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EXHIBIT 10.40
ASSET ACQUISITION AGREEMENT
by and among
Physicians' Specialty Corp.,
PSC Management Corp.,
▇▇▇▇ Ear, Nose & Throat Associates, P.C.
and
▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D.,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, M.D.,
▇▇▇▇▇ ▇▇▇▇▇, M.D.,
▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D., and
▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D.
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TABLE OF CONTENTS
Page
SECTION 1. SALE AND ACQUISITION OF ASSETS.........................................................................1
1.1 CONVEYANCE OF ASSETS......................................................................................1
1.2 EXCLUDED ASSETS...........................................................................................3
1.3 ACQUISITION PRICE; ASSUMPTION OF LIABILITIES..............................................................3
1.4 EMPLOYMENT ARRANGEMENTS...................................................................................4
1.5 SELLER'S FINANCIAL INFORMATION............................................................................5
1.6 EACH PARTY TO BEAR COSTS..................................................................................5
1.7 ASSIGNMENT OF CONTRACTS AND ASSETS; CONSENTS..............................................................5
1.8 COOPERATION WITH REGULATORY APPROVALS.....................................................................6
1.9 IRREVOCABLE GUARANTY BY PARENT............................................................................6
1.10 CLOSING...................................................................................................6
1.10 CLOSING...................................................................................................8
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER...............................................8
2.1 CORPORATE EXISTENCE; GOOD STANDING........................................................................8
2.2 POWER AND AUTHORITY; ENFORCEABILITY.......................................................................8
2.3 SUBSIDIARIES AND AFFILIATES...............................................................................9
2.4 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS.........................................................9
2.5 SELLER'S FINANCIAL INFORMATION...........................................................................10
2.6 LEASES...................................................................................................10
2.7 PERSONAL PROPERTY........................................................................................10
2.8 INVENTORIES..............................................................................................10
2.9 PRINCIPAL PLACE OF BUSINESS..............................................................................10
2.10 LOCATION OF ASSETS.......................................................................................10
2.11 INTELLECTUAL PROPERTY RIGHTS.............................................................................10
2.12 DIRECTORS AND OFFICERS; PAYROLL INFORMATION..............................................................11
2.13 LEGAL PROCEEDINGS........................................................................................11
2.14 CONTRACTS................................................................................................11
2.15 SUBSEQUENT EVENTS........................................................................................12
2.16 ACCOUNTS RECEIVABLE......................................................................................13
2.17 TAX RETURNS..............................................................................................13
2.18 COMMISSIONS AND FEES.....................................................................................14
2.19 MATERIAL LIABILITIES.....................................................................................14
2.20 INSURANCE POLICIES.......................................................................................14
2.21 EMPLOYEE BENEFIT PLANS...................................................................................14
2.22 COMPLIANCE WITH LAWS IN GENERAL..........................................................................15
2.23 FRAUD AND ABUSE..........................................................................................15
2.24 MEDICARE, MEDICAID, AND OTHER THIRD-PARTY PAYOR PAYMENT LIABILITIES......................................15
2.25 BILLING NEW PRACTICES AND REFERRAL SOURCES...............................................................16
2.26 PHYSICIAN SELF-REFERRALS.................................................................................17
2.28 NO UNTRUE REPRESENTATIONS................................................................................17
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND PSC......................................................17
3.1 CORPORATE EXISTENCE; GOOD STANDING; QUALIFICATION.........................................................17
3.2 POWER AND AUTHORITY; ENFORCEABILITY.......................................................................17
3.3 COMMISSIONS AND FEES......................................................................................18
3.4 CAPITALIZATION............................................................................................18
3.5 PSC COMMON STOCK..........................................................................................18
3.6 PARENT DOCUMENTS..........................................................................................18
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3.7 LEGAL PROCEEDINGS.........................................................................................18
SECTION 4. ACCESS TO INFORMATION AND DOCUMENTS...................................................................18
4.1 ACCESS TO SELLER'S INFORMATION............................................................................18
