAS, Seller wishes to convey to PSC, and PSC wishes to acquire
from Seller, substantially all of the properties and assets of Seller, subject
to certain liabilities set forth herein, all upon the terms and subject to the
conditions set forth herein.
NOW THEREFORE, in consideration of the premises, the mutual promises
and covenants hereinafter set forth, and the contemplated delivery by PSC to
Seller of shares of the Common Stock of Parent, and for other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the parties
hereto do hereby agree as follows:
SECTION 1. TERMS OF THE SALE AND ACQUISITION OF ASSETS.
The sale of the assets of Seller hereunder and the acquisition thereof
by PSC shall be made at the Closing (as defined in Section 1.12) based on the
respective representations, warranties and agreements of the parties hereto and
subject to the terms and conditions herein stated.
1.1 CONVEYANCE OF ASSETS. Subject to the provisions of Section
1.2 hereof, at the Closing Seller shall convey, transfer and assign to PSC and
PSC shall acquire from Seller all of Seller's right, title and interest in and
to the properties and assets of
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Seller as a going concern, including, without limitation, all items of personal
property and other assets used in connection with the Business (except as
otherwise provided herein), whether or not any of such assets have any value
for accounting purposes (individually "Asset," and collectively "Assets"), free
and clear of all obligations, security interests, liens, claims and
encumbrances whatsoever, except as specifically assumed by PSC pursuant to
Section 1.3(b). Without limiting the generality of the foregoing, the Assets
specifically include:
(a) All real estate, personal property, plant,
furniture, fixtures and equipment owned by Seller which are utilized in or
related to the Business, including, but not limited to, all items owned by
Seller identified on Exhibit 1.1(a) attached hereto.
(b) All contracts, agreements and commitments of
Seller and/or the Shareholders related to the Business identified on Exhibit
2.6 and Exhibit 2.14 attached hereto and set forth on Exhibit 1.3(b) and all
contracts, agreements and commitments of Seller and/or the Shareholders related
to the Business and entered into after the date hereof and prior to the Closing
in the ordinary course of business and not in violation of Section 7.1 hereof
(but excluding this Agreement and the agreements, instruments and documents
executed and delivered by PSC pursuant to this Agreement and also excluding
physician employment agreements of Seller and any contracts with nurse
practitioners and physician assistants of Seller) and all contract rights of
Seller incident thereto, and all general intangibles of Seller.
(c) Subject to applicable laws and regulations,
all inventories maintained by Seller as of the Closing Date as described in
Exhibit 1.1(c).
(d) Subject to applicable laws and regulations,
all accounts receivable of Seller, notes receivable and other rights to receive
payments owing to Seller in existence on the Closing Date, and all proceeds and
cash arising from the collection of same from and after the Closing Date.
(e) Subject to applicable laws and regulations,
all patient accounts receivable records of Seller.
(f) The books and records of Seller relating to
the Assets, all of which shall be delivered to PSC, or such person as PSC may
designate, on the Closing Date.
(g) Subject to applicable laws and regulations,
all transferable licenses and other regulatory approvals necessary for or
incident to the operation of the Assets.
(h) Seller's right to use the name "▇.▇. ▇▇▇▇▇▇,
III, M.D., P.C." and all other trade and service marks and names and goodwill
associated therewith, and all customer lists, clinical and administrative
policy and procedure manuals, trade
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secrets, copyrights, patents, marketing and promotional materials (including
audiotapes, videotapes and printed materials) and all other property rights
required for or incident to the marketing of the products and services of the
Business, and all books and records relating thereto.
(i) All of Seller's prepaid expenses, prepaid
insurance, deposits and similar items.
1.2 EXCLUDED ASSETS. There shall be excluded from the Assets
transferred and conveyed hereunder, and Seller shall retain all of its right,
title and interest in and to, the assets set forth on Exhibit 1.2 attached
hereto and the following assets:
(a) The minute books of Seller and similar
corporate records of Seller.
(b) All considerations to be delivered by PSC on
the Closing Date.
(c) All assets listed in Exhibit 1.2 hereto.
(d) Patient charts, records and files.
1.3 ACQUISITION PSC PRICE; ASSUMPTION OF LIABILITIES. As
consideration for the sale of the Assets by Seller, at Closing PSC shall
provide Seller with the following considerations:
(a) Parent Shares. At the Closing Parent shall
issue to Seller shares of the Common Stock, par value $.001 per share, of
Parent (the "Parent Common Stock") with a total value equal to $992,000 subject
to any adjustments described in Section 1.3(b) or Section 5.10 hereof (the
"Acquisition Price"). The number of shares of Parent Common Stock which shall
constitute the Acquisition Price shall be determined by dividing the
Acquisition Price by the Initial Public Offering Price of the Parent Common
Stock. For purposes of this Section 1.3(a), the "Initial Public Offering
Price" shall mean the price for the shares of Parent Common Stock as priced and
sold on a gross basis before taking into account the managing underwriters'
commissions and costs associated with Parent's initial public offering (the
"IPO"). Assuming an IPO Price of $9.50 per share and no adjustments pursuant
to Section 5.10, a total of 104,421 shares of Parent Common Stock would be
issued as the Acquisition Price. The Acquisition Price shall be allocated to
the acquisition of the Assets as set forth on Exhibit 1.3(a)(1) attached
hereto. The parties shall use such allocation in completing Form 8594 and
satisfying any and all other reporting requirements of the Internal Revenue
Service or any other state or local taxing authority.
(b) Assumption of Liabilities. Except as
otherwise provided herein, at the Closing PSC shall assume up to One Hundred
Sixty-Eight Thousand
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Dollars ($168,000) of Seller's stated liabilities in the form of accounts
payable, accrued expenses, notes payable and capitalized leases and shall
perform or discharge on or after the Closing Date (as defined in Section 1.12),
only those contracts, leases, commitments, obligations and liabilities of
Seller which are listed on Exhibit 1.3(b) attached hereto (collectively, the
"Obligations"), except to the extent that such contracts, leases, commitments,
obligations and liabilities are excluded by virtue of the operation of other
provisions of this Agreement, provided, that in the event the amount of stated
liabilities assumed by PSC under this Section 1.3(b) exceeds $168,000, the
Acquisition Price shall be reduced on a dollar-for-dollar basis by the amount
of such excess. PSC agrees to promptly pay and discharge such Obligations as
the same become due and payable.
(c) Liabilities Not Assumed. Notwithstanding any
contrary provision contained herein, PSC shall not be deemed to have assumed,
nor shall PSC assume (i) any liability which may be incurred by reason of any
uncured material breach of or any monetary default under such contracts,
leases, commitments or obligations which occurred prior to the Closing Date;
(ii) any liability for any employee benefits payable to employees of Seller,
including, but not limited to, liabilities arising under any Seller Plan (as
defined in Section 2.21 hereto) and liabilities for accrued sick leave or
vacation days; (iii) any liability based upon or arising out of a violation of
any antitrust or similar restraint-of-trade laws by Seller, including, without
limiting the generality of the foregoing, any such antitrust liability which
may arise in connection with agreements, contracts, commitments or orders for
the sale of goods or provision of services by Seller reflected on the books of
Seller at or prior to the Closing Date; (iv) any liability based upon or
arising out of overpayments due to the Medicare and/or Medicaid programs, any
other third party payor, or any liability based upon or arising out of a
violation of any false claim, anti-kickback, prohibition or self- referral laws
or similar fraud and abuse laws by Seller; (v) any medical malpractice
liability associated with the Business or Seller or any person associated with
the Business or Seller; (vi) any liability based upon or arising out of any
tortious conduct or wrongful actions of Seller or any Shareholder; or (vii) any
liability for the payment of any taxes imposed by law on Seller arising from or
by reason of the transactions contemplated by this Agreement or otherwise.
1.4 EMPLOYMENT ARRANGEMENTS.
(a) Following the Closing PSC will initially
offer employment as employees-at-will to all persons (other than physicians
and such personnel as are specified in the Management Services Agreement,
defined in Section 1.5 below) who are employees of Seller on the Closing Date;
Seller's employees who become employed by PSC are hereinafter referred to as
"Transferred Employees" and the physicians and such other personnel as are
specified in the Management Services Agreement, but who will not become
employed by PSC are hereafter referred to as the "Practice Employees."
(b) As of the Closing Date, Seller will: (i)
terminate any employment contracts applicable to those persons who are employed
by PSC as
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Transferred Employees pursuant to Section 1.4(a) hereof; and (ii) terminate the
participation of all such employees in all Seller Plans, such termination to be
effected in accordance with and to the extent permitted by applicable
provisions of the Internal Revenue Code of 1986, as amended, (the "Code") and
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
all other applicable laws, rules and regulations; and (iii) cause the Seller
Plans to make timely appropriate distributions, to the extent required, to such
employees in accordance with, and to the extent permitted by, the terms and
conditions of such Seller Plans. Seller will provide to PSC such copies of
documents and other information related to the termination of such employees'
participation in the Seller Plans as PSC may request.
(c) At the Closing, the Shareholders agree to
become employees of PSC Alabama Corp., a Delaware corporation ("Practice"), a
wholly owned subsidiary of Parent, and shall each execute with Practice a
seventy- eight (78) month primary term employment contract.
1.5 MANAGEMENT SERVICES AGREEMENT. Shareholders acknowledge and
agree that Practice and PSC shall execute a Management Services Agreement
substantially in the form of Exhibit 1.5 at the time of the acquisition of
assets of Seller by PSC which shall govern the business relationship between
Practice and PSC.
