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STOCK PURCHASE AGREEMENT
dated as of October 3, 1997
among
BMJ MEDICAL MANAGEMENT, INC.,
THE STOCKHOLDERS LISTED ON EXHIBIT A
and
VALLEY SPORTS SURGEONS, INC.
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STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
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ARTICLE I PURCHASE AND SALE OF SHARES.................. 1
1.1. Transfer of Shares........................... 1
1.2. Purchase Price; Exchange of Capital Stock.... 2
1.3. Delivery of Shares........................... 2
ARTICLE II THE CLOSING.................................. 2
ARTICLE III REPRESENTATIONS AND WARRANTIES............... 2
3.1. Representations and Warranties of the Company
and the Stockholders......................... 2
(a) Organization, Good Standing, Qualification
and Power.................................... 3
(b) Equity Investments........................... 3
(c) Authority.................................... 3
(d) Capital Structure of the Company............. 4
(e) Financial Information........................ 4
(f) Absence of Undisclosed Liabilities........... 4
(g) Absence of Changes........................... 5
(h) Tax Matters.................................. 7
(i) Litigation, Etc.............................. 8
(j) Compliance with Laws......................... 8
(k) Accounts Receivable; Accounts Payable........ 8
(l) Labor Relations; Employees................... 9
(m) Employee Benefit Plans....................... 9
(n) Insurance.................................... 10
(o) Real Property................................ 10
(p) Agreements, No Defaults, Etc................. 10
(q) Brokers...................................... 12
(r) Burdensome Restrictions...................... 12
(s) Disclosure................................... 12
3.2. Representations and Warranties of the
Stockholders................................. 12
(a) Authority, Enforceability, No Violation,
Etc.......................................... 12
(b) Record Ownership............................. 13
(c) FIRPTA Affidavit............................. 13
(d) Brokers...................................... 13
3.3. Representations and Warranties of the Buyer.. 14
(a) Authority, Enforceability, No Violation,
Etc.......................................... 14
(b) Organization, Good Standing and Power........ 14
(c) Capitalization............................... 14
(d) Financial Information........................ 15
(e) Absence of Undisclosed Liabilities........... 15
(f) Absence of Changes........................... 15
(g) Litigation, Etc.............................. 16
(h) Compliance; Governmental Authorizations...... 17
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(i) Employees.................................... 17
(j) Insurance.................................... 17
(k) Burdensome Restrictions...................... 17
(l) Disclosure................................... 17
(m) Brokers...................................... 17
ARTICLE IV CONDITIONS OF CLOSING........................ 18
4.1. Conditions to Obligation of the Buyer........ 18
(a) Authorization................................ 18
(b) Performance of Obligations................... 18
(c) Representations and Warranties............... 18
(d) No Litigation or Legislation................. 18
(e) Consents..................................... 18
(f) Stockholder Certificates..................... 18
(g) Amendment of Articles........................ 19
(h) Absence of Changes........................... 19
(i) Restricted Stock Agreement................... 19
(j) Stockholder Non-Competition Agreement........ 19
(k) Opinion of Counsel to the Company............ 19
(l) Due Diligence................................ 19
(m) Company Liabilities.......................... 19
4.2. Conditions to Obligation of the Stockholders. 19
(a) Authorization................................ 19
(b) Performance of Obligations of the Buyer...... 20
(c) Amendment of Management Services Agreement... 20
(d) Restricted Stock Agreement................... 20
ARTICLE V INDEMNIFICATION.............................. 20
5.1. Definitions.................................. 20
5.2. Indemnification by the Stockholders.......... 21
5.3. Indemnification by Buyer..................... 23
5.4. Notice and Defense of Third Party Claims..... 23
5.5. Remedies Cumulative; Right of Set-Off........ 25
5.6. Survival of Representations and Warranties,
Etc.......................................... 25
ARTICLE VI MISCELLANEOUS................................ 26
6.1. Expenses..................................... 26
6.2. Purchase Price Adjustment.................... 26
6.3. Entire Agreement; Amendment.................. 26
6.4. Severability................................. 26
6.5. Descriptive Headings; Number and Gender...... 27
6.6. Public Announcements......................... 27
6.7. Notices...................................... 27
6.8. Counterparts................................. 28
6.9. Governing Law................................ 28
6.10. Benefits of Agreement........................ 28
EXHIBITS
EXHIBIT A - Restricted Stock Agreement
EXHIBIT B - Stockholder Non-Competitor Agreement
EXHIBIT C - Opinion of Counsel to the Company and the
Stockholders
EXHIBIT D - Amendment to Management Services Agreement
SCHEDULES
I - Stockholders; Record Ownership; Share Exchange
II - Company Liabilities
3.1(a) - Other Business
3.1(e) - Company Financial Statements
3.1(f) - Company Undisclosed Liabilities
3.1(g) - Company Changes
3.1(h) - Tax Matters
3.1(i) - Company Litigation
3.1(k) - Accounts Receivable; Accounts Payable
3.1(l) - Company Employees
3.1(m) - Employee Benefit Plans
3.1(n) - Insurance
3.1(o) - Real Property
3.1(p) - Company Restrictions
3.1(q) - Disclosure
3.2(a) - Stockholder Consents
3.3(a) - Buyer Consents
3.3(d) - Buyer Financial Statements
3.3(e) - Buyer Undisclosed Liabilities
3.3(f) - Buyer Changes
3.3(g) - Buyer Litigation
3.3(i) - Buyer Employees
3.3(k) - Buyer Restrictions
DEFINITIONS
The following capitalized terms, which may be used in more than one Section
or other location of this Agreement, are defined in the following Sections or
other locations:
Additional Purchase Price..................................................6.2
Affiliate..............................................................5.1.(a)
Buyer.................................................................Preamble
Buyer Balance Sheet.....................................................3.3(d)
Buyer Balance Sheet Date...............................................3.3.(d)
Buyer Common Stock.........................................................1.2
Buyer Group............................................................5.1.(h)
Buyer Unaudited Financial Statements....................................3.3(d)
Closing............................................................ Article II
Closing Date........................................................Article II
Company...............................................................Preamble
Company Balance Sheet..................................................3.1.(e)
Company Balance Sheet Date.............................................3.1.(e)
Company Common Stock..................................................Preamble
Company Unaudited Financial Statements.................................3.1.(e)
Contract................................................................3.1(p)
Determination Date.........................................................6.2
Employee benefit plan...............................................3.1.(m)(i)
Employee Plans......................................................3.1.(m)(i)
Employees..............................................................3.1.(l)
Encumbrances...........................................................1.1.(a)
ERISA...............................................................3.1.(m)(i)
Formation Documents....................................................3.1.(a)
GAAP...................................................................3.1.(e)
Indemnified Persons....................................................5.1.(d)
Indemnifying Persons...................................................5.1.(e)
Key Employee.......................................................3.1.(g)(xi)
Losses.................................................................5.1.(f)
Management Business...................................................Preamble
Management Services Agreement ........................................Preamble
Medical Group.........................................................Preamble
Per Share Deficiency Amount................................................6.2
Person.................................................................5.1.(g)
Purchase Price.............................................................1.2
Real Property..........................................................3.1.(o)
Returns.............................................................3.1.(h)(i)
Set-Off Cap................................................................5.5
Shares................................................................Preamble
Stockholder...........................................................Preamble
Stockholders..........................................................Preamble
Stockholder Group......................................................5.1.(i)
Subject Business......................................................Preamble
Survival Date..............................................................5.6
Tax................................................................3.1.(h)(iv)
Taxes..............................................................3.1.(h)(iv)
Transaction Documents..................................................3.1.(a)
Transferee.........................................................3.1.(h)(iv)
STOCK PURCHASE AGREEMENT
dated as of October 3, 1997, among
BONE, MUSCLE AND JOINT, INC., a
Delaware corporation (the "Buyer"),
the STOCKHOLDERS listed on Schedule
I hereto and executing a
counterpart signature page hereto
(each, a "Stockholder" and
collectively, the "Stockholders"),
and VALLEY SPORTS SURGEONS, INC., a
Pennsylvania corporation (the
"Company").
