EXHIBIT 10.38
ESCROW AGREEMENT
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This Agreement, dated as of June 16, 1997, is among Physician Health
Corporation, a Delaware corporation (the "Company"), Weston Presidio Capital II,
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L.P. (in its capacity only as escrow agent hereunder, and not as an Investor,
the "Escrow Agent"), and each of the investors set forth on the signatures pages
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below (Weston Presidio Capital II, L.P. and each of the other investors being
hereinafter referred to as the "Investors"). Reference is made to the Securities
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Purchase Agreement (the " Purchase Agreement") dated as of the date hereof,
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between the Company and the Investors. Terms defined in the Purchase Agreement
and not otherwise defined herein shall have the meanings set forth in the
Purchase Agreement.
Recitals: The Company and the Investors have entered into the Purchase
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Agreement pursuant to which, among other things, the Investors have agreed to
purchase Investor Securities, on the terms and subject to conditions set forth
in the Purchase Agreement (a) at the Third Closing on the condition that
certificates for such Investor Securities be held in the Securities Escrow
created hereby and (b) at the Second Closing, the proceeds of which, and
certificates therefor, shall be held in the Purchase Price Escrow and Securities
Escrow, respectively, created hereby.
In consideration of good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the parties agree as follows:
1. Establishment of the Securities Escrow. Pursuant to Section 2.3 of the
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Purchase Agreement, the Company herewith delivers to the Escrow Agent
certificates evidencing the respective Investor Securities set forth in Exhibit
1 of the Purchase Agreement for the Third Closing (the "Securities Escrow").
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Such Investor Securities shall be held in the Securities Escrow and distributed
by the Escrow Agent in accordance with the terms and conditions hereinafter set
forth.
2. Second Closing Escrow. Pursuant to Section 2.4 of the Purchase Agreement,
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on the date of the Second Closing under the Purchase Agreement, (a) the Company
shall deliver to the Escrow Agent for deposit in the Securities Escrow
certificates evidencing the respective Investor Securities set forth in Exhibit
1 of the Purchase Agreement for the Second Closing, and (b) the Investors shall
deposit the purchase price therefor into an interest-bearing restricted account
with the Company's principal depository bank (the "Purchase Price Escrow"),
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from which withdrawal of funds shall be subject to the presentation of a written
request signed by both a general partner of the Escrow Agent and
an executive officer of the Company. The Investor Securities shall be held and
distributed by the Escrow Agent (and funds held in the Purchase Price Escrow
shall be simultaneously released) in accordance with the terms and conditions
hereinafter set forth. Investor Securities contained in the Securities Escrow
and cash and other investments contained in the Purchase Price Escrow are
referred to collectively as the "Escrow Assets".
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3. Disposition of Escrow Assets. Escrow Assets will be held in escrow by the
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Escrow Agent until authorized for release and delivery as follows:
3.1. Disposition of Escrow Assets in respect of the Second Closing. Pursuant
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to Section 2.4 of the Purchase Agreement, immediately upon the (a) receipt of a
notice requesting the delivery of all or a portion of the Investor Securities in
the Securities Escrow to the Investors signed by holders (the "Required
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Holders") at the time (excluding the Company or any of its Subsidiaries) of at
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least two-thirds of the voting power of all classes and types of Investor
Securities (calculated to give pro forma effect to the conversion of all
Preferred Stock and the exercise of all Warrants); and (b) the execution by an
executive officer of the Company and a general partner of the Escrow Agent of a
written request for the delivery of all or a portion of funds held in the
Purchase Price Escrow to the Company, Investor Securities shall be so delivered
to Investors and funds from the Purchase Price Escrow shall be so released to
the Company in accordance with such notice and request.
3.2. Disposition of Investor Securities in the Securities Escrow in respect of
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the Third Closing. Pursuant to Section 2.5 of the Purchase Agreement, upon
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receipt of confirmation of payment to the Company of the purchase price for the
Investor Securities set forth in Exhibit 1 of the Purchase Agreement for the
Third Closing, the Escrow Agent shall release the Investor Securities purchased
thereby to the respective Investors purchasing them.
3.3. Court Order. Upon receipt of a final and nonappealable order of a court
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of competent jurisdiction with respect to release to a specified of all or any
portion of the Investor Securities in the Securities Escrow, the Escrow Agent
shall deliver the amount of the Investor Securities in the Securities Escrow
specified in such award or order to the party as directed in such award or
order. Upon receipt of a final and nonappealable order of a court of competent
jurisdiction with respect to the payment to a specified party of all or any
portion of the funds held in the Purchase Price Escrow, an executive officer of
the Company and a general partner of the Escrow Agent shall authorize in writing
the release of the amount of funds in the Purchase Price Escrow as specified in
such award or order to the party as directed in such award or order.