1.6 SELLER'S FINANCIAL INFORMATION. The agreement between the
parties evidenced by this Agreement has been reached based on financial
information about Seller, the Assets and the Business as of December 31, 1996,
all provided to PSC by Seller. The audited Balance Sheet of Seller as of
December 31, 1996 ("Balance Sheet Date"), is attached hereto as Exhibit 1.6 and
is hereinafter referred to as the "Balance Sheet".
1.7 EACH PARTY TO BEAR COSTS. Each of the parties to this
Agreement shall pay all of the costs and expenses incurred by such party in
connection with the transactions contemplated by this Agreement, except as
otherwise provided herein. Without limiting the generality of the foregoing,
and whether or not such liabilities may be deemed to have been incurred in the
ordinary course of business, neither party shall be liable for or required to
pay, either directly or indirectly, any of the following liabilities or
expenses incurred by the other party: (a) fees and expenses of any person for
services as a finder, or for fees and expenses of any persons for financial
services rendered to such other party in connection with negotiating and
closing the sale contemplated by this Agreement; (b) fees and expenses of legal
counsel retained by such other party for services rendered to such party in
connection with negotiating and closing the sale contemplated by this
Agreement; (c) fees and expenses of any auditors and accountants retained by
such other party for services rendered to such party in connection with
negotiating and closing the sale contemplated by this Agreement; (d) state and
federal income taxes or other similar charges on income incurred by such other
party on any gain from the purchase and sale of Assets 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
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contemplated hereby.
1.8 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. Seller will use its 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 included within the
Assets and all claims and demands in such contracts may be realized, Seller and
the Shareholders hereby covenant with PSC and Parent that Seller, by itself or
by its agents, will, at the request and expense and under the direction of PSC,
in the name of Seller 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 Seller 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 Seller in and under
every such contract and in respect of every such claim and demand, from and
after the Closing, and Seller shall hold the same for the benefit of, and shall
pay the same over to, PSC.
1.9 COOPERATION WITH REGULATORY APPROVALS. Seller and the
Shareholders shall cooperate with and assist PSC, as PSC shall reasonably
request, in obtaining the approval of all regulatory agencies and officials
whose approval is required for the transfer of all licenses and other
regulatory approvals required to enable PSC to acquire the Assets and operate
the Business.
1.10 IRREVOCABLE GUARANTY BY PARENT. To induce Seller to execute
and deliver this Agreement, Parent hereby unconditionally and irrevocably
guarantees the Seller and Shareholders 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
and delivery of all property stipulated to be transferred by PSC pursuant to
this Agreement and PSC's obligation to indemnify the Seller and the
Shareholders pursuant to Section 8.2. This guaranty shall be a guaranty of
payment, not merely collection, and shall be unaffected by any subsequent
modification or amendment of this Agreement whether or not Parent has knowledge
of or consented to such modification or amendment. In the event that PSC fails
to fully perform all such covenants and obligations in accordance with their
terms or pay all or any part of such sums or deliver all or any part of such
property when due, Parent will perform all such covenants and obligations in
accordance with their terms or immediately pay or deliver to Seller (or such
other payee or transferee as may be provided in any such agreement) the amount
due and unpaid or the property not delivered, 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
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obligation or covenant, or any waiver thereof or other compromise or indulgence
with respect thereto or any release or impairment of any security for any such
obligation or covenant, or any other circumstance which might otherwise
constitute a legal or equitable discharge of a surety or guarantor, no notice
to, or consent of, Parent shall be required.
1.11 TAX AND ACCOUNTING TREATMENT. It is intended by the parties
that the purchase and sale contemplated by this Agreement and related documents
qualify as a reorganization under the provisions of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended, and that for accounting purposes, it
is intended that such transaction be accounted for by Parent as a "pooling of
interests".
1.12 CLOSING.
(a) Closing. Subject to the fulfillment of the
conditions precedent specified in Sections 5 and 6, the transaction
contemplated by this Agreement shall be consummated at a closing (the
"Closing") to be held at 10:00 a.m. local time simultaneously with the closing
of the IPO at the offices of Bachner, Tally, ▇▇▇▇▇▇▇, & ▇▇▇▇▇▇ L.L.P., New
York, New York, or at such other location, as is mutually agreed upon by the
Parties. The date on which the Closing occurs shall be referred to as the
"Closing Date."
(b) Documents to be Delivered by Seller. At the
Closing, Seller shall deliver, or cause to be delivered, to PSC the following:
(i) Such bills of sale, endorsements and
assignments as are necessary to vest in PSC good and
valid title to the Purchased Assets;
(ii) The certificate required to be
delivered pursuant to Section 5.5;
(iii) The legal opinion required to be
delivered pursuant to Section 5.7 of this Agreement;
(iv) The other agreements, documents and
instruments required by Sections 5.8 through 5.14;
(v) Any other documentation required to
be delivered under this Agreement or otherwise
requested to be delivered by PSC that is necessary or
appropriate to consummate the Transaction; and
(vi) Pursuant to 5.18 of this Agreement,
a copy of the ▇▇▇▇ of sale evidencing that any
medical assets of Seller not acquired by PSC have
been transferred by Seller to Practice.
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(c) Documents and Other Items to be Delivered by
Purchaser. At the Closing, PSC shall deliver to Seller the following:
(i) The Acquisition Price, payable by
shares of Parent Common Stock pursuant to Section
1.3;
(ii) The certificate required to be
delivered pursuant to Sections 6.4 of this
Agreement;
(iii) The legal opinion required to be
delivered pursuant to Section 6.6 of this Agreement;
(iv) The other agreements, documents and
instruments required by Section 6.7, 6.9 and 6.10;
(v) Any other documentation required to
be delivered under this Agreement or otherwise
reasonably requested to be delivered by Seller or the
Shareholders that is necessary or appropriate to
consummate the transaction.
Simultaneously with such delivery, Seller and Shareholders jointly and
severally agree to use their best efforts and to take all action as may be
reasonably necessary to put PSC in possession and operating control of the
Assets free and clear of all liens or other restrictions or encumbrances,
including the obtaining of such consents of third parties as may be reasonably
necessary to effect the foregoing.
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SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS.
The Seller and Shareholders jointly and severally represent
and warrant to PSC and Parent as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Seller is a professional
corporation duly organized, validly existing and in good standing under the
laws of the State of Alabama. Seller has all necessary corporate powers to own
all of its assets and to carry on its business as such business is now being
conducted. Seller is not required to qualify to do business as a foreign
corporation in any other state or jurisdiction by reason of its business,
properties or activities in or relating to such other state or jurisdiction.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS.
(a) Seller has corporate power to execute,
deliver and perform its obligations under this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement, and
has taken all action required by law, its Articles of Incorporation, its Bylaws
or otherwise, to authorize the execution and delivery of and the performance
of this Agreement and such related documents. The execution and delivery of
this Agreement, and the agreements related hereto executed and delivered
pursuant to this Agreement, do not, and, subject to the receipt of consents to
assignments of leases and other contracts where required and the receipt of
regulatory approvals where required, the consummation of the transactions
contemplated hereby will not, violate any provision of the Articles of
Incorporation or Bylaws of Seller 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 Seller is a
party or by which Seller is bound, or violate any material restrictions of any
kind to which Seller is subject which could have a Material Adverse Effect.
(b) The execution and delivery of this Agreement,
and the agreements related hereto executed and delivered pursuant to this
Agreement, do not, and the consummation of the transactions contemplated hereby
will not, violate any provisions of, or result in the acceleration of, any
obligation under any mortgage, lien, lease, agreement, instrument, order,
arbitration award, judgment or decree to which any Shareholder is a party or by
which any Shareholder is bound, or violate any material restrictions of any
kind to which any Shareholder is subject and which could have a Material
Adverse Effect.
2.3 SUBSIDIARIES AND AFFILIATES. Seller does not own stock in or
control, directly or indirectly, any other corporation, association or business
organization, nor is Seller a party to any joint venture or partnership. The
Shareholders are the sole shareholders of Seller and own all the capital stock
of Seller in the respective proportionate amounts set forth in Exhibit 2.3.
There are no outstanding (a) securities
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of Seller convertible into equity interests in Seller, or (b) commitments,
options, rights or warrants to issue any such equity interests in Seller, or to
issue securities of Seller convertible into such equity interests.
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, or waivers thereof, have been duly obtained and are in full force and
effect, and there are no proceedings pending or, to the knowledge of Seller and
Shareholders, threatened which may result in the revocation, cancellation or
suspension, or any adverse modification, of any thereof. Any and all past
litigation concerning such building or other permits, certificates of
occupancy, concessions, grants, franchises, licenses, certificates of need and
other governmental authorizations and approvals, and all claims and causes of
action raised therein, have been finally adjudicated.
(b) Approvals. Each Shareholder holds in full force and effect
all approvals, authorizations, licenses, and certifications required by law
(the "Approvals") to practice medicine. Evidence of such Approvals has been
delivered to PSC. There has been no lapse, revocation, or suspension of any
Approval, or any formal allegation (including any complaint, indictment or
initiation of proceedings) made before a court of law, licensing or regulatory
authority, professional organization, or the medical staff or committee of a
hospital, regarding any Shareholder's practice or fitness to practice medicine,
including any allegation of the following: alcohol abuse, a violation of any
law or regulation relating to controlled substances, professional malpractice
or misconduct, improper billing practices, or a crime involving moral
turpitude. The foregoing does not include any action taken as a result of
failure to timely complete medical records.