The Company is a physician practice management company (the "Subject
Business") operating in the Commonwealth of Pennsylvania which was formed by the
Stockholders to manage the non-medical aspects of the medical practice conducted
by the Stockholders through Valley Sports & Arthritis Surgeons, a Pennsylvania
professional corporation (the "Medical Group"). In connection therewith,
effective September 1, 1997, the Company entered into a Management Services
Agreement with the Medical Group (the "Management Services Agreement"), pursuant
to which the Company provides non-medical management services to the Medical
Group in return for a management fee.
The Buyer is also a physician practice management company (the "Management
Business"), which is seeking to expand its market in Lehigh County,
Pennsylvania. Accordingly, the Buyer desires to purchase from the Stockholders,
and the Stockholders desire to sell to the Buyer, all of the issued and
outstanding shares (collectively, the "Shares") of common stock, $.01 par value
(the "Company Common Stock"), of the Company, on the terms and subject to the
conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants, representations and conditions hereinafter set forth, and intending
to be legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1. Transfer of Shares. (a) On the terms and subject to the conditions of
this Agreement, at the Closing, each Stockholder shall sell, transfer, convey
and assign to the Buyer, and the Buyer shall purchase and acquire from such
Stockholder, all of the Shares owned by such Stockholder, the number of which is
set forth on Schedule I attached hereto opposite the name of such Stockholder,
free and clear of all Encumbrances. As used herein, the term "Encumbrances"
shall mean and include security interests, mortgages, liens, pledges, charges,
easements, reservations, restrictions, clouds, equities, rights of way,
options, rights of first refusal and all other encumbrances, whether or not
relating to the extension of credit or the borrowing of money.
1.2. Purchase Price; Exchange of Capital Stock. In exchange for the Shares
of Company Common Stock being purchased by the Buyer, the Buyer shall, upon the
execution and delivery of a Restricted Stock Agreement by each Stockholder,
issue and deliver to the Stockholders certificates representing an aggregate of
503,250 shares (the "Purchase Price") of common stock, $.001 par value (the
"Buyer Common Stock"), of the Buyer, or 1,667.50 shares of Buyer Common Stock
per share of Company Common Stock. The stock certificates shall be registered in
the names of the respective Stockholders evidencing that number of shares to
which each such Stockholder is entitled, which number is set forth opposite the
name of such Stockholder on Schedule I attached hereto.
1.3. Delivery of Shares. At the Closing, in consideration of the Buyer's
delivery of the Purchase Price, (a) each Stockholder shall deliver to the
Company a certificate or certificates representing the Shares owned by such
Stockholder as set forth on Schedule I, duly endorsed in blank for transfer or
accompanied by undated stock powers duly executed in blank, sufficient in form
and substance to convey to the Buyer good title to all of the Shares, free and
clear of all Encumbrances and (b) the Company shall deliver to the Buyer a
certificate registered in the name of the Buyer, representing all of the Shares.
ARTICLE II
THE CLOSING
The closing (the "Closing") of the transactions contemplated by this
Agreement shall take place on the date hereof (the "Closing Date") at the
offices of ▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP, ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, simultaneously with the execution and delivery of this
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Company and the Stockholders.
The Company and the Stockholders hereby jointly and severally represent and
warrant to the Buyer as follows:
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(a) Organization, Good Standing, Qualification and Power. The Company
is a business corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania and has all
requisite power and authority to own, lease and operate its properties and
to carry on its business as now being conducted and as proposed to be
conducted, to enter into this Agreement and the other agreements
contemplated hereby (collectively, the "Transaction Documents"), and to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. Except as set forth on
Schedule 3.1(a), the Company has never engaged in any business other than
the Subject Business. The Company has delivered to the Buyer true and
correct copies of its articles of incorporation and bylaws (collectively,
the "Formation Documents"), each as in effect on the date hereof.
(b) Equity Investments. The Company currently has no subsidiaries, nor
does the Company currently own, any capital stock or other proprietary
interest, directly or indirectly, in any Person.
(c) Authority. The execution, delivery and performance of this
Agreement and the Transaction Documents and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary action on the part of the Company. This
Agreement and the Transaction Documents have been duly and validly executed
and delivered by the Company and constitute the legal, valid and binding
obligations of the Company enforceable in accordance with their respective
terms, except as enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights
of creditors generally. Neither the execution, delivery or performance of
this Agreement or any Transaction Document by the Company nor the
consummation by the Company of the transactions contemplated hereby or
thereby, nor compliance by the Company with any provision hereof or thereof
will (i) conflict with or result in a breach of any provision of the
Formation Documents of the Company, (ii) cause a default (with due notice,
lapse of time or both), or give rise to any right of termination,
cancellation or acceleration, under any of the terms, conditions or
provisions of any note, bond, lease, mortgage, indenture, license or other
instrument, obligation or agreement to which the Company is a party or by
which any of their respective properties or assets may be bound (with
respect to which defaults or other rights all requisite waivers or consents
shall have been obtained at or prior to the date hereof) or (iii) violate
any law, statute, rule or regulation or order, writ, judgment, injunction
or decree of any court, administrative agency or governmental body
applicable to the Company, the Subject Business or any of the Company's
properties or assets. No permit, authorization, consent or approval of or
by, or any notification of or filing with, any person (governmental or
private) is required in connection with the execution, delivery
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or performance by the Company of this Agreement or the Transaction
Documents or the consummation of the transactions contemplated hereby or
thereby.
(d) Capital Structure of the Company. The authorized capital stock of
the Company consists of 300 shares of Common Stock, all of which shares
have been issued and are outstanding. The Shares are duly authorized,
validly issued and outstanding, fully paid and nonassessable, with no
personal liability attaching to the ownership thereof, and constitute all
of the issued and outstanding shares of capital stock of the Company. All
of the Shares were issued in compliance with all applicable Federal and
state securities laws, rules and regulations. No shares of capital stock
are held by the Company in its treasury. Except for the Shares, there are
no shares of capital stock or other securities of the Company issued and
outstanding, no options, warrants, rights (including, without limitation,
stock appreciation rights and/or preemptive rights), calls, agreements,
convertible securities or other commitments or rights to purchase or
acquire any unissued or treasury stock or other securities of the Company,
and no other securities of the Company are reserved for issuance for any
purpose. There are no contracts, commitments, agreements, understandings,
arrangements or restrictions of any nature to which any Stockholder or the
Company is a party or by which any Stockholder or the Company is bound or
subject relating to any shares of capital stock or other securities of the
Company, whether or not outstanding.
(e) Financial Information. Schedule 3.1(e) contains (i) the unaudited
statements of assets, liabilities and stockholders' equity of the Company
at August 31, 1997 (the "Company Balance Sheet"; and the date thereof being
referred to as the "Company Balance Sheet Date"), and the related unaudited
statements of revenue and expenses for the periods then ended (including
the notes thereto and other financial information included therein)
(collectively, the "Company Unaudited Financial Statements"), and (ii) the
compiled financial statements of the Subject Medical Business for the
periods ended December 31, 1996, December 31, 1995, and December 31, 1994
(the "Company Review Financial Statements"). The Company Unaudited
Financial Statements and the Company Review Financial Statements (i) are
true, complete and correct, (ii) were prepared in accordance with generally
accepted accounting principles ("GAAP") consistently applied, (iii) were
prepared in accordance with the books and records of the Company and (iv)
fairly present the financial position of the Company and the Subject
Business as of the dates thereof.
(f) Absence of Undisclosed Liabilities. Except as set forth on
Schedule 3.1(f), as of the Company Balance Sheet Date, (i) neither the
Company nor the Subject Business had any material liability of any nature
(matured or unmatured, fixed or contingent, known or unknown) which was not
provided for or
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disclosed on the Company Balance Sheet, (ii) all liability reserves
established by the Company on the Company Balance Sheet were adequate and
(iii) there were no loss contingencies (as such term is used in Statement
of Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board in March 1975) which were not adequately provided for or
disclosed on the Company Balance Sheet.