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3.4. Closing out of Securities Escrow and Purchase Price Escrow. Except to the
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extent the Escrow Agent has received written notice of a claim for dispositions
from the Securities Escrow or Purchase Price Escrow, (a) on April 14, 1998, the
Escrow Agent shall deliver to the Company any remaining Investor Securities in
the Securities Escrow in respect of the Third Closing, in accordance with
Section 2.5 of the Purchase Agreement; and (b) on April 30, 1998, the Escrow
Agent shall deliver to the Company any remaining Investor Securities in the
Securities Escrow in respect of the Second Closing and shall release any funds
remaining in the Purchase Price Escrow, in accordance with Section 2.4 of the
Purchase Agreement.
3.5. Limited Obligation. Unless otherwise provided herein, the Escrow Agent
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(in such capacity) is not to be concerned with the Purchase Agreement or any
other agreement that may affect the Investor Securities in the Securities
Escrow.
3.6. Reliance on Notices. The Escrow Agent shall be protected in acting upon
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any notice, request, waiver, consent, receipt or other document reasonably
believed by the Escrow Agent to be signed by the proper party or parties.
3.7. Standard of Conduct. The Escrow Agent shall not be liable for any error
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or judgment or for any act done or step taken or omitted by it in good faith or~
for any mistake of fact or law, or for anything that it may do or refrain from
doing in connection herewith, except its own gross negligence or willful
misconduct, and the Escrow Agent shall have no duties to anyone except those
signing this Agreement.
3.8. Legal Counsel. The Escrow Agent may consult legal counsel in the event of
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any dispute or question as to the construction of this Agreement, or the Escrow
Agent's duties hereunder, and the Escrow Agent shall incur no liability and
shall be fully protected in acting in accordance with the opinion and
instructions of counsel.
3.9. Disputes. In the event of any disagreement between the parties or any of
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them and/or any other person, resulting in adverse claims and demands being made
in connection with or for the Escrow Assets, the Escrow Agent shall refuse to
comply with any such claim or demand so long as such disagreement shall
continue, and in so doing the Escrow Agent shall not be or become liable for
damages or interest to the parties or any of them or to any person named herein
for its failure or refusal to comply with such conflicting or adverse demands.
The Escrow Agent shall continue so to refrain and refuse so to act until all
differences shall have been resolved by agreement and the Escrow Agent shall
have been notified thereof in writing signed by the Investors and the Company.
In the event of such disagreement,
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the Escrow Agent in its discretion may commence litigation (or, if the Escrow
Agent determines it to be required by the circumstances, file a suit in
interpleader) for the purpose of having the respective rights of the claimants
adjudicated and may deposit with the court all documents and property held
hereunder.
3.10. Indemnification. The Escrow Agent hereby is jointly and severally
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indemnified by the Investors and the Company from all losses, costs and expenses
that may be incurred by it as a result of its involvement in any arbitration or
litigation arising from the performance of its duties hereunder, provided that
such arbitration or litigation shall not result from any action taken or omitted
by the Escrow Agent for which it shall have been adjudged to have failed to
comply with the standards of conduct in Section 4.3. The Investors (on a joint
and several basis), on one hand, and the Company, on the other hand, shall each
be liable for one-half of any amount paid to the Escrow Agent as indemnification
under this Section 3.10. Without limitation to the aforesaid joint and several
liability of the Investors, the liability of the Investors shall be pro rata in
accordance with their respective ownership of Investor Securities (calculated to
give pro forma effect to the conversion of all Preferred Stock and the exercise
of all Warrants). Such indemnification shall survive termination of this
Agreement until extinguished by any applicable statute of limitations.
3.11. No Ownership Interest. The Escrow Agent does not have any interest in
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the Escrow Assets hereunder but is serving as escrow holder only and having only
possession thereof. This paragraph shall survive notwithstanding any termination
of this Agreement or the resignation of the Escrow Agent.
3.12. Resignation. The Escrow Agent (and any successor Escrow Agent) may at
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any time resign by delivering the Investor Securities in the Securities Escrow
to any successor Escrow Agent jointly designated by the other parties hereto in
writing or to any court of competent jurisdiction, whereupon the Escrow Agent
shall be discharged from any further obligations arising in connection with this
Agreement. The resignation of the Escrow Agent will take effect on the earlier
of (a) the appointment of a successor (including an order by a court of
competent jurisdiction) or (b) the day that is 30 days after the date of
delivery of its written notice of resignation to the other parties hereto. If at
that time the Escrow Agent has not received a designation of a successor Escrow
Agent, the Escrow Agent's sole responsibility after that time shall be to
safekeep the Escrow Assets until receipt of a designation of successor Escrow
Agent, or a joint written instruction as to disposition of the Escrow Assets by
the other parties hereto, or a final order of a court of competent jurisdiction
mandating disposition of Escrow Assets. If no successor
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escrow agent is appointed at the end of such 30 day period, the Escrow Agent
may apply to a court of competent jurisdiction for such appointment.