(c) Provider Numbers. Each Shareholder holds a valid Medicare
provider number and valid uniform physician identification numbers. Evidence
of such numbers has been delivered to PSC.
(d) Board Certification. Each Shareholder is certified by the
American Board of Otolaryngology and evidence of such board certification(s)
has been delivered to PSC.
(e) No Conviction. No Shareholder has ever been convicted of a
criminal offense relating to the Medicare or any federally-funded state health
care program. For purposes of this Agreement, the term conviction includes the
entry of a plea of guilty or nolo contendere and participation in a first
offender, deferred adjudication, or other arrangement or program whereby a
judgment of conviction has been withheld.
2.5 SELLER'S FINANCIAL INFORMATION. Seller has heretofore
furnished PSC and Parent with copies of financial information about Seller as
set forth on Exhibit 2.5 attached hereto, including, but not limited to, the
Balance Sheet. All such financial statements have been prepared in accordance
with generally accepted accounting
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principles consistently followed throughout the periods indicated, reflect all
liabilities of Seller as of their respective dates, and present fairly the
financial position of Seller as of such dates and the results of operations and
cash flows for the period or periods reflected therein.
2.6 LEASES. Exhibit 2.6 attached hereto sets forth a list of all
leases pursuant to which Seller leases, as lessor or lessee, real or personal
property used in operating the Business or otherwise; however the parties
understand and agree that only those leases [IF ANY] listed on Exhibit 1.3(b)
will be assumed by PSC. Except as indicated on Exhibit 2.16, all such leases
listed on Exhibit 2.6 are valid and effective in accordance with their
respective terms, and there is not under any such lease any existing default by
Seller, as lessor or lessee, or any condition or event of which Seller or any
Shareholder has knowledge which with notice or lapse of time, or both, would
constitute a default, in respect of which Seller has not taken adequate steps
to cure such default or to prevent a default from occurring. With respect to
any lease not assumed by PSC, Seller and the Shareholders represent and
covenant that they will honor and discharge all obligations of Seller under
such leases.
2.7 PERSONAL PROPERTY. Seller owns all of the personal property
reflected on the Balance Sheet and included in the Assets, including, but not
limited to, all items of personal property identified on Exhibit 1.1(a) and
Exhibit 1.1(c) attached hereto, free and clear of any liens, claims, charges,
exceptions or encumbrances, except for those set forth in Exhibit 2.7 attached
hereto. All such personal property that comprises the Assets shall be
transferred to PSC subject to only claims, charges, exceptions or encumbrances
set forth on Exhibit 2.7. Such personal property is in usable condition,
normal wear and tear excepted, and suitable for its purpose and intended use.
2.8 INVENTORIES. The items of Seller's inventory have been
acquired in the ordinary course of the Business and maintained at levels
consistent with past practices and are in all material respects adequate for
the reasonable requirements of the Business.
2.9 PRINCIPAL PLACE OF BUSINESS. The principal places of business
of Seller are, and have been for the previous five (5) years, in Jefferson
County, Alabama.
2.10 LOCATION OF ASSETS. All of the Assets are located in
Jefferson County, Alabama.
2.11 INTELLECTUAL PROPERTY RIGHTS. Except as set forth in Exhibit
2.11 attached hereto, Seller has no right, title or interest in or to patents,
patent rights, manufacturing processes, trade names, trademarks, service marks,
inventions, specialized treatment protocols, copyrights, formulas and trade
secrets. Except for off-the-shelf software licenses, Seller is not a licensee
in respect of any patents, trademarks, service marks, trade names, copyrights
or applications therefor, or manufacturing processes, formulas or trade
secrets. Seller owns and possesses adequate licenses or other rights to use
all such patents, trademarks, service marks, trade names, copyrights,
manufacturing
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processes, inventions, specialized treatment protocols, formulas and trade
secrets necessary to conduct its business as now operated. No claim is pending
or has been made to the effect that the present or past operations of Seller
infringe upon or conflict with the asserted rights of others to such patents,
patent rights, manufacturing processes, trade names, trademarks, service marks,
inventions, specialized treatment protocols, copyrights, formulas and trade
secrets.
2.12 DIRECTORS AND OFFICERS; PAYROLL INFORMATION. Set forth on
Exhibit 2.12 attached hereto is a true and complete list, as of the date of
this Agreement, of: (a) the name of each Director and officer of Seller and
the offices held by each; and (b) the most recent payroll report of Seller,
showing all current employees of Seller and their current levels of
compensation other than bonuses and other extraordinary compensation.
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2.13 LEGAL PROCEEDINGS. Except as set forth in Exhibit 2.13
attached hereto, neither Seller nor any Shareholder has knowledge of any
pending or threatened litigation, governmental investigation, condemnation or
other proceeding against or relating to or affecting Seller, any Shareholder,
the Business, the Assets or the transactions contemplated by this Agreement,
including, but not limited to, claims for medical malpractice or negligence,
and, to the knowledge of Seller and Shareholders, no basis for any such action
exists, nor is there any legal impediment of which Seller or any Shareholder
has knowledge to the continued operation of the Business in the ordinary
course.
2.14 CONTRACTS. Seller has delivered to PSC true copies of all
written, and disclosed to PSC all Material oral, outstanding contracts,
obligations and commitments of Seller and each Shareholder entered into in
connection with the Business, all of which are listed or incorporated by
reference on Exhibit 2.6 (in the case of leases) and Exhibit 2.14 (in the case
of managed care contracts, third party payor contracts and contracts other than
leases) attached hereto. Except as otherwise indicated on such Exhibits, all
of such contracts, obligations and commitments are valid, binding and
enforceable against Seller in accordance with their terms and are in full force
and effect, subject to limitations on enforceability imposed by, bankruptcy,
moratorium, creditors' rights or similar laws. Except as set forth or
incorporated by reference on such Exhibits, to Seller's knowledge no default or
alleged default by Seller exists thereunder. Except as listed or incorporated
by reference on Exhibit 2.6 and Exhibit 2.14, neither Seller nor any
Shareholder is a party to any Material written or oral agreement, contract,
lease or plan of a type described as follows:
(a) Contract related to the Assets, not made in
the ordinary course of business, other than this Agreement.
(b) Employment contract which is not terminable
without cost or other liability to Seller, 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 Business now booked or for normal operating inventories, or (ii) which is
not terminable without material cost or liability to Seller, or any successors
or assigns thereof, upon notice of 30 days or less.
15
(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.
2.15 SUBSEQUENT EVENTS. Except as set forth on Exhibit 2.15
attached hereto, Seller has not, since the date of the Balance Sheet:
(a) Incurred any material uninsured obligation or
liability (absolute, accrued, contingent or otherwise), or any material adverse
change except in connection with the performance of this Agreement, other than
in the ordinary course of business.
(b) Discharged or satisfied any material lien or
encumbrance, or paid or satisfied any material obligation or liability
(absolute, accrued, contingent or otherwise) other than (i) liabilities shown
or reflected on the Balance Sheet or (ii) liabilities incurred since the date
of the Balance Sheet in the ordinary course of business.
(c) Increased or established any reserve for
taxes or any other liability on its books or otherwise provided therefor,
except as may have been required due to income or operations of Seller.
(d) Mortgaged, pledged or subjected to any lien,
charge or other encumbrance any of the Assets, tangible or intangible.
(e) Sold or transferred any of the Assets,
canceled any debts or claims or waived any rights, except in the ordinary
course of business.
(f) 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 Seller to any officer or employee, consultant or agent
(other than normal merit increases), or by means of any bonus or pension plan,
contract or other commitment, increased the compensation of any officer,
employee, consultant or agent.
(g) Authorized any capital expenditures in excess
of $1,000.00.
(h) Except for this Agreement and any other
agreement executed and delivered pursuant to this Agreement, entered into any
material transaction other than in the ordinary course of business or permitted
under other Sections hereof.
(i) Issued any stock, bonds or other securities.
16
(j) Experienced damage, destruction or loss
(whether or not covered by insurance) materially and adversely affecting any of
its properties, assets or business, or experienced any other material adverse
change in its financial condition, assets, liabilities or business.
(k) Paid bonuses, distributions, or advanced
loans to shareholders or employees outside of the ordinary course of business
consistent with past practices of Seller.
2.16 ACCOUNTS RECEIVABLE. Exhibit 2.16 reflects the amount of
Seller's accounts receivable as of the date of the Balance Sheet, net of
allowances for uncollectible and doubtful accounts, all in conformity with
generally accepted accounting principles. Seller maintains its accounting
records in sufficient detail to substantiate the accounts receivable reflected
on Exhibit 2.16 and has given and will give to PSC full and complete access to
those records, including the right to make copies therefrom. Since the date of
the Balance Sheet, Seller 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 of the knowledge of the Seller and the Shareholders,
the Seller is in substantial compliance with the terms and conditions of such
third-party payor arrangements, and to Seller's knowledge the reserves
established by Seller are adequate to cover any liability resulting from lack
of compliance.
2.17 TAX RETURNS. Seller has filed all tax returns 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. Seller
has no tax liability, except for ad valorem taxes for the fiscal year ending in
1996, taxes being contested in good faith, as set forth on Exhibit 2.17
attached hereto, and sales, use, employment and similar taxes for periods as to
which such taxes have not yet become due and payable.
2.18 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
PSC or Parent resulting from any action taken by Seller or Shareholders or
their respective agents or employees, or any of them.