(g) Absence of Changes. Except as set forth on Schedule 3.1(g), since
the Company Balance Sheet Date, the Company and the Subject Business have
been operated in the ordinary course and consistent with past practice and
there has not been:
(i) any material adverse change in the condition (financial or
otherwise), assets (including, without limitation, levels of working
capital and the components thereof), liabilities, operations, results
of operations, earnings, business or prospects of the Company or the
Subject Business;
(ii) any damage, destruction or loss (whether or not covered by
insurance) in an aggregate amount exceeding $25,000 affecting any
asset or property of the Company or the Subject Business;
(iii) any obligation or liability (whether absolute, accrued,
contingent or otherwise and whether due or to become due) created or
incurred, or any transaction, contract or commitment entered into, by
the Company or the Subject Business other than such items created or
incurred in the ordinary course of the Company or the Subject Business
and consistent with past practice;
(iv) any payment, discharge or satisfaction of any claim, lien,
encumbrance, liability or obligation by the Company or the Subject
Business outside the ordinary course of the Company or the Subject
Business (whether absolute, accrued, contingent or otherwise and
whether due or to become due);
(v) any license, sale, transfer, pledge, mortgage or other
disposition of any tangible or intangible asset of the Company or the
Subject Business except in the ordinary course of the Company or the
Subject Business and consistent with past practice;
(vi) any write-off as uncollectible of any accounts receivable in
connection with the Company or the Subject Business or any portion
thereof in excess of $5,000 in the aggregate exclusive of all normal
contractual adjustments from third party payors;
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(vii) except for all normal contractual adjustments from third
party payors, any account receivable in connection with the Company or
the Subject Business in an amount greater than $10,000 which (A) has
become delinquent in its payment by more than 90 days, (B) has had
asserted against it any claim, refusal to pay or right of set-off, (C)
an account debtor has refused to pay for any reason or with respect to
which the Company or the Subject Business, such account debtor has
become insolvent or bankrupt or (D) has been pledged to any third
party;
(viii) any cancellation of any debts or claims of, or any
amendment, termination or waiver of any rights of material value to,
the Company or the Subject Business;
(ix) any general uniform increase in the compensation of
employees of the Company or the Subject Business (including, without
limitation, any increase pursuant to any bonus, pension,
profit-sharing, deferred compensation arrangement or other plan or
commitment) or any increase in compensation payable to any officer,
employee, consultant or agent thereof, or the entering into of any
employment contract with any officer or employee, or the making of any
loan to, or the engagement in any transaction with, any officer of the
Company or the Subject Business;
(x) any change in the accounting methods or practices followed in
connection with the Company or the Subject Business or any change in
depreciation or amortization policies or rates theretofore adopted;
(xi) any termination of employment of any key employee of the
Company or the Subject Business listed on Annex A (each, a "Key
Employee"), or any expression of intention by any Key Employee of the
Company or the Subject Business to terminate such employment with the
Company or the Subject Business;
(xii) any agreement or commitment relating to the sale of any
material fixed assets of the Company or the Subject Business;
(xiii) any other transaction relating to the Company or the
Subject Business other than in the ordinary course of the Company or
the Subject Business and consistent with past practice; or
(xiv) any agreement or understanding, whether in writing or
otherwise, for the Company or the Subject Business to take any of the
actions specified in items (i) through (xiii) above.
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(h) Tax Matters. (i) Except as set forth on Schedule 3.1(h), (A)
all Taxes relating to the Company or the Subject Business required to
be paid through the date hereof and all returns, declarations of
estimated Tax, Tax reports, information returns and statements
required to be filed in connection with the Company or the Subject
Business prior to the date hereof (other than those for which
extensions shall have been granted prior to the date hereof) relating
to any Taxes with respect to any income, properties or operations of
the Company or the Subject Business prior to the date hereof
(collectively, "Returns") have been duly filed; (B) as of the time of
filing, the Returns correctly reflected in all material respects (and,
as to any Returns not filed as of the date hereof, will correctly
reflect in all material respects) the facts regarding the income,
business, assets, operations, activities and status of the Company
and/or the Subject Business and any other information required to be
shown therein; (C) all Taxes relating to the operations of the Company
and/or the Subject Business that have been shown as due and payable on
the Returns have been timely paid and filed or adequate provisions
made to the books and records of the Company; (D) in connection with
the Company and the Subject Business (x) the Company has made
provision on the Company Balance Sheet for all Taxes payable for any
periods that end on or before the Company Balance Sheet Date for which
no Returns have yet been filed and for any periods that begin on or
before the Company Balance Sheet Date and end after the Company
Balance Sheet Date to the extent such Taxes are attributable to the
portion of any such period ending on the Company Balance Sheet Date
and (y) provision has been made for all Taxes payable for any periods
that end on or before the date hereof for which no Returns have then
been filed and for any periods that begin on or before the date hereof
and end after such date to the extent such Taxes are attributable to
the portion of any such period ending on such date; (E) no tax liens
have been filed with respect to any of the assets of the Company or
the Subject Business , and there are no pending tax audits of any
Returns relating to the Company or the Subject Business; and (F) no
deficiency or addition to Taxes, interest or penalties for any Taxes
relating to the operation of the Company or the Subject Business has
been proposed, asserted or assessed in writing (or any member of any
affiliated or combined group of which the Company was a member for
which the Company could be liable).
(ii) The Company is not a foreign person within the meaning
of ss.1.1445-2(b) of the Regulations under Section 1445 of the
Code.
(iii) The Company has provided the Buyer with true and
complete copies of all Federal, state and foreign Returns of the
Company for the calendar years ending December 31, 1993, 1994 and
1995.
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(iv) For purposes of this Agreement, "Tax" means any of the
Taxes and "Taxes" means, with respect to any person or entity,
(A) all Federal, state, local and foreign income taxes (including
any tax on or based upon net income, or gross income, or income
as specially defined, or earnings, or profits, or selected items
of income, earnings or profits) and all Federal, state, local and
foreign gross receipts, sales, use, ad valorem, transfer,
franchise, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall
profits taxes, alternative or add-on minimum taxes, customs
duties or other Federal, state, local and foreign taxes, fees,
assessments or charges of any kind whatsoever, together with any
interest and any penalties, additions to tax or additional
amounts imposed by any taxing authority (domestic or foreign) on
such person or entity and (B) any liability for the payment of
any amount of the type described in the immediately preceding
clause (A) as a result of being a "transferee" (within the
meaning of Section 6901 of the Code or any other applicable law)
of another person or entity or a member of an affiliated or
combined group.
(i) Litigation, Etc. Except as set forth on Schedule 3.1(i),
there are no (i) actions, suits, claims, investigations or legal or
administrative or arbitration proceedings pending or threatened
against the Company or in connection with the Subject Business,
whether at law or in equity, or before or by any Federal, state,
municipal or other governmental department, commission, board, bureau,
agency or instrumentality or (ii) judgments, decrees, injunctions or
orders of any court, governmental department, commission, agency,
instrumentality or arbitrator against the Company, its assets or
affecting the Subject Business. The Company has delivered to the Buyer
all documents and correspondence relating to matters referred to in
said Schedule 3.1(i).
(j) Compliance with Laws. The Company and the Subject Business
have complied in all material respects with all applicable material
Federal, state, local or foreign laws, ordinances, regulations and
orders.
(k) Accounts Receivable; Accounts Payable. (i) Except as set
forth on Schedule 3.1(k), all of the accounts receivable owing to the
Company in connection with the Subject Business as of the date hereof
constitute valid and enforceable claims arising from bona fide
transactions in the ordinary course of the Subject Business, the
amounts of which are actually due and owing, and as of the date hereof
there are no claims, refusals to pay or other rights of set-off
against any thereof. Except as set forth on Schedule 3.1(k), as of the
date hereof, there is (A) no account debtor or note debtor of the
Subject Business delinquent in its payment by more than 60 days, (B)
no account debtor or note debtor of the Subject Business who or which
has refused to pay its obligations for any reason or is the
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subject of a bankruptcy proceeding and (C) no account receivable or
note receivable of the Company pledged to any third party.