3.13. Acceptance of Duties: Payment of Costs. The Escrow Agent hereby accepts
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its appointment and agrees to act as escrow agent under the terms and conditions
of this Agreement and acknowledges receipt of the Investor Securities in respect
of the Third Closing. The Company agrees to reimburse the Escrow Agent for all
reasonable administrative charges, out-of-pocket expenses, disbursements and
advances incurred or made by the Escrow Agent in performance of its duties
hereunder (including reasonable fees, and out-of-pocket expenses and
disbursements, of its counsel), not to exceed $2,000, unless there is a dispute
between the parties arising from the Escrow Agent's performance of its duties or
this Agreement.
3.14. No Offset. The Escrow Agent shall have no right to offset against any
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Escrow Assets for any debts, claims or other obligations owing to it by the
Company, the Investors or any other person. The Escrow Agent shall have no lien
against the Escrow Assets.
3.15. General Action. The Escrow Agent may execute any of its powers or
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responsibilities hereunder and exercise any rights hereunder either directly or
by or through its agents or attorneys. Nothing in this Agreement shall be deemed
to impose upon the Escrow Agent any duty to qualify to do business or to act as
fiduciary or otherwise in any jurisdiction other than The Commonwealth of
Massachusetts. The Escrow Agent shall not be responsible for and shall not be
under a duty to examine into or opine upon the validity, binding effect,
execution or sufficiency of this Agreement or of any agreement amendatory or
supplemental hereto.
4. Notices. All claims, notices, objections and other communications hereunder
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shall be in writing and shall be deemed to have been duly given (a) when
personally delivered, (b) when received by facsimile or by overnight courier
service, (c) on the earlier of (i) actual receipt by the addressee or (ii) the
fifth business day after mailing by first class certified or registered mail,
return receipt requested. Notices must be sent to the parties at the following
addresses or as the Investors, the Company or the Escrow Agent shall furnish to
each of the other parties in writing.
If to the Investors, to:
Weston Presidio Capital II, L.P.
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Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
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Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to the Company, to:
Physician Health Corporation
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Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇/▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
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Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, III
If to the Escrow Agent, to:
Weston Presidio Capital II, L.P.
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Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
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Ropes & ▇▇▇▇
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Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
5. Binding Effect; Successors. This Agreement shall be binding upon and inure
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to the benefit of the parties hereto and their respective heirs, executors,
successors and assigns, provided that this Agreement may not be assigned by any
party without the prior written consent of the other parties (or in the case of
any consent by Investors, of the Required Holders), which consent shall not be
unreasonably withheld.
6. Amendments. This Agreement may not be amended or modified at any time
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except in such manner as may be agreed upon by a written instrument executed by
each of the parties hereto.
7. Waiver. No waiver of any provision hereof shall be effective unless made in
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writing and signed by the waiving party. The failure of any party to require the
performance of any term or obligation of this Agreement, or the waiver by any
party of any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of any subsequent
breach.
8. Termination. This Agreement shall automatically terminate upon the final
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distribution of the Escrow Assets in accordance with the terms hereof.
9. Governing Law. This Agreement shall be construed and enforced in accordance
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with the laws (other than the conflict of laws rules) of The Commonwealth of
Massachusetts.
10. Headings. The headings and captions in this Agreement are for convenience
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only and in no way define or limit the scope or content of any provision of this
Agreement.
11. Severability. In the event that any provision hereof would, under
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applicable law, be invalid or unenforceable in any respect, such provision shall
be construed by modifying or limiting it so as to be valid and enforceable to
the maximum extent compatible with, and possible under, applicable law. The
provisions hereof are severable, and in the event any provision hereof should be
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held invalid or unenforceable in any respect, it shall not invalidate, render
unenforceable or otherwise affect any other provision hereof.
12. Counterparts. This Agreement may be executed in any number of
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counterparts, each of which when so executed shall be deemed to be an original
and all of which together shall constitute one and the same agreement.
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The parties have executed this Agreement under seal as of the date first above
written.
Company: PHYSICIAN HEALTH CORPORATION
By:
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Title:
Escrow Agent: WESTON PRESIDIO CAPITAL II, L.P.
By: WESTON PRESIDIO CAPITAL
MANAGEMENT II, L.P.
By:
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General Partner
Investors: WESTON PRESIDIO CAPITAL II, L.P.
By: WESTON PRESIDIO CAPITAL
MANAGEMENT II, L.P.
By:
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General Partner
BANCBOSTON VENTURES, INC.
By:
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Title:
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Signature Page to
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Escrow Agreement
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MERCURY ASSET MANAGEMENT plc, on
behalf of ROWAN NOMINEES LIMITED
By:
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Title:
NATWEST VENTURES INVESTMENTS LIMITED
By:
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Title:
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