2.19 MATERIAL LIABILITIES. Except as set forth on Exhibit 2.15, or
to the extent reflected or reserved against on the Balance Sheet, Seller did
not have, as of the Balance Sheet Date, and has not incurred since that date,
any material uninsured liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due
which would have a Material Adverse Effect, other than those incurred in the
ordinary course of business. Except as set forth on Exhibit 2.15, Seller and
Shareholders do not know, or have reasonable grounds to know, of any basis for
the assertion against Seller as of the Balance Sheet Date, of any material
claim or liability of any nature in any amount not fully reflected or reserved
17
against on the Balance Sheet, or of any material uninsured claim or liability
of any nature arising since that date which would have a Material Adverse
Effect other than those incurred in the ordinary course of business or
contemplated by this Agreement.
2.20 INSURANCE POLICIES. Seller or each Shareholder maintains
policies of comprehensive general liability and professional liability
insurance in amounts of not less than $1 million per occurrence and $3 million
aggregate on a claims made basis and property damage insurance on the Assets to
be sold hereunder. Valid policies in such amounts are outstanding and duly in
force and will remain duly in force through the Closing Date. All such
policies are described in Exhibit 2.20 attached hereto.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on Exhibit 2.21
attached hereto, Seller has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of incentive compensation plan, program, agreement,
policy, commitment, contract or arrangement (whether or not set forth in a
written document); (b) any pension, profit sharing, retirement or other plan,
program or arrangement; or (c) any other employee benefit plan, fund or
program, including, but not limited to, those described in Section 3(3) of
ERISA. All such plans listed on Exhibit 2.21 (individually "Seller Plan," and
collectively "Seller Plans") have been operated and administered in all
material respects in accordance with, as applicable, ERISA, the Internal
Revenue Code of 1986, as amended, title VII of the Civil Rights Act of 1964, as
amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in
Employment Act of 1967, as amended, and the related rules and regulations
adopted by those federal agencies responsible for the administration of such
laws. No act or failure to act by Seller has resulted in a "prohibited
transaction" (as defined in ERISA) with respect to the Seller Plans. No
"reportable event" (as defined in ERISA) has occurred with respect to any of
the Seller Plans. Seller has not previously made, is not currently making, and
is not obligated in any way to make, any contributions to any multi-employer
plan within the meaning of the Multi-Employer Pension Plan Amendments Act of
1980.
2.22 COMPLIANCE WITH LAWS IN GENERAL. Neither Seller nor any
Shareholder has knowledge of material violations of any federal, state and
local laws, regulations and ordinances relating to the operations of the
Business and the Assets, including, without limitation, the Federal
Environmental Protection Act, the Occupational Safety and Health Act, the
Americans with Disabilities Act and any Environmental Laws, and no notice of
any pending inspection or violation of any such law, regulation or ordinance
has been received by Seller or any Shareholder.
2.23 FRAUD AND ABUSE. Seller and Shareholders and all persons and
entities providing professional services for the Business have not, to the
knowledge of Seller and Shareholders, 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
18
material fact for use in determining rights to any benefit or payment; (b)
knowingly and willfully making or causing to be made any false statement or
representations of a material fact for use in determining rights to any benefit
or payment; (c) any failure by a claimant to disclose knowledge of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; (d) knowingly and willfully
soliciting or receiving any remuneration (including any kickback, bribe or
rebate) directly or indirectly, overtly or covertly, in cash or in kind, or
offering to pay or receive such remuneration (i) in return for referring an
individual to a person for the furnishing or arranging for the furnishing of
any item or service for which payment may be made in whole or in part by
Medicare or Medicaid, or (ii) in return for purchasing, leasing or ordering or
arranging for, or recommending, purchasing, lease or ordering any good,
facility, service or item for which payment may be made in whole or in part by
Medicare or Medicaid; (e) engaging in any activity which is a basis for
exclusion from the Medicare, Medicaid and other federally-funded programs under
Section 1320a-7a of Title 42 of the United States Code; (f) any violation of
the Medicare or Medicaid requirements, including and fraud and abuse
provisions, except where such circumstances would not have a Material Adverse
Effect.
2.24 MEDICARE, MEDICAID, AND OTHER THIRD-PARTY PAYOR PAYMENT
LIABILITIES. Except as described in Exhibit 2.24 neither Seller nor any
Shareholder has, and as of the Closing Date, will have, any liabilities to any
third party fiscal intermediary or carrier administering any state Medicaid
program or the federal Medicare program, or to any other third party payor for
the recoupment of any amounts previously paid to Seller (or any predecessor
corporation) or any Shareholder by any such third-party fiscal intermediary,
carrier, Medicaid program, Medicare program, or third party payor. There are
no pending or 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 Seller or any Shareholder.
2.25 BILLING PRACTICES AND REFERRAL SOURCES. (a) Billing
Practices Generally. All billing practices by Seller and each Shareholder to
all third party payors, including, but not limited to, the federal Medicare
program, state Medicaid programs and private insurance companies, have been
true, fair and correct and in compliance with all applicable laws, regulations
and policies of all such third party payors, and neither Seller nor any
Shareholder has billed for or received any payment or reimbursement in excess
amounts allowed by law.
(b) Gratuitous Payments. Neither Seller nor any
Shareholder, director, or officer of Seller, nor to Seller's knowledge any
employee or agent acting on behalf of or for the benefit of Seller or any
Shareholder, has directly or indirectly (i) offered or paid any remuneration,
in cash or in kind, to, or made any financial arrangements with, any past or
present customers, past or present patients, past or present suppliers,
contractors or third party payors of Seller in order to obtain business or
payments from such persons, other than entertainment activities in the ordinary
and lawful course of
19
business; (ii) given or agreed to give, or is aware that there has been made or
that there is any agreement to make, any gift or gratuitous payment of any
kind, nature or description (whether in money, property or services) to any
customer or potential customer, patient or potential patient, supplier or
potential supplier, contractors, third party payor or any other person other
than in connection with promotional or entertainment activities in the ordinary
and lawful course of business; (iii) made or agreed to make, or is aware that
there has been made or that there is any agreement to make, any contribution,
payment or gift of funds or property to, or for the private use of, any
governmental official, employee or agent where either the contribution, payment
or gift or the purpose of such contribution, payment or gift is or was illegal
under the laws of the United States or under the laws of any state thereof or
any other jurisdiction (foreign or domestic) under which such payment,
contribution or gift was made; (iv) established or maintained any unrecorded
fund or asset for any purpose or made any false or artificial entries on any of
its books or records for any reason or (v) made, or agreed to make, or is aware
that there has been made or that there is any agreement to make, any payment to
any person with the intention or understanding that any part of such payment
would be used for any purpose other than that described in the documents
supporting such payment.
(c) Transactions with Referral Sources. Neither Seller
nor any Shareholder, director, or officer thereof, nor to Seller's knowledge
any employee of Seller, is a party to any contract, lease, agreement or
arrangement, including, but not limited to, any joint venture or consulting
agreement with any physician, hospital, nursing facility, home health agency or
other person who is in a position to make or influence referrals to or
otherwise generate business for Seller or any Shareholder to provide services,
lease space, lease equipment or engage in any other venture activity.
2.26 PHYSICIAN SELF-REFERRALS. Neither Seller nor any Shareholder
has submitted any claims in connection with any referrals which violated any
applicable self-referral law, including the ▇▇▇▇▇ Law (42 U.S.C. Section
1395nn) or any applicable state self-referral law as those laws are currently
interpreted.
2.27 INVESTMENT INTENT. (a) Acquisition Purpose. Seller and
Shareholders (through their ownership interest in Seller) are acquiring the
Parent Common Stock to be received by them under this Agreement for investment
purposes only and not with a view to the sale or distribution thereof.
(b) Experience in Financial Matters. Seller and
Shareholders have had the opportunity to discuss Parent's business, management
and financial affairs with Parent's management. Seller and Shareholders have
such knowledge and experience in financial matters that they are capable of
evaluating the merits and risks of an investment in the Parent Common Stock.
Seller's and each of Shareholders' financial condition is such that it or he is
able to bear all economic risks of investment in the Parent Common Stock,
including the risks of holding the Parent Common Stock for an indefinite period
of time.
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(c) Non-transferability of Parent Common Stock.
Seller and Shareholders understand that since the shares of Parent Common Stock
have not been registered under the 1933 Act, the shares of Parent Common Stock
must be held indefinitely unless they are subsequently registered under the
1933 Act or an exemption from such registration is available. Other than as
set forth in the Registration Rights Agreement, Seller and Shareholders
acknowledge that neither Parent nor PSC is under any obligation to register
under the 1933 Act any sale of the Parent Common Stock or to comply with any
provisions which would entitle any such sale to any exemption from
registration. Seller and Shareholders are fully familiar with Rule 144
promulgated under the 1933 Act.
(d) Legend on Parent Common Stock. Each stock certificate
representing the Parent Common Stock shall bear a legend in, or substantially
in, the following form and any other legend required by any applicable state
securities or Blue Sky laws:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
any state securities laws and may not be sold, pledged or
otherwise transferred without an effective registration under
said Act and any applicable state securities laws or unless
the company shall have received an opinion of counsel
satisfactory to the company that an exemption from
registration under such Act and any applicable state
securities laws is then available."
Seller and Shareholders agree to abide by the terms of this legend. Parent may
maintain a "stop transfer order" against the Parent Common Stock.
2.27 NO UNTRUE REPRESENTATIONS. To the knowledge of Seller and
Shareholders, no representation or warranty by Seller or any Shareholder in
this Agreement, and no Exhibit or certificate issued by officers or Directors
of Seller or any Shareholder and 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 and information provided by
Seller or the Shareholders for valuation of the Business by PSC and Parent is
true, accurate and complete in all material respects.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND PSC.