(ii) All accounts payable and notes payable by the Company
to third parties arose in the ordinary course of business and,
except as set forth in Schedule 3.1(k), there is no account
payable or note payable past due or delinquent in its payment.
(l) Labor Relations; Employees. Schedule 3.1(l) contains a true
and complete list of the persons employed by the Company as of the
date hereof (the "Employees"). Except as set forth on Schedule 3.1(l),
(i) the Company is not delinquent in payments to any of the Employees
for any wages, salaries, commissions, bonuses or other compensation
for any services performed by them to the date hereof or amounts
required to be reimbursed to the Employees; (ii) upon termination of
the employment of any of the Employees, neither the Company, the
Subject Business nor the Buyer will by reason of anything done prior
to the date hereof, or by reason of the consummation of the
transactions contemplated hereby, be liable for any excise taxes
pursuant to Section 4980B of the Code or to any of the Employees for
severance pay or any other payments; (iii) there is no unfair labor
practice complaint against the Company or in connection with the
Subject Business pending before the National Labor Relations Board or
any comparable state, local or foreign agency; (iv) there is no labor
strike, dispute, slowdown or stoppage actually pending or threatened
against or involving the Company; (v) there is no collective
bargaining agreement covering any of the Employees; and (vi) to the
best knowledge of the Stockholders, no Employee or consultant is in
violation of any (A) employment agreement, arrangement or policy
between such person and any previous employer (private or
governmental) or (B) agreement restricting or prohibiting the use of
any information or materials used or being used by such person in
connection with such person's employment by or association with the
Company or the Subject Business.
(m) Employee Benefit Plans. (i) Schedule 3.1(m) identifies each
"employee benefit plan", as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and all
other written or oral plans, programs, policies or agreements
involving direct or indirect compensation (including any employment
agreements entered into between the Company or the Subject Business
and any Employee or former employee of the Company or in connection
with the Subject Business, but excluding workers' compensation,
unemployment compensation and other government-mandated programs)
currently or previously maintained or entered into by the Company or
in connection with the Subject Business for the benefit of any
Employee or former employee of the Company or in connection with the
Subject Business under which the Company or any affiliate thereof has
any present or future obligation or liability (the
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"Employee Plans"). The Company has provided the Buyer with true and
complete age, salary, service and related data for Employees of the
Company and in connection with the Subject Business.
(ii) Schedule 3.1(m) lists each employment, severance or
other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage
(including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation or
other forms of incentive compensation or post-retirement
insurance, compensation or benefits currently maintained by the
Company or in connection with the Subject Business.
(n) Insurance. Schedule 3.1(n) contains a list of all policies of
liability, theft, fidelity, fire, product liability, errors and
omissions, health and other property and casualty forms of insurance
held by the Company covering the assets, properties or operations of
the Company and the Subject Business (specifying the insurer, amount
of coverage, type of insurance, policy number and any pending claims
thereunder). All such policies of insurance are valid and enforceable
policies and are outstanding and duly in force and all premiums with
respect thereto are currently paid. The Company has not, during the
last five fiscal years, been denied or had revoked or rescinded any
policy of insurance relating to the assets, properties or operations
of the Company or the Subject Business.
(o) Real Property. Schedule 3.1(o) sets forth an accurate and
complete legal description of the entire right, title and interest of
the Company in and to all real property, together with all buildings,
facilities, fixtures and improvements located on such real property,
owned or leased by the Company (the "Real Property"), together with an
accurate description of the title insurance policy or other evidence
of title issued with respect thereto, the most current survey of such
real property and a description of the use thereof. Other than the
Real Property, the Company has no other interest (leasehold or
otherwise) in real property used, held for use or intended to be used
in the Subject Business. The Company possesses a valid leasehold
interest in all Real Property leased by the Company.
(p) Agreements, No Defaults, Etc. Except as set forth on Schedule
3.1(p), the Company is not a party to any:
(i) Contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or
other basis;
(ii) Contract with any Affiliate of the Company;
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(iii) Contract relating to the borrowing of money or to the
mortgaging, pledging or otherwise placing an Encumbrance on any
asset or group of assets of the Company;
(iv) Contract relating to any guarantee of any obligation
for borrowed money or otherwise;
(v) Contract with respect to the lending or investing of
funds;
(vi) Contract or indemnification with respect to any form of
intangible property, including any Intellectual Property Rights
or confidential information;
(vii) Contract or group of related Contracts with the same
party (excluding purchase orders entered into in the ordinary
course of business which are to be completed within three months
of entering into such purchase orders) for the purchase or sale
of products or services under which the undelivered balance of
such products or services has a selling price in excess of
$10,000;
(viii) Contract that prohibits it from freely engaging in
business anywhere in the world;
(ix) other Contract (x) that is not terminable by either
party without penalty upon not more than 30 days' advance notice
and involves aggregate consideration in excess of $20,000 or (y)
that involves aggregate consideration in excess of $25,000
(excluding in the case of clauses (x) and (y) above any purchase
order entered into in the ordinary course of business which is to
be completed within three months of entering into such purchase
orders); or
(x) other Contract material to the Subject Business.
As used herein, "Contract" means any (written or oral) loan or credit
agreement, note, bond, mortgage, indenture, lease, sublease, purchase order
or other agreement, instrument, permit, concession, franchise or license.
Except as set forth in on Schedule 3.1(p), there are no vehicles, boats,
aircraft, apartments or other residential or recreational properties or
facilities owned or operated by the Company for executive, administrative
or sales purposes or any social club memberships owned or paid for by it.
Except as set forth on Schedule 3.1(p), the Company has in all material
respects performed all the obligations required to be performed by it to
date and is not in default or alleged to be in default in any material
respect under any Contract, and there exists no event, condition or
occurrence which, after notice or lapse of time, or both, would constitute
such a default by the Company of any of the foregoing. The
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Company has furnished to the Buyer true and complete copies of all
Contracts listed on Schedule 3.1(p) or complete descriptions of all
material terms of any oral Contracts listed on such schedule.
(q) Brokers. No agent, broker, investment banker, or other Person
acting on behalf of the Company or under the authority of the Company is or
will be entitled to any fee or commission directly or indirectly from the
Buyer (or the Company in the event the transactions contemplated hereby do
not occur) in connection with any of the transactions contemplated hereby.
(r) Burdensome Restrictions. Except as set forth on Schedule 3.1(r),
neither the Company nor the Subject Business is bound by any oral or
written agreement or contract which by its terms prohibits it from
operating the Company or the Subject Business (or any material part
thereof).
(s) Disclosure. Neither the Transaction Documents (including the
Exhibits and Schedules attached thereto) nor any other document,
certificate or written statement furnished to the Buyer by or on behalf of
the Company and the Stockholders in connection with the transactions
contemplated hereby contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading. Except as set forth on
Schedule 3.1(s), there have been no events or transactions, or information
which has come to the attention of the Company or the Stockholders, which,
as they relate directly to the Company or the Subject Business, could
reasonably be expected to have a material adverse effect on the business,
operations, affairs, prospects or condition of the Company or the Subject
Business.