PSC and Parent hereby jointly and severally represent and
warrant to Seller and Shareholders as follows:
3.1 CORPORATE EXISTENCE; GOOD STANDING; QUALIFICATION. Each of
PSC and Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of PSC and Parent has
all necessary corporate
21
power to own its properties and assets and to carry on its business as
presently conducted and is duly qualified to do business and is in good
standing in all jurisdictions in which the character of the property owned,
leased or operated or the nature of the business transacted by it makes
qualification necessary.
3.2 POWER AND AUTHORITY. Each of PSC and Parent has corporate
power to execute and deliver this Agreement and perform its obligations under
this Agreement and all agreements and other documents executed and delivered by
it pursuant to this Agreement, and has taken all actions required by law, its
Certificate of Incorporation, its By-laws or otherwise, to authorize the
execution, delivery and performance of this Agreement and such related
documents. The execution and delivery of this Agreement, and the agreements
related hereto executed and delivered pursuant to this Agreement do not and,
subject to the receipt of consents to assignments of leases and other contracts
where required and the receipt of regulatory approvals where required, the
consummation of the transactions contemplated hereby will not, violate any
provision of the Certificate of Incorporation or Bylaws of either PSC 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 or Parent is a party or by which either of them
is bound, or violate any restrictions of any kind to which PSC 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
Seller or Shareholders resulting from any action taken by PSC or Parent or
their respective officers, Directors or agents, or any of them.
3.4 CAPITALIZATION. Parent has an authorized capitalization of
10,000 shares of Preferred Stock, par value $1.00 per share, of which no shares
are issued and outstanding, and no shares are held in treasury, and 50,000,000
shares of common stock, par value $.001 per share, of which 599,893 shares are
issued and outstanding, and no shares are held in treasury. All of the Parent
Common Stock to be issued pursuant to this Agreement will, when so delivered,
be duly and validly issued and fully paid and nonassessable. Except as
disclosed in the draft Registration Statement (as hereinafter defined), and
except as described on Exhibit 3.4, there are no options, warrants or similar
rights granted by Parent or any other agreements to which Parent is a party
providing for the issuance or sale by it of any additional securities. There
is no liability for dividends declared or accumulated but unpaid with respect
to any shares of Parent Common Stock. Parent has not paid any dividends to any
holder of Parent Common Stock or participated in or effected any issuance,
exchange or retirement of Parent Common Stock, or otherwise changed the equity
interests of holders of Parent Common Stock, in contemplation of effecting the
transaction contemplated by this Agreement within the two years immediately
preceding the Closing Date.
22
3.5 PSC COMMON STOCK. Parent owns, beneficially and of record,
all of the issued and outstanding shares of Common Stock of PSC, free and clear
of all liens and encumbrances. Parent has taken all such actions as may be
required in its capacity as the sole shareholder of PSC to approve this
transaction.
3.6 PARENT DOCUMENTS. Parent has heretofore furnished Seller with
its Registration Statement S-1 dated on or about February 11, 1997, filed with
the SEC, relating to the offer and sale of 2,200,000 shares of Parent Common
Stock in the IPO (the "Registration Statement"). To the Parent's best
knowledge, such Registration Statement does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements contained therein not misleading, provided, however, Parent makes
no representation or warranty to Seller and Shareholders regarding information
in the Registration Statement provided by or on behalf of Seller or the
Shareholders.
3.7 LEGAL PROCEEDINGS. Except as disclosed in the Registration
Statement, there is no material litigation, governmental investigation or other
proceeding pending or, so far as is known to Parent threatened against or
relating to Parent, its properties or business, or the transaction contemplated
by this Agreement and, so far as is known to Parent, no basis for any such
action exists.
SECTION 4. ACCESS TO INFORMATION AND DOCUMENTS PRIOR TO CLOSING.
4.1 ACCESS TO SELLER'S INFORMATION. Seller and Shareholders shall
give to PSC and its counsel, accountants, engineers and other representatives
full access to all the requested properties, documents, contracts, personnel
files and other records of Seller and the Business hereunder and shall furnish
PSC with copies of such requested documents and with such information with
respect to the affairs of Seller as PSC shall from time to time reasonably
request. Seller and Shareholders shall disclose and make available to Parent
and its representatives all requested books, contracts, accounts, personnel
records, letters of intent papers, records, communications with regulatory
authorities and other documents relating to the Assets and to the Business.
4.2 ACCESS TO INFORMATION OF PSC AND PARENT. PSC and Parent shall
give to Seller and Shareholders and their respective counsel, accountants and
other representatives such access to the documents, contracts and other records
of PSC, Parent and PSC and shall furnish Seller and Shareholders with copies of
such documents and with such information with respect to the affairs of PSC,
Parent and PSC as Seller and Shareholders shall from time to time reasonably
request.
4.3 RETENTION OF RECORDS. Without cost to Seller, PSC shall
retain all books and records of Seller ("Records") transferred to it pursuant
to this Agreement for the greater of four years from the Closing Date or such
longer periods of time as required by applicable statutes, rules and
regulations. For a period of four years after the Closing Date, and for such
longer period as the Records are maintained, each party will, during normal
business hours and so as not to unreasonably disrupt normal
23
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 relating
to the Assets 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 to be
performed by them in connection with this Agreement is subject to satisfaction
of the following conditions precedent (any of which may be waived in writing by
PSC or Parent):
5.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties set forth in Article 2 shall be true and correct in all material
respects as of the date made and at and as of the Closing, except as a result
of changes expressly permitted by this Agreement.
5.2 COVENANTS. The Shareholders and Seller shall have performed
and complied with all of their covenants and agreements in all material
respects through the Closing.
5.3 NO SUIT OR PROCEEDING. No action, suit, or proceeding shall
be pending before any court or quasi- judicial or administrative agency of any
federal, state, local, or foreign jurisdiction in which an unfavorable
injunction, judgment, order, decree, ruling, or charge would (i) prevent
consummation of any of the transactions contemplated by this Agreement, (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (iii) affect adversely the right of PSC to operate the
Business (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect).
5.4 ABSENCE OF MATERIAL ADVERSE CHANGE.
(i) There shall have been no change in the
condition (financial or otherwise), business, assets, or
prospects of Seller or the Business from the Balance Sheet
Date which has had or could reasonably be expected to have a
Material Adverse Effect on the Seller, the Business, or the
Assets.
24
(ii) Neither Seller nor the Assets shall have
been, and shall not be seriously threatened to be materially
adversely affected in any way as a result of fire, explosion,
disaster, accident, labor dispute, any action by the United
States or any other government or government authority,
domestic or foreign, riot, act of war, civil disturbance or
Act of God.
5.5 CERTIFICATE. The Shareholders 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.
5.6 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 acquisition of
the Assets by PSC, including, without limitation, the consent of the lessors to
transfer to PSC the leases listed on Exhibits 2.6 and/or 2.14.
5.7 COUNSEL OPINION. Parent and PSC shall have received from
counsel to the Seller and Shareholders an opinion dated as of the Closing Date,
in form and substance reasonably satisfactory to Parent and PSC.
5.8 OTHER AGREEMENTS EXECUTED. (i) Each Shareholder shall have
executed and delivered an Employment Agreement with Practice in the form
required by the Management Services Agreement, which will in the aggregate
among the Shareholders provide for (a) graduated liquidated damages in the
event of voluntary termination of such employment by the physician or breach by
the physician of certain provisions therein; and (b) procurement by each
physician of extended reporting period coverage of existing professional
liability insurance (for personal injury or death arising out of any
malpractice by such Shareholder physician) in the amounts of not less than
$3,000,000 per occurrence and $5,000,000 annual aggregate, (ii) Practice shall
have executed and delivered the Management Services Agreement, and (iii) the
Shareholders shall have executed and delivered the Registration Rights
Agreement in substantially the form of Exhibit 5.8 (the "Registration Rights
Agreement").
5.9 RELEASE OF LIENS. All liens encumbering the Assets other than
those listed on Exhibit 5.9, shall be duly released by the secured parties and
other lien holders, and UCC-3 release or termination statements and other lien
release documents, if any, shall have been recorded or the recording thereof
provided for.
5.10 CLOSING DATE FINANCIAL CERTIFICATE; FINANCIAL REQUIREMENTS.
Seller shall have delivered to PSC a closing date financial certificate which
shall certify as of the last day of the month prior to the effective date of
the Registration Statement an unaudited cash basis balance sheet of Seller and
for the period ended as of such date a statement of operations of Seller, along
with a detailed accounts receivable aging analysis of Seller as of such date.
The net worth of Practice as of the Closing Date (defined as the accrual basis
net worth of assets acquired by PSC including the net
25
realizable value of its accounts receivable, less assumed liabilities) shall be
greater than zero (0); provided, that if Seller's net worth as of the Closing
Date is greater than zero but less than $52,000, the stock portion of the
purchase price indicated in Section 1.3(a) hereof shall be reduced by the
amount of such shortfall. The net realizable value of Seller's accounts
receivable (as determined in accordance with GAAP on a consistent basis with
the year end 1996 audited financial statements of Seller) shall be not less
than $150,000 as of the Closing Date.