3.2. Representations and Warranties of the Stockholders. Each of the
Stockholders hereby severally represents and warrants to the Buyer as follows:
(a) Authority, Enforceability, No Violation, Etc. Such Stockholder has
the full and absolute power to sell the Shares and enter into this
Agreement and the Transaction Documents to which it is a party as
contemplated hereby, to perform its obligations under this Agreement and
each Transaction Document, and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance by such
Stockholder of this Agreement and each Transaction Document to which it is
a party and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary action
(corporate or otherwise) on the part of such Stockholder. This Agreement
and each Transaction Document to which such Stockholder is a party has been
duly and validly executed and delivered by such Stockholder and is a valid
and binding obligation of such Stockholder,
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enforceable against such Stockholder in accordance with its terms. Neither
the execution, delivery and/or performance by the Stockholder of this
Agreement or any Transaction Document to which it is a party, nor the
consummation of the transactions contemplated hereby or thereby nor
compliance by such Stockholder with any of the provisions hereof or thereof
will (i) conflict with or result in a breach of any provision of the
Company's Formation Documents, (ii) to the best knowledge of such
Stockholder, violate any law, statute, rule or regulation or order, writ,
judgment, injunction or decree of any court, administrative agency or
governmental authority, in each case applicable to such Stockholder, the
Shares or the Company, or (iii) cause a default (with due notice, lapse of
time or both), or give rise to any right of termination, cancellation or
acceleration, under any of the terms, conditions or provisions of any note,
bond, lease, mortgage, indenture, license or other instrument, obligation
or agreement to which such Stockholder, the Company or the Subject Business
is a party or by which they or any of their respective properties or assets
may be bound (with respect to which defaults or other rights all requisite
waivers or consents shall have been obtained at or prior to the date
hereof). Except as set forth on Schedule 3.2(a), no filing with, and no
permit, authorization, consent or approval of, any Person (private or
public) is necessary for the consummation by the Stockholder of the
transactions contemplated by this Agreement and the Transaction Documents.
(b) Record Ownership. Such Stockholder is the lawful owner, of record
and beneficially, of the Shares listed opposite such Stockholder's name on
Schedule I hereto and has good title to such Shares, free and clear of any
and all Encumbrances. Such Stockholder acquired the Shares in one or more
transactions exempt from registration under the Securities Act of 1933, as
amended. Upon the sale by such Stockholder to the Buyer of the Shares at
the Closing in accordance with the terms hereof, the Shares owned by such
Stockholder will be transferred to the Buyer, free and clear of all
Encumbrances.
(c) FIRPTA Affidavit. Such Stockholder is not a foreign person within
the meaning of Section 1445-2(b) of the regulations promulgated under
Section 1445 of the Code and will deliver to the Buyer prior to the Closing
Date a true and accurate certificate so stating which shall comply in all
respects with Section 1445-2(b)(2)(i) of such regulations.
(d) Brokers. No agent, broker, investment banker, or other Person
acting on behalf of such Stockholder or under the authority of such
Stockholder is or will be entitled to any fee or commission directly or
indirectly from the Buyer (or the Company in the event the transactions
contemplated hereby do not occur) in connection with any of the
transactions contemplated hereby.
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3.3. Representations and Warranties of the Buyer. The Buyer hereby
represents and warrants to the Stockholders as follows:
(a) Authority, Enforceability, No Violation, Etc. The Buyer has full
and absolute power and authority to execute and deliver this Agreement and
the Transaction Documents to which it is a party, to perform its
obligations under this Agreement and each such Transaction Document, and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by the Buyer of this Agreement and each
Transaction Document to which it is a party and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of the Buyer. This
Agreement and each Transaction Document to which the Buyer is a party is a
valid and binding obligation of the Buyer, enforceable against it in
accordance with the terms thereof. Neither the execution, delivery or
performance by the Buyer of this Agreement or any Transaction Document to
which it is a party, nor the consummation by the Buyer of the transactions
contemplated hereby or thereby nor compliance by the Buyer with any of the
provisions hereof or thereof will (i) conflict with or result in a breach
of any provision of the Buyer's certificate of incorporation or bylaws,
(ii) violate any material law, statute, rule or regulation or judgment,
order, writ, injunction or decree of any governmental authority, in each
case applicable to the Buyer or its assets, or (iii) conflict with or
result in a default or breach of any provision of any contract or agreement
to which the Buyer is a party or by which its assets may be bound. Except
as set forth on Schedule 3.3(a), no filing with, and no permit,
authorization, consent or approval of, any Person (private or public) is
necessary for the consummation by the Buyer of the transactions
contemplated by this Agreement and the Transaction Documents.
(b) Organization, Good Standing and Power. The Buyer (i) is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and (ii) has all requisite corporate power
and authority to own, lease and operate its properties, to carry on its
business as now being conducted, to execute and deliver this Agreement and
the Transaction Documents to which it is a party, to perform its
obligations hereunder and thereunder, and to consummate the transactions
contemplated hereby and thereby.
(c) Capitalization. (A) The total authorized capital of the Buyer
consists of 25,000,000 shares of common stock, of which 11,462,459 shares
are issued and outstanding, and 9,233,049 shares of preferred stock, of
which (i) 999,999 shares of Series A Convertible Preferred Stock, (ii)
2,000,001 shares of Series B Convertible Preferred Stock, (iii) 254,999
shares of Series C Convertible Preferred Stock, (iv) 188,072 shares of
Series D Convertible Preferred Stock, and (v) 741,669 shares of
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Series E Convertible Preferred Stock are all issued and outstanding. Each
of the outstanding shares of capital stock has been duly and validly
authorized and issued, is fully paid for and non-assessable, and was issued
in compliance with all applicable Federal and state securities laws.
(B) The Buyer has taken all action necessary or appropriate to
duly authorize the creation, issuance and sale of the common stock to
be issued hereunder. Such shares of common stock, when issued, sold
and delivered, as provided for herein and in the Restricted Stock
Agreements, will be validly issued, fully paid and nonassessable, with
no personal liability attaching to the ownership of the shares. The
issuance of such shares of common stock will not violate any
preemptive or similar right of any person.
(d) Financial Information. Schedule 3.3(d) contains the unaudited
statements of assets, liabilities and stockholders' equity of the
Management Business as of the date set forth therein (the "Buyer Balance
Sheet"; and the date thereof being referred to as the "Buyer Balance Sheet
Date"), and the related unaudited statements of revenue and expenses for
the periods then ended (including the notes thereto and other financial
information included therein) (collectively, the "Buyer Unaudited Financial
Statements"). The Buyer Unaudited Financial Statements (i) were prepared in
accordance with the books and records of the Management Business, and (ii)
fairly present the financial position of the Management Business as of the
dates thereof.
(e) Absence of Undisclosed Liabilities. Except as set forth on
Schedule 3.3(e), as of the Buyer Balance Sheet Date, (i) the Management
Business did not have any material liability of any nature required to be
disclosed on a balance sheet (matured or unmatured, fixed or contingent,
known or unknown) which was not provided for or disclosed on the Buyer
Balance Sheet, (ii) all liability reserves established by the Management
Business on the Buyer Balance Sheet were adequate and (iii) there were no
loss contingencies (as such term is used in Statement of Financial
Accounting Standards No. 5 issued by the Financial Accounting Standards
Board in March 1975) which were not adequately provided for or disclosed on
the Buyer Balance Sheet.
(f) Absence of Changes. Except as set forth on Schedule 3.3(f), since
the Buyer Balance Sheet Date, the Management Business has been operated in
the ordinary course and consistent with past practice and there has not
been:
(i) any material adverse change in the condition (financial or
otherwise), assets, liabilities, operations, results of operations,
earnings, business or prospects of the Management Business;
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(ii) any damage, destruction or loss (whether or not covered by
insurance) in an aggregate amount exceeding $25,000 affecting any
asset or property of the Management Business;
(iii) any obligation or liability (whether absolute, accrued,
contingent or otherwise and whether due or to become due) created or
incurred, or any transaction, contract or commitment entered into, by
the Management Business other than such items created or incurred in
the ordinary course of the Management Business and consistent with
past practice;
(iv) any payment, discharge or satisfaction of any claim, lien,
encumbrance, liability or obligation by the Management Business
outside the ordinary course of the Management Business (whether
absolute, accrued, contingent or otherwise and whether due or to
become due);
(v) any license, sale, transfer, pledge, mortgage or other
disposition of any material tangible or intangible asset of the
Management Business except in the ordinary course of the Management
Business and consistent with past practice;
(vi) any cancellation of any debts or claims of, or any
amendment, termination or waiver of any rights of material value to,
the Management Business;
(vii) any change in the accounting methods or practices followed
in connection with the Management Business or any change in
depreciation or amortization policies or rates theretofore adopted;
(viii) any other transaction relating to the Management Business
other than in the ordinary course of the Management Business and
consistent with past practice; or
(ix) any agreement or understanding, whether in writing or
otherwise, for the Management Business to take any of the actions
specified in items (i) through (viii) above.