5.11 CORPORATE DOCUMENTS. Seller shall have furnished PSC with
copies of the following documents: the Articles of Incorporation and all
amendments thereto of Seller and of Practice, duly certified by the Secretary
of State of the State of Alabama, certificates, executed by the proper
officials of the State of Alabama, as to the valid existence and good standing
of Seller and of Practice in the State of Alabama; resolutions authorizing this
Agreement and the transactions provided for herein, duly adopted by the Board
of Directors or other governing body of Seller and duly adopted by all the
Shareholders, all as duly certified by the Secretary of Seller; and resolutions
of the Practice authorizing the execution, delivery and performance of the
Management Services Agreement by the Practice, as duly certified by the
Secretary of the Practice.
5.12 INSTRUMENTS OF CONVEYANCE. Simultaneously with the execution
of this Agreement and in order to effect the conveyance, transfer and
assignment of the Assets and the Business and the assumption of certain
liabilities, Seller shall have executed and delivered to PSC all such bills of
sale, assignment and assumption agreements and other documents or instruments
of conveyance, transfer or assignment as shall be necessary or appropriate to
vest in or confirm to PSC Seller's right, title and interest in and to the
Assets, free and clear of all obligations, security interests, liens and
encumbrances whatsoever, except as specifically assumed by PSC pursuant to
Section 1.3(b).
5.13 PRACTICE ACQUISITION. The Practice shall have acquired from
the Seller the excluded assets referred to in Section 1.2(c) (other than those
personally owned items (if any) identified as such on Exhibit 1.2(c)) and (d)
(the "Medical Excluded Assets") for the purpose of acquiring and owning such
assets, subject to and in accordance with the provisions of a ▇▇▇▇ of Sale and
Assignment by and from the Seller in form and substance reasonably satisfactory
to PSC.
5.14 INVESTOR LETTER AND FINANCIAL DATA SHEET. Seller and each
Shareholder shall have provided to Parent contemporaneously herewith a
fully-completed and executed Investor Letter and Financial Data Sheet
substantially in the form of Exhibit 5.14.
5.15 ASSIGNMENT OF LEASES. At the option of PSC, Seller shall
obtain consent from lessor and assign to PSC any real property lease utilized
by Seller in the Practice and lease to Parent and PSC any real property owned
by Seller or the Shareholders and utilized in Seller's practice. All such
leases shall be on reasonable terms mutually agreeable to the Parties.
26
5.16 LISTING OF SHARES IN NASDAQ. Shares of common stock of Parent
shall have been listed for trading on NASDAQ at an initial public offering
("IPO") price of not less than $8.00 per share unless such condition is waived
in writing by PSC and Parent.
27
5.17 CONTEMPORANEOUS ACQUISITION. Contemporaneously with the
Closing, PSC will acquire the assets of AENT and the capital stock of Atlanta
ENT Center, Inc., Atlanta-AHP, Inc. and ENT Center of Atlanta, Inc. pursuant to
separate agreements with ▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D. and the shareholders of AENT.
5.18 AUDIT OPINION. Parent and PSC shall have received an
affirmative opinion from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & Co. that the transaction
contemplated herein can be accounted for pursuant to SAB 48 or as a "pooling of
interests" transaction.
SECTION 6. CONDITIONS TO OBLIGATION OF SELLER AND THE SHAREHOLDERS.
The obligation of Seller and the Shareholders to consummate the
transactions to be performed by them in connection with this Agreement is
subject to satisfaction of the following conditions (any one of which may be
waived in writing by Seller or the Shareholder);
6.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties set forth in Article 3 above shall be true and correct in all
material respects at and as of the Closing;
6.2 COVENANTS. Parent and PSC shall have performed and complied
with all of their covenants and agreements in all material respects through the
Closing;
6.3 NO SUIT OR PROCEEDING. No action, suit or proceeding shall be
pending before any court or quasi- judicial or administrative agency of any
federal, state, local, or foreign jurisdiction wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (a) prevent
consummation of any of the transactions contemplated by this Agreement or (b)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order, decree,
ruling, or charge shall be in effect);
6.4 CERTIFICATE. PSC shall have delivered to Seller a certificate
to the effect that each of the conditions specified in Sections 6.1-6.3 is
satisfied in all respects;
6.5 GOVERNMENT APPROVALS. Seller, Parent and PSC shall have
received all authorizations, consents, and approvals of governments and
governmental agencies, if any, that may be required;
6.6 COUNSEL OPINION. The Seller shall have received from counsel
to Parent and PSC an opinion dated as of the Closing Date in form and substance
reasonably satisfactory to Seller;
6.7 OTHER AGREEMENTS EXECUTED. (i) The Practice shall have
executed and delivered an Employment Agreement with each Shareholder in the
form required by the Management Services Agreement, (ii) PSC shall have
executed and delivered the
28
Management Services Agreement, and (iii) meeting the requirements of Section
5.8 above, Parent shall have executed and delivered the Registration Rights
Agreement.
6.8 PARENT STOCK. Parent or PSC shall have delivered at the
closing the Parent Common Stock required as the Acquisition Price under Section
1.3(a).
6.9 CORPORATE DOCUMENTS. (a) PSC shall have furnished Seller with
copies of the following documents: the Certificate of Incorporation and all
amendments thereto of PSC, duly certified by the Delaware Secretary of State;
certificates, executed by the proper Delaware officials, as to the good
standing of PSC in Delaware; and resolutions authorizing this Agreement and the
transactions provided for herein, duly adopted by the Board of Directors of PSC
and duly certified by the Secretary of PSC.
(b) Parent shall have furnished Seller with copies of the
following documents; the Certificate of Incorporation and all amendments
thereto of Parent, duly certified by the Delaware Secretary of State;
certificates, executed by the proper Delaware officials, as to the good
standing of Parent in Delaware; and resolutions authorizing this Agreement and
the transactions provided for herein, duly adopted by the Board of Directors of
Parent and duly certified by the Secretary of Parent.
6.10 ASSUMPTION OF LIABILITIES. PSC shall have assumed the
Obligations in accordance with Section 1.3(b) pursuant to an assumption
agreement in form and substance reasonably satisfactory to Seller.
6.11 ABSENCE OF MATERIAL ADVERSE CHANGE. There shall have been no
change in the condition (financial or otherwise), business, assets, or
prospects of PSC or Parent from the date of this Agreement which has had or
could reasonably be expected to have a material adverse effect on PSC or
Parent.
6.12 LISTING OF SHARES. Shares of the common stock of Parent shall
have been listed for trading on NASDAQ at an IPO price of not greater than
$10.50 per share unless such condition is waived in writing by Seller and
Shareholders.
6.13 CONSULTING AGREEMENT. PSC shall have entered into a
consulting agreement with ▇.▇. ▇▇▇▇▇▇, III, M.D. and ▇▇▇▇ ▇▇▇▇▇▇▇, M.D.
whereby they will assist PSC and Parent in merging with and/or acquiring other
otolaryngology practices in Alabama. Such agreement shall provide, through the
PSC Health Care Professional's Stock Option Plan, for 10,000 share options of
Parent Common Stock for each additional one million dollars ($1,000,000) of
Practice revenues achieved through such mergers and acquisitions during the
initial term of each physician's employment agreement with Practice.
6.14 AENT CLOSING. Prior to or contemporaneously with the Closing,
PSC shall have acquired substantially all the assets of Atlanta Ear, Nose &
Throat Associates, P.C.
29
SECTION 7. CERTAIN ADDITIONAL COVENANTS.
7.1 CONDUCT OF BUSINESS PRIOR TO CLOSING. During the period from
and after the date of this Agreement and until the Closing Date:
(a) Seller and the Shareholders will carry on the
Business 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 Business 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;
(b) Neither Seller nor the Shareholders will
permit any change to be made in the articles of incorporation or by-laws or, if
applicable, shareholder agreement of Seller, other than with the prior written
consent of PSC.
(c) Neither Seller nor the Shareholders will
acquire or dispose of any capital assets having an initial cost or current
value in excess of $1,000 other than with the prior written consent of PSC;
(d) Neither Seller nor the Shareholders will
increase the compensation payable or to become payable to any of its employees
or agents other than (a) with the prior written consent of PSC or (b) cash
bonuses by Seller to the Shareholders consistent with the past practice of
Seller;
(e) Neither Seller nor the Shareholders will
take, or permit or suffer to be taken, any action which is represented and
warranted in Section 2.15 not to have occurred since the Balance Sheet Date
other than with the prior written consent of PSC.
7.2 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Except as set forth on
Exhibit 7.2, Seller hereby covenants and agrees that it will take whatever
steps are necessary to pay or fund completely or reserve completely for any
accrued benefits, where applicable, or vested accrued benefits for which Seller
or any entity might have any liability whatsoever arising from any salary,
wage, benefit, bonus, vacation pay, sick leave, insurance, employment tax or
similar liability of Seller to any employee or other person or entity
(including, without limitation, any Seller Plan and any liability under
employment contracts with Seller) allocable to services performed prior to the
Closing Date. Seller acknowledges that the purpose and intent of this covenant
is to assure that PSC shall have no liability whatsoever at any time in the
future with respect to any of Seller's employees or similar persons or
entities, including, without limitation, any Seller Plan, except as indicated
on Exhibit 7.2.
7.3 CREDITOR'S CLAIMS. Seller and Shareholders represent,
covenant and agree that all of the creditors with respect to the Business will
be paid in full by Seller prior to the Closing Date, or within such other
period as is normally permitted by such
30
creditors in the ordinary course of business, except to the extent that any
liability to such creditors is assumed by PSC pursuant to this Agreement. If
required by PSC, Seller and Shareholders shall furnish PSC with proof of
payment of all creditors with respect to the Assets. Notwithstanding the
foregoing, Seller may dispute the amount or validity of any such creditor's
claim without being deemed to be in violation of this Section 7.3, provided
that such dispute is in good faith.
7.4 AFFILIATE AGREEMENTS. Seller will use its reasonable, good
faith efforts to cause its directors and its executive officers and
"affiliates" (within the meaning of Rule 145 under the Securities Act of 1933,
as amended) to execute and deliver to Parent as soon as practicable
instructions in the form attached hereto as Exhibit 7.4 relating to the
disposition of the shares of Parent issued to the Seller.
7.5 WAIVER OF BULK TRANSFER COMPLIANCE. Seller, the Shareholders
and PSC hereby waive any compliance with the Alabama Bulk Transfers Act.
Seller and the Shareholders jointly and severally represent, covenant and agree
that all of the creditors with respect to the Business will be paid in full by
the Seller prior to the Closing Date, or within such other period as is
normally permitted by such creditors in the ordinary course of business, except
to the extent that any liability to such creditors is assumed by PSC pursuant
to this Agreement. If required by PSC, the Seller and the Shareholders shall
furnish PSC with proof of payment of all creditors with respect to the
Business. Notwithstanding the foregoing, the Seller may dispute the amount of
validity of any such creditor's claim without being deemed to be in violation
of this Section 7.5, provided that such dispute is in good faith and does not
unreasonably delay the resolution of the claim.
7.6 LIQUIDATION OF SELLER. As soon as practical, but in no event
later than 12 months following the Closing Date, Seller will dissolve and
liquidate in accordance with applicable law.
7.7 COVENANT NOT TO COMPETE. For a period of five (5) years from
and after the Closing Date, each of Seller and each Shareholder agrees that it
or 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 or own any business or venture in competition
with the Business or PSC or Parent in the Geographic Territory (as defined
below); provided however, that ownership of less than 1% of the outstanding
stock of any publicly traded corporation shall not be deemed to violate this
clause, (ii) within the Geographic Territory, directly or indirectly, solicit
or attempt to solicit any customer or client of PSC or Parent or patient of
Practice other than in the course of a Shareholder's normal performance of
services and duties for Practice as a physician thereof; or (iii) solicit or
employ or attempt to solicit or hire away or employ any employee of PSC or
Parent or Practice. If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section is invalid or
unenforceable, the Shareholders 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
31
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid
or unenforceable term or provision, and this Agreement shall be enforceable as
so modified. The parties agree that the Business currently serves territories
each with greater than an fifteen (15) mile radius of Seller's office location.
Accordingly, as used herein, the term "Geographic Territory" shall mean each
area within an fifteen (15) mile radius of each of the office locations of
Seller and Practice. The parties agree that the restraints set forth above in
this Section 7.7 are reasonable in respect to subject matter, length of time
and geographic area. Each of Seller and the Shareholders 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 and Parent, and that, were it, he or she to
breach any of the covenants contained in this Section 7.7, PSC would be harmed
and the damage to PSC would be irreparable. Accordingly, Seller and the
Shareholders acknowledge and agree that, as PSC's legal remedies may be
inadequate in the event of a breach of the covenants in this Section 7.7, in
addition to damages and other remedies available to PSC, such covenants may be
enforced by injunction or other equitable remedies.
7.8 CONFIDENTIALITY.
(a) Seller and the Shareholders shall, and shall
use their reasonable efforts to cause their respective employees, agents and
representatives to, for a period of five (5) years after the Closing, hold in
confidence all financial information about Seller, the Business and the Assets,
except such disclosure as may be required by law or governmental order or
regulation, or by subpoena or other legal process (provided PSC will be
provided advance notice of such disclosure in order to afford it the
opportunity to seek an appropriate protective order).
(b) Seller and the Shareholders further agree to,
and shall use their reasonable efforts to cause their respective employees,
agents and representatives who are not hired by PSC at Closing, to keep
confidential for a period of five (5) years after the Closing, any and all
information relating to services, products, marketing information, sources of
supply, pricing and patients of Seller on the date hereof or developed by or
for Seller, except such disclosure as may be required by law or governmental
order or regulation, or by subpoena or other legal process (provided PSC will
be provided advance notice of such disclosure in order to seek an appropriate
protective order).
(c) The restrictions in this Section 7.8 shall
not apply to any information that comes into the public domain through no fault
of Seller or the Shareholders.
7.9 POOLING AND TAX-FREE COMBINATION TREATMENT. Neither Parent,
Seller or Shareholders shall intentionally take or cause to be taken any
action, which would disqualify the combination as a "pooling of interests"
under generally accepted accounting principles and applicable SEC requirements
or as a "reorganization" within
32
the meaning of Section 368(a)(1)(C) of the Code. Each Shareholder represents
and warrants to Parent that he has no present intention or plan or design to
dispose of the shares of Parent Common Stock that he will receive pursuant to
the liquidation of Seller. Further, each of the Shareholders hereby covenants
and agrees with Parent that he will not sell, convey or otherwise transfer any
shares of Parent Common Stock distributed to such Shareholder pursuant to the
liquidation of Seller until the expiration of not less than one (1) month
following the release by Parent of consolidated financial statements of Parent
to the public that reflect at least one (1) month of joint operations of Parent
and Seller's business. Each Party hereto agrees to take such further action or
action and to execute such other documents, agreements, certificates or
instruments as may be necessary or desirable to maintain pooling of interests
accounting treatment of the transactions contemplated by this Agreement in
accordance with all applicable financial accounting standards.
SECTION 8. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
8.1 NATURE AND SURVIVAL. All statements contained in this
Agreement or in any Exhibit attached hereto, any agreement executed pursuant
hereto, and any certificate executed and delivered by any party pursuant to the
terms of this Agreement, shall constitute representations and warranties of
Seller and Shareholders, jointly and severally, or of PSC and Parent, jointly
and severally, as the case may be. All such representations and warranties,
all representations and warranties expressly labeled as such in this Agreement
and the obligations of the parties to indemnify any other party pursuant to
Section 8.2 or 8.3(a), shall survive the date of this Agreement and the Closing
Date (i) with respect to the representations and warranties in Sections 2.1
through 2.4 and Sections 2.23 through 2.26, for the period of the applicable
statute of limitations, and (ii) with respect to all other representations and
warranties until the earlier of (A) a period of one (1) year following the
Closing Date or (B) the date of issuance of the first audited consolidated
financial statements for Parent and its subsidiaries which contain combined
operations of Parent and the Business. Each party covenants with the other
parties not to make any claim with respect to such representations or
warranties against any party after the date on which such survival period shall
terminate. No party shall be entitled to bring suit against any other party
pursuant to Section 8.2 or 8.3(a) hereof, unless such party has timely given
the notice required in Section 8.4 hereof. Each party hereby releases, acquits
and discharges the other party from any and all claims and demands, actions and
causes of action, damages, costs, expenses and rights of setoff with respect to
which the notice required by Section 8.4 is not timely provided.
8.2 INDEMNIFICATION BY 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 Seller and Shareholders,
and their respective agents, employees, legal representatives, successors and
assigns (each of the foregoing, including Seller and Shareholders, for purposes
of this Section 8.2 and, to the extent applicable, Section 8.4, an "Indemnified
Person"), harmless from and against
33
any and all liabilities, losses, claims, damages, actions, suits, costs,
deficiencies and expenses (including, but not limited to, reasonable fees and
disbursements of counsel through appeal) arising from or by reason of or
resulting from any breach by Indemnitor of any representation, warranty,
agreement or covenant made by Indemnitor contained in this Agreement (including
the Exhibits hereto) and each document, certificate or other instrument
furnished or to be furnished by Indemnitor hereunder, excluding, however, any
and all liabilities of Seller or the Shareholders which are not expressly
assumed by PSC under this Agreement.
8.3 INDEMNIFICATION BY SELLER AND SHAREHOLDERS. (a) Seller and
Shareholders (for purposes of this Section 8.3(a) and, to the extent
applicable, Section 8.3(b) and Section 8.4, "Indemnitor"), shall jointly and
severally indemnify and hold PSC and Parent and their respective officers,
directors, shareholders, affiliates, agents, employees, legal representatives,
successors and assigns (each of the foregoing, including PSC and Parent, for
purposes of this Section 8.3(a) and, to the extent applicable, Sections 8.3(b)
and 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), in an aggregate amount not to exceed the Acquisition
Price arising from or by reason of or resulting from any breach by Indemnitor
(or any of them) of any representation or warranty contained in this Agreement
(including the Exhibits hereto) and each document, certificate or other
instrument furnished or to be furnished by Indemnitor hereunder, and with
respect to all times prior to the Closing Date, arising from or by reason of or
resulting from the Indemnitor's management and conduct of the ownership or
operation of the Business or the Assets and from any alleged act of negligence
or malpractice of Indemnitor or its employees, agents and independent
contractors in or about the Business or the Assets.
(b) The Seller and the Shareholders jointly and severally
agree to indemnify and hold harmless each Indemnified Person 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, resulting from, arising out of,
relating to or caused by any breach of any covenant or agreement of the Seller
or a Shareholder contained in this Agreement.
8.4 INDEMNIFICATION PROCEDURE. Within 60 days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding, or otherwise becomes aware of any claim or other circumstance, in
respect of which indemnification or reimbursement may be sought under Section
8.2 or Section 8.3(a), such Indemnified Person shall notify Indemnitor thereof.