(g) Litigation, Etc. Except as set forth on Schedule 3.3(g), there are
no (i) actions, suits, claims, investigations or legal or administrative or
arbitration proceedings pending or, to the best knowledge of the Buyer,
threatened against the Buyer or in connection with the Management Business,
whether at law or in equity, or before or by any Federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, which, if adversely determined, could have a material
adverse effect on the Buyer or (ii) judgments, decrees, injunctions or
orders of any
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court, governmental department, commission, agency, instrumentality or
arbitrator against the Buyer its assets or affecting the Management
Business.
(h) Compliance; Governmental Authorizations. The Buyer and the
Management Business shall have complied in all material respects with all
applicable material Federal, state, local or foreign laws, ordinances,
regulations and orders. The Buyer has all Federal, state, local and foreign
governmental licenses and permits necessary in the conduct of the
Management Business, the lack of which would have a material adverse effect
on the Buyer's ability to operate the Management Business after the date
hereof on substantially the same basis as presently operated, and such
licenses and permits are in full force and effect. To the best knowledge of
the Buyer, none of such licenses and permits shall be affected in any
material respect by the transactions contemplated hereby.
(i) Employees. Except as set forth on Schedule 3.3(i), the Buyer is
not delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other compensation for any services performed by
them through the date hereof.
(j) Insurance. The Buyer has obtained such policies of insurance as
are usual and customary for businesses of the type conducted by the Buyer.
All such policies of insurance are valid and enforceable policies, and all
premiums with respect thereto are currently paid.
(k) Burdensome Restrictions. Except as set forth on Schedule 3.3(k),
neither the Buyer nor the Management Business is bound by any oral or
written agreement or contract which by its terms prohibits it from
conducting the Buyer or the Management Business (or any material part
thereof).
(l) Disclosure. Neither the Buyer Transaction Documents (including the
Exhibits and Schedules attached thereto) nor any other document,
certificate or written statement furnished to the Medical Group by or on
behalf of the Buyer in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein
and therein not misleading.
(m) Brokers. No agent, broker, investment banker, or other Person
acting on behalf of the Buyer or under the authority of the Buyer is or
will be entitled to any fees a certificate certifying that the
representations reasonably be expected to have a material adverse effect on
the Company.
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ARTICLE IV
CONDITIONS OF CLOSING
4.1. Conditions to Obligation of the Buyer. The obligation of the Buyer to
perform this Agreement is subject to the satisfaction of the following
conditions, unless waived in writing by the Buyer:
(a) Authorization. All corporate or other action necessary to
authorize the execution, delivery and performance of this Agreement and the
Transaction Documents by the Company and the Stockholders and the
consummation of the transactions contemplated by this Agreement and the
Transaction Documents shall have been duly and validly taken by the Company
and the Stockholders, and the Company and the Stockholders shall have full
power and authority to enter into and consummate the transactions
contemplated by this Agreement and the Transaction Documents.
(b) Performance of Obligations. The Company and the Stockholders shall
deliver to the Buyer a certificate certifying that the Company and the
Stockholders have performed and complied in all material respects with all
agreements and obligations and satisfied all conditions required to be
performed, complied with or satisfied by each of them under this Agreement
and the Transaction Documents prior to or at the Closing.
(c) Representations and Warranties. The Stockholders shall deliver to
the Buyer a certificate certifying that the representations and warranties
of the Company and the Stockholders set forth in Section 3.1 and the
representation and warranties of the Stockholders set forth in Section 3.2
of this Agreement shall be true and correct in all material respects as of
the date of this Agreement.
(d) No Litigation or Legislation. There shall not be any statute, rule
or regulation which makes the transactions contemplated by this Agreement
and the Transaction Documents illegal or otherwise prohibited or any
pending or threatened investigation, hearing, order, decree or judgment
enjoining or seeking to enjoin the performance of this Agreement or the
Transaction Documents and the transactions contemplated hereby or thereby.
(e) Consents. The Company and the Stockholders shall have received all
third party consents and approvals required in connection with the
transactions contemplated hereby.
(f) Stockholder Certificates. The Buyer shall have received from each
Stockholder the certificates representing
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the Shares owned by such Stockholder duly endorsed in blank and in proper
form for transfer to the Buyer.
(g) Amendment of Articles. The Company shall have delivered to the
Buyer evidence of the amendment of its articles of incorporation changing
(i) the form of the Company from a Pennsylvania professional corporation to
a Pennsylvania business corporation and (ii) its name, which amendment
shall be satisfactory to the Buyer and its counsel.
(h) Absence of Changes. No fact, condition or event shall have
occurred which has had or could reasonably be expected to have a material
adverse effect on the Company.
(i) Restricted Stock Agreement. Each of the Stockholders shall have
executed and delivered to the Buyer a Restricted Stock Agreement, in
substantially the form of Exhibit A attached hereto.
(j) Stockholder Non-Competition Agreement. Each of the Stockholders
shall have executed and delivered to the Buyer a Stockholder
Non-Competition Agreement, in substantially the form of Exhibit B attached
hereto.
(k) Opinion of Counsel to the Company. The Buyer shall have received
an opinion dated the Closing Date from ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇, counsel to
the Company and the Stockholders, in substantially the form of Exhibit C
hereto.
(l) Due Diligence. The Buyer shall have completed its due diligence
review of (i) the business, assets and liabilities of the Company and (ii)
the Shares being transferred hereunder, and the Buyer and its counsel shall
be satisfied, in their sole discretion, with the results of such due
diligence.
(m) Company Liabilities. The Buyer shall receive evidence satisfactory
to the Buyer that as of the Closing the only liabilities of the Company are
those set forth on Schedule II, and that no other accounts payable or other
liabilities of the Company exist as of the Closing Date.
4.2. Conditions to Obligation of the Stockholders. The obligation of the
Stockholders to perform this Agreement is subject to the satisfaction of the
following conditions, unless waived by the Stockholders:
(a) Authorization. All corporate or other action necessary to
authorize the execution, delivery and performance of this Agreement and the
Transaction Documents by the Buyer and the consummation of the transactions
contemplated by this Agreement and the Transaction Documents shall have
been duly and validly taken by the Buyer and the Buyer shall have full
power and
-19-
authority to enter into and consummate the transactions contemplated by
this Agreement and the Transaction Documents.
(b) Performance of Obligations of the Buyer. The Buyer shall have
performed and complied in all material respects with all agreements and
obligations and satisfied all conditions to be performed, complied with and
satisfied by it under this Agreement and the Transaction Documents prior to
or at the Closing.
(c) Amendment of Management Services Agreement. Immediately following
the closing of the transactions contemplated hereunder, the Buyer shall
cause the Company to enter into an amendment to the Management Services
Agreement, in substantially the form of Exhibit D attached hereto.
(d) Restricted Stock Agreement. The Buyer shall have executed and
delivered to each Stockholder a Restricted Stock Agreement.
ARTICLE V
INDEMNIFICATION
5.1. Definitions. As used in this Article V and elsewhere in this
Agreement, the following terms shall have the following meanings:
(a) "Affiliate" means, with respect to any Person, any other Person,
directly or indirectly, through one or more intermediaries, controlling,
controlled by or under common control with such Person;
(b) "Buyer Group" means and includes the Buyer, its Affiliates, their
respective directors, officers, stockholders, employees, agents and
representatives (including, after the Closing, the Company) and any of
their respective successors and assigns; and
(c) "Indemnified Persons" means the Buyer Group or the Stockholder
Group, as applicable;
(d) "Indemnifying Persons" means the Buyer or the Stockholders, as
applicable;
(e) "Losses" means the amount of any loss, obligation, liability,
damage, cost, expense, claims, actions or causes of action (including
reasonable attorneys' fees and expenses) sustained or suffered by an
Indemnified Person;
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(f) "Person" shall be construed broadly and shall include, without
limitation, an individual, a partnership, an investment fund, a limited
liability corporation or partnership, a corporation, an association, a
joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or
political subdivision thereof;
(g) "Stockholder Group" means and includes each of the Stockholders,
their Affiliates and any of their successors and assigns (excluding the
Buyer).