If any such action or other proceeding shall be brought against any Indemnified
Person, Indemnitor shall, upon written notice given within a reasonable time
following receipt by Indemnitor of such notice from Indemnified Person, be
entitled to assume the defense of such action or proceeding with counsel chosen
by Indemnitor and reasonably satisfactory to Indemnified Person; provided,
however, that any Indemnified Person may at its own expense retain separate
counsel to participate in such defense. Notwithstanding the
34
foregoing, Indemnified Person shall have the right to employ separate counsel
at Indemnitor's expense and to control its own defense of such action or
proceeding if, in the reasonable opinion of counsel to such Indemnified Person,
(a) there are or may be legal defenses available to such Indemnified Person or
to other Indemnified Persons that are different from or additional to those
available to Indemnitor and which could not be adequately advanced by counsel
chosen by Indemnitor, or (b) a conflict or potential conflict exists between
Indemnitor and such Indemnified Person that would make such separate
representation advisable; provided, however, that in no event shall Indemnitor
be required to pay fees and expenses hereunder for more than one firm of
attorneys in any jurisdiction in any one action or proceeding or group of
related actions or proceedings. Indemnitor shall not, without the prior
written consent of any Indemnified Person, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding to which such Indemnified Person is a party unless such settlement
compromise or consent includes an unconditional release of such Indemnified
Person from all liability arising or potentially arising from or by reason of
such claim, action or proceeding.
8.5 LIMITATIONS UPON OBLIGATIONS. Anything in this Section 8 to
the contrary notwithstanding, it is expressly acknowledged and agreed that no
payment shall be made hereunder by PSC or Parent (individually and collectively
a "Parent Party") to Seller or Shareholders (individually and collectively a
"Selling Party") or, by a Selling Party to a Parent Party, on claims for
indemnification under Sections 8.2 or 8.3(a) until the aggregate of all such
claims of a Parent Party against a Selling Party under Section 8.3(a), or by a
Selling Party against a Parent Party under Section 8.2, shall exceed
$10,000.00, in which event the Party holding such claim shall be entitled to
indemnification with respect to all such claims in the aggregate. In the event
that such claims do not aggregate in excess of $10,000.00, then neither the
Parent Parties nor the Selling Parties shall have any claim for indemnification
against the other under Section 8.2 or Section 8.3(a).
35
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
Seller;
(b) by either PSC, Parent or Seller 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 March 31, 1997 or such later date as the parties may
agree to; provided, however, that the right to terminate this
Agreement pursuant to this Section 9.1(b)(ii) shall not be
available to any party whose breach of any representation or
warranty or failure to perform or comply with any obligation
or condition under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before
such date;
(c) by PSC or Parent, upon prior written notice to Seller
and the Shareholders, if any of the conditions specified in Section 5
have not been met or waived prior to the Closing Date (or any
extension thereof pursuant to Section 9.1(b)(ii) above); or
(d) by Seller and the Shareholders, upon prior written
notice to PSC, if any of the conditions specified in Section 6 shall
not have been met or waived prior to the Closing Date (or any
extension thereof pursuant to Section 9.1(b)(ii) above).
9.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to this Section 9, this Agreement shall forthwith become
null and void and there shall be no liability on the part of any of the parties
hereto or their respective officers or directors with respect to this
Agreement, except for Section 1.7 which shall remain in full force and effect
after any such termination of this Agreement, and except that nothing herein
shall relieve any party from liability for a breach of this Agreement prior to
the termination thereof.
SECTION 10. MISCELLANEOUS.
10.1 NOTICES. Any communications required or desired to be given
hereunder
36
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile and overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
37
If to PSC:
PSC MANAGEMENT CORP.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Parent:
PHYSICIANS SPECIALTY CORP.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy of each notice directed to PSC or Parent to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Seller or Shareholders:
▇.▇. ▇▇▇▇▇▇, III, M.D.
▇▇▇▇ ▇▇▇▇▇▇▇, M.D.
c/o ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
All such communications shall be deemed to have been delivered on the date of
delivery or on the next business day following the deposit of such
communications with the overnight courier.
10.2 FURTHER ASSURANCES. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement. Seller and
Shareholders will execute and deliver from time to time thereafter, at the
request of PSC, all such further instruments
38
of conveyance, assignment and further assurance as may reasonably be required
in order to vest in and confirm to PSC all of Seller's right, title and
interest in and to the Assets.
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 (other than Parent's
disclosures in the Registration Statement) 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 Georgia, 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
assurance that such knowledge is based upon a reasonable investigation, unless
otherwise expressly provided. Unless otherwise expressly provided herein,
Seller shall be deemed to have knowledge of any facts known to any Shareholder.
10.7 "MATERIAL". An individual claim, obligation or liability
shall be deemed to be "material" if the amount thereof exceeds $5,000.00 or
involves the violation of any federal, state or local statute, rule or
regulation. A contract or lease shall be deemed to be material if it requires
a single payment in excess of $5,000.00 or payment for any future 12-month
period in excess of $5,000.00, except that no contract for the acquisition of
inventory items or consumable supplies shall be deemed material unless such
contract cannot be terminated without cause by Seller on not more than 30 days
notice, or has, as of the Closing Date, an amount payable with respect thereto
of more than $5,000.00.
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
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principles, (ii) changes in applicable law, and (iii) any changes resulting
from any restructuring or other similar charges or write-offs taken by Seller
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 APPOINTMENT OF ATTORNEY-IN-FACT. Effective at the Closing,
Seller hereby constitutes and appoints PSC, and its successors and assigns, the
true and lawful attorneys for Seller, with full power of substitution, in the
name of Seller, but on behalf of and for the benefit of and at the expense of
PSC, to institute and prosecute, in the name of Seller or otherwise, all
proceedings which PSC may deem proper in order to collect, assert or enforce
any claim, right or title of any kind in or to the Assets, to defend and
compromise any and all actions, suits or proceedings in respect of any such
Assets, and to do all such acts and things in relation thereto as PSC shall
deem advisable, subject to applicable laws and regulations. Seller agrees that
the foregoing powers shall be coupled with an interest and shall be irrevocable
by Seller or by its dissolution or in any manner or for any reason. PSC shall
retain for its own account any amounts collected pursuant to the foregoing
powers, including any sums payable in respect thereof, and Seller shall pay to
PSC, when received, any amounts which shall be received by Seller in respect of
any Assets.
10.12 CAPTIONS. The captions or headings in this Agreement are made
for convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.
10.13 INTEGRATION OF EXHIBITS. All Exhibits attached to this
Agreement are integral parts of this Agreement as if fully set forth herein,
and all statements appearing therein shall be deemed disclosed for all purposes
and not only in connection with the specific representation in which they are
explicitly referenced; provided, however, that
40
any liabilities or obligations to be assumed by PSC shall be set forth on
Exhibit 1.3(b), and the inclusion of any liabilities or obligations in any
other Exhibits shall not be deemed or construed to incorporate such liabilities
or obligations into Exhibit 1.3(b).
10.14 ENTIRE AGREEMENT. This instrument, including all Exhibits
attached hereto, contains the entire agreement of the parties and supersedes
any and all prior or contemporaneous agreements between the parties, written or
oral, with respect to the transactions contemplated hereby. It may not be
changed or terminated orally, but may only be changed by an agreement in
writing signed by the party or parties against whom enforcement of any waiver,
change, modification, extension, discharge or termination is sought.
10.15 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument.
10.16 BINDING EFFECT. This Agreement shall be binding on, and shall
inure to the benefit of, the parties hereto, and their respective successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. No party may assign any right or obligation
hereunder without the prior written consent of the other parties.
10.17 NO RULE OF CONSTRUCTION. The parties acknowledge that this
Agreement was initially prepared by 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.
10.18 COSTS OF ENFORCEMENT. In the event that PSC or Parent on the
one hand, or Seller or Shareholders, 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, from the other party as part of any judgment in such suit.
The term "prevailing party" shall mean the party in whose favor final judgment
after appeal (if any) is rendered with respect to the claims asserted in the
Complaint. "Reasonable attorneys' fees" are those attorneys' fees actually
incurred in obtaining a judgment in favor of the prevailing party.
10.19 TRANSFER OF ASSETS; ASSIGNMENT. The parties also hereby agree
that this Agreement shall not be assigned or transferred by either party
without the prior written consent of the other; provided, however, that this
Agreement may be assigned, in whole or in part, by PSC or Parent, in its sole
discretion, to any parent, subsidiary or affiliate of PSC or Parent or to any
party acquiring all or substantially all PSC's or Parent's assets. Any such
assignment shall not affect Parent's obligations hereunder or under any
documents executed by Parent pursuant to this Agreement.
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10.20 SEVERABILITY. In the event any term, covenant, condition,
agreement, section or provision hereof shall be deemed invalid or unenforceable
by a court of competent and final jurisdiction in the premises, the same shall
be severable and this Agreement shall not terminate or be deemed void or
voidable, but shall continue in full force and effect without such stricken
provision.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
"PSC"
PSC MANAGEMENT CORP.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Secretary and Vice Chairman
"PARENT"
PHYSICIANS' SPECIALTY CORP.
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Secretary and Vice Chairman
"SELLER"
▇.▇. ▇▇▇▇▇▇, III, M.D., P.C.
By /s/ ▇.▇. ▇▇▇▇▇▇, III, M.D.
Title: President
"SHAREHOLDERS"
/s/ ▇.▇. ▇▇▇▇▇▇, III, M.D.
W.J. ▇▇▇▇▇▇, III, M.D.
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇, M.D.
▇▇▇▇ ▇▇▇▇▇▇▇, M.D.