5.2. Indemnification by the Stockholders. (a) Subject to the limitations
contained herein, each of the Stockholders and their respective heirs, estate
and assigns shall severally indemnify and hold harmless the Buyer Group against
any and all Losses which the Buyer Group (or any member thereof) may suffer,
sustain or become subject to as the result of:
(i) the untruth, inaccuracy or breach of any representation or
warranty of such Stockholder contained in Section 3.2 of this
Agreement or any Transaction Document or in any certificate,
instrument or agreement delivered by such Stockholder pursuant hereto
or thereto or in connection with the transactions contemplated hereby
or thereby; or
(ii) the breach by such Stockholder of any covenant or agreement
to be performed by such Stockholder contained in or made pursuant to
this Agreement or any Transaction Document or in any certificate,
instrument or agreement delivered by such Stockholder pursuant hereto
or thereto or in connection with the transactions contemplated hereby
or thereby; or
(iii) all reasonable fees, costs and expenses (including, without
limitation, reasonable attorneys', accountants' and other professional
fees and expenses), incurred by the Buyer Group in connection with any
action, suit, proceeding, demand, assessment or judgment incident to
any of the matters indemnified against under this Section 5.2(a) or in
connection with the enforcement by the Buyer Group (or any member
thereof) of its rights under this Section 5.2(a).
(b) Subject to the limitations contained herein, the Stockholders and
their respective heirs, estates and assigns shall jointly and severally
indemnify and hold harmless the Buyer Group against any and all Losses
which it (or any member thereof) may suffer, sustain or become subject to
as the result of:
(i) any Taxes imposed on the Company by any Federal, state, local
or foreign authority or taxing
-21-
jurisdiction or any reasonable attorneys', accountants' and other
professional fees and expenses sustained, suffered or incurred by the
Company or the Buyer Group, or any member thereof, relating to periods
on or prior to the Closing Date; or
(ii) the untruth, inaccuracy or breach of any representation or
warranty of the Company and the Stockholders contained in Section 3.1
of this Agreement or any Transaction Document or in any certificate,
instrument or agreement delivered by the Company pursuant hereto or
thereto or in connection with the transactions contemplated hereby or
thereby; or
(iii) any liabilities and obligations of the Company or any
Stockholder for fees, costs and expenses relating to or arising out of
the execution, delivery and performance by the Company and any such
Stockholder of this Agreement and the Transaction Documents and the
consummation of the transactions contemplated hereby or thereby,
including, without limitation, legal and accounting fees and expenses
and taxes incurred by the Company and the Stockholders; or
(iv) the breach of any covenant or agreement of the Company
contained in or made pursuant to this Agreement or any Transaction
Document or in any certificate, instrument or agreement delivered by
the Company pursuant hereto or thereto or in connection with the
transactions contemplated hereby or thereby; or
(v) any liabilities and obligations arising out of any medical
malpractice claims against the Company or any Stockholder initiated or
filed on or before the Closing Date or at any time thereafter whether
or not covered by insurance; or
(vi) [subject to due diligence review]; or
(vii) all reasonable fees, costs and expenses (including, without
limitation, reasonable attorneys', accountants' and other professional
fees and expenses), incurred by the Buyer Group in connection with any
action, suit, proceeding, demand, assessment or judgment incident to
any of the matters indemnified against under this Section 5.2(b) or in
connection with the enforcement by the Buyer Group of its rights under
this Section 5.2(b).
No claim, demand, suit or cause of action shall be brought against the
Stockholders under or pursuant to this Section 5.2 with respect to the
representations and warranties set forth in Sections 3.1 and 3.2 hereof unless
the Buyer Group, or any of its members, at any time prior to the Survival Date
(as hereinafter
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defined), gives the Stockholders prompt written notice, with reasonable
specificity, of the existence of any such claim, demand, suit or cause of action
under this Agreement or any Transaction Document. Upon the giving of such
written notice as aforesaid, the Buyer Group, or any of its members, shall have
the right to commence legal proceedings for the enforcement of its or their
rights under this Agreement and the Transaction Documents.
5.3. Indemnification by Buyer. Subject to the limitations contained herein,
the Buyer shall indemnify the Stockholder Group against any Losses which the
Stockholder Group may suffer, sustain or become subject to as the result of:
(a) the untruth, inaccuracy or breach of any representation, warranty,
covenant or agreement of the Buyer contained in or made pursuant to this
Agreement or any Transaction Document or in any certificate, instrument or
agreement delivered by the Buyer pursuant hereto or thereto, or in
connection with the transactions contemplated hereby or thereby; and
(b) all reasonable fees, costs and expenses (including, without
limitation, reasonable attorneys', accountants' and other professional fees
and expenses), incurred by the Stockholder Group in connection with any
action, suit, proceeding, demand, assessment or judgment incident to any of
the matters indemnified against under this Section 5.3 or in connection
with the enforcement by the Stockholder Group of its rights under this
Section 5.3.
No claim, demand, suit or cause of action shall be brought against the Buyer
under or pursuant to this Section 5.3 with respect to the representations and
warranties set forth in Sections 3.3 hereof unless the Stockholder Group, or any
of its members, at any time prior to the Survival Date (as hereinafter defined),
gives the Buyer prompt written notice, with reasonable specificity, of the
existence of any such claim, demand, suit or cause of action under this
Agreement or any Transaction Document. Upon the giving of such written notice as
aforesaid, the Stockholder Group, or any of its members, shall have the right to
commence legal proceedings for the enforcement of its or their rights under this
Agreement and the Transaction Documents.
5.4. Notice and Defense of Third Party Claims. The obligations and
liabilities of the Indemnifying Persons under Sections 5.2 and 5.3 with respect
to claims resulting from the assertion of liability by third parties shall be
subject to the following terms and conditions:
(a) The Indemnified Persons shall give written notice to the
Indemnifying Persons of any claim which might give rise to a claim by the
Indemnified Persons against the Indemnifying Persons based on the indemnity
agreement contained in
-23-
Sections 5.2 or 5.3, stating the nature and basis of such claim and the
amount thereof, to the extent known (including any claim arising out of any
inquiry, audit or investigation by the Internal Revenue Service or any
other governmental authority with respect to Taxes).
(b) In the event any action, suit or proceeding is brought against any
Indemnified Person, with respect to which the Indemnifying Persons may have
liability under the indemnity agreement contained in Sections 5.2 or 5.3,
the action, suit or proceeding shall, upon the written agreement of the
Indemnifying Persons that they are obligated to indemnify under the
indemnity agreement contained in Sections 5.2 or 5.3, be defended
(including all proceedings on appeal or for review which counsel for the
defendant shall deem appropriate) by the Indemnifying Persons; provided,
however, that the Indemnified Persons shall have the right to employ their
own counsel in such case, but the fees and expenses of such counsel shall
be at the expense of the Indemnified Persons unless (i) the employment of
such counsel shall have been authorized in writing by the Indemnifying
Persons in connection with the defense of such action, suit or proceeding,
(ii) the Indemnifying Persons shall not have agreed, promptly after the
notice to them provided in Section 5.4(a) above, that they are obligated to
indemnify under the indemnity agreement contained in Sections 5.2 or 5.3 or
shall not have taken all reasonable actions in connection with such
obligation in a timely fashion, (iii) the Indemnified Persons shall have
reasonably concluded that such action, suit or proceeding mainly involves
matters beyond the scope of the indemnity agreement contained in Sections
5.2 or 5.3 or (iv) the Indemnified Persons shall have reasonably concluded
that a potential conflict exists or a defense is potentially available to
them which is not available to the Indemnifying Persons, in any of which
events the Indemnifying Persons shall not have the right to direct the
defense of such action, suit or proceeding on behalf of the Indemnified
Persons and that portion of such fees and expenses reasonably related to
matters covered by the indemnity agreement contained in Sections 5.2 and
5.3 shall be borne by the Indemnifying Persons. The Indemnified Persons
shall be kept fully informed of such action, suit or proceeding at all
stages thereof whether or not they are so represented. The Indemnifying
Persons shall make available to the Indemnified Persons and their attorneys
and accountants all books and records of the Indemnifying Persons relating
to such proceedings or litigation. The parties hereto agree to render to
each other such assistance as they may reasonably require of each other in
order to ensure the proper and adequate defense of any such action, suit or
proceeding, and, in connection therewith, if the Indemnifying Persons shall
have assumed the defense of any action, suit or proceeding brought or
commenced by the Internal Revenue Service or any other governmental
authority with respect to Taxes, the Indemnified Persons will provide the
Indemnifying Persons with such powers of attorney and other similar
instruments of authority as the
-24-
parties agree may be necessary to facilitate the Indemnifying Persons'
representation of the Indemnified Persons in such action, suit or
proceeding.
(c) The Indemnifying Persons shall not make any settlement of any
claims without the written consent of the Indemnified Persons, which
consent shall not be unreasonably withheld or delayed.
5.5. Remedies Cumulative; Right of Set-Off. The remedies provided for in
this Article V shall be cumulative and shall not be deemed an election of
remedies or preclude assertion by the Buyer Group of any other rights or the
seeking of any other remedies against the Indemnifying Persons. The Buyer Group,
or any of them, shall have, without need for any other action to be taken, the
express right to set-off, with or without notice, any indemnifiable losses
incurred by any member of the Buyer Group against any and all payments due to
any Stockholder under this Agreement, any Transaction Document and the
Restricted Stock Agreement. The parties hereto agree that such right of set-off
shall be in addition to, and not in lieu of, all other remedies available to the
Buyer Group, and that such right of set-off shall not be considered an election
of remedies, and in connection with the foregoing, the Stockholders expressly
agree not to claim or assert a defense based on the election of remedies. Each
of the Stockholders expressly agrees that all of the Stockholders liabilities
for payments due to the Buyer Group pursuant to this Article V shall be joint
and several, and that each Stockholder shall be fully responsible for the
payment obligations of all Stockholders.
5.6. Survival of Representations and Warranties, Etc. Subject to the
further provisions of this Article V, the representations and warranties of the
Stockholders contained in Sections 3.1 and 3.2 and the representations and
warranties of the Buyer contained in Section 3.3 shall survive the Closing and
shall terminate on the fourth anniversary of the Closing Date; provided,
however, that the representations and warranties of the Stockholders set forth
in Sections 3,1(a), 3.1(c), 3.1(d), 3.2(a) and 3.2(b) shall survive the Closing
and remain in full force and effect as provided by law and that the
representations and warranties of the Stockholders set forth in Section 3.1(h)
shall survive the Closing until the expiration of the statute of limitations, if
any, applicable to the matters set forth therein. Except as otherwise expressly
provided in this Agreement, all agreements and covenants contained in this
Agreement (including, but not limited to, the indemnification agreements
contained herein) shall survive the Closing and remain in full force and effect
as provided by applicable law. For convenience of reference, the date upon which
any representation, warranty, agreement or covenant shall terminate, if any,
shall be referred to as the "Survival Date."
-25-
ARTICLE VI
MISCELLANEOUS
6.1. Expenses. Each of the Company and the Stockholders, on the one hand,
and the Buyer, on the other hand, shall pay their respective expenses in
connection with the preparation of and consummation of the transactions
contemplated by this Agreement; provided that the Stockholders shall be
responsible for any and all expenses of the Company or the Stockholders that
remain unpaid as of the Closing Date.
6.2. Purchase Price Adjustment. In the event that the Fair Market Value (as
hereinafter defined) of a share of Buyer Common Stock, determined as of the
first anniversary of the date hereof (the "Determination Date"), is less than
$6.00 (such difference, if any, being referred to herein as the "Per Share
Deficiency Amount"), the Buyer shall pay to the Stockholders an aggregate amount
(the "Additional Purchase Price") equal to the Per Share Deficiency Amount
multiplied by 176,814. The Additional Purchase Price shall be payable by the
Buyer to the Shareholders in cash not later than 30 days after the Determination
Date and such amount shall be divided equally among the Shareholders.
6.3. Entire Agreement; Amendment. (a) This Agreement and the Exhibits and
Schedules attached hereto contain the entire agreement among the parties with
respect to the transactions contemplated hereby and supersede all prior
agreements and understandings among the parties with respect thereto.
(b) This Agreement shall not be altered or otherwise amended except
pursuant to an instrument in writing signed by the parties hereto.
6.4. Severability. It is the desire and intent of the parties hereto that
the provisions of this Agreement be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of this
Agreement shall be adjudicated by a court of competent jurisdiction to be
invalid, prohibited or unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of this
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction. Notwithstanding the foregoing, if such provision could be
more narrowly drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of this
-26-
Agreement or affecting the validity or enforceability of such provision in any
other jurisdiction.
6.5. Descriptive Headings; Number and Gender. (a) Descriptive headings are
for convenience only and shall not control or affect the meaning or construction
of any provision of this Agreement.
(b) Any reference to the masculine, feminine or neuter gender shall
include such other genders and any reference to the singular or plural
shall include the other, in each case unless the context otherwise
requires.
6.6. Public Announcements. The parties will consult with each other before
issuing any press release or otherwise making any public statements with respect
to this Agreement and the transactions contemplated hereby, and no party will
issue any such press release or any such public statement prior to such
consultation and the agreement of the other party, except as may be required by
law.
6.7. Notices. All notices or other communications which are required
hereunder or otherwise delivered in connection herewith shall be in writing and
shall be deemed to have been duly given if delivered personally or if sent by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
if to the Buyer, to:
I BMJ Medical Management, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇-▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇,
M.D. Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇;
with a copy to:
▇'▇▇▇▇▇▇▇▇ Graev & Karabell, LLP
▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ Held, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇;
-27-
if to the Company, to:
Valley Sports Surgeons, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇; and
if to any Stockholder, to him or her at the address
listed beneath his or her name on Schedule I hereto;
with a copy to:
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇
700 Mellon Bank Center
▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇-▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇;
or to such other address as any party to whom notice is to be given may have
furnished to the other parties in writing in accordance herewith. Any such
notice or communication shall be effective upon receipt.
6.8. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
agreement.
6.9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania (without giving
effect to principles of conflicts of laws).
6.10. Benefits of Agreement. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Anything contained herein to the
contrary notwithstanding, this Agreement shall not be assignable by the
Stockholders without the consent of the Buyer. The Buyer may, without the
consent of the Stockholders, collaterally assign this Agreement to a financial
or lending institution providing financing to the Buyer; provided, however, that
no such assignment shall release the Buyer from its obligations hereunder.
* * *
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IN WITNESS WHEREOF, each of the parties has caused this Stock Purchase
Agreement to be executed on the day and year first written above.
BMJ MEDICAL MANAGEMENT, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D.
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D.
President and Chief Executive
Officer
STOCKHOLDERS:
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D.
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, M.D.
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, M.D.
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, M.D.
---------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, M.D.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D.
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D.
/s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, M.D.
---------------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, M.D.
VALLEY SPORTS SURGEONS, INC.
By:
------------------------------------
Name:
Title:
Schedule I
Stockholders; Record Ownership;
Share Exchange
===============================================================================
Stockholder Shares of Company Shares of Parent
Name and Address Common Stock Common Stock
--------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D. 60 100,650
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier:___________
--------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, M.D. 60 100,650
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier:___________
--------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, M.D. 60 100,650
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier:___________
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D. 60 100,650
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier:___________
--------------------------------------------------------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, M.D. 60 100,650
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier:___________
================================================================================
Schedule II
Company Liabilities
[See Attached.]
EXHIBIT A
Restricted Stock Agreement
See Attached.
EXHIBIT B
Stockholder Non-Competition Agreement
See Attached.
EXHIBIT C
Form of Opinion of Counsel to
the Company and the Stockholders
See Attached.
EXHIBIT D
Amendment to
Management Services Agreement
See Attached.