4.2 RETENTION OF RECORDS......................................................................................18
SECTION 5. CONDITIONS TO OBLIGATION OF PARENT AND PSC TO CLOSE...................................................19
5.1 REPRESENTATIONS AND WARRANTIES TRUE......................................................................19
5.2 COVENANTS................................................................................................19
5.3 NO SUIT OR PROCEEDING....................................................................................19
5.5 ABSENCE OF MATERIAL ADVERSE CHANGE.......................................................................19
5.5 CERTIFICATE..............................................................................................19
5.6 CONSENTS AND APPROVALS...................................................................................20
5.7 COUNSEL OPINION..........................................................................................20
5.8 OTHER AGREEMENTS EXECUTED................................................................................20
5.9 RELEASE OF LIENS.........................................................................................20
5.10 CLOSING DATE FINANCIAL CERTIFICATE; CLOSING DATE FINANCIAL STATUS........................................20
5.11 CORPORATE DOCUMENTS......................................................................................20
5.12 INSTRUMENTS OF CONVEYANCE................................................................................20
5.13 STOCKHOLDERS' AGREEMENT..................................................................................21
5.14 INVESTOR LETTER AND FINANCIAL DATA SHEET.................................................................21
SECTION 6. CONDITIONS TO ASSUMED OBLIGATION OF SELLER AND THE SHAREHOLDER........................................21
6.1 REPRESENTATIONS AND WARRANTIES TRUE.......................................................................21
6.2 COVENANTS.................................................................................................21
6.3 NO SUIT OR PROCEEDING.....................................................................................21
6.5 CERTIFICATE...............................................................................................21
6.5 GOVERNMENT APPROVALS......................................................................................21
6.6 COUNSEL OPINION...........................................................................................21
6.7 ACQUISITION PRICE.........................................................................................21
SECTION 7. CERTAIN ADDITIONAL COVENANTS..........................................................................22
7.1 CONDUCT OF BUSINESS PRIOR TO CLOSING......................................................................22
7.2 FUNDING OF ACCRUED EMPLOYEE BENEFITS......................................................................22
7.3 CREDITOR'S CLAIMS.........................................................................................23
7.4 INTENTIONALLY OMITTED.....................................................................................23
7.5 COVENANT NOT TO COMPETE...................................................................................23
7.6 CONFIDENTIALITY...........................................................................................24
7.7 SHORTFALL IN COLLECTION OF ACCOUNTS.......................................................................24
7.8 ACKNOWLEDGMENT OF MSA.....................................................................................24
7.9 AUDIT OF FINANCIAL STATEMENTS.............................................................................24
SECTION 8. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION................................25
8.1 NATURE AND SURVIVAL.......................................................................................25
8.2 INDEMNIFICATION BY PSC AND PARENT.........................................................................25
8.3 INDEMNIFICATION BY SELLER AND SHAREHOLDER.................................................................25
8.4 INDEMNIFICATION PROCEDURE.................................................................................25
8.5 LIMITATIONS UPON OBLIGATIONS..............................................................................26
8.6 RIGHT OF OFFSET...........................................................................................26
SECTION 9. TERMINATION...........................................................................................27
9.1 RIGHT TO TERMINATE........................................................................................27
9.2 EFFECT OF TERMINATION.....................................................................................27
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SECTION 10. MISCELLANEOUS........................................................................................27
10.1 NOTICES.................................................................................................27
10.2 FURTHER ASSURANCES......................................................................................29
10.3 PUBLIC DISCLOSURES......................................................................................29
10.4 GOVERNING LAW...........................................................................................29
10.5 "INCLUDING".............................................................................................29
10.6 "KNOWLEDGE".............................................................................................29
10.7 "MATERIAL"..............................................................................................29
10.8 "MATERIAL ADVERSE CHANGE" OR "MATERIAL ADVERSE EFFECT"..................................................30
10.9 "HAZARDOUS MATERIALS"...................................................................................30
10.10 "ENVIRONMENTAL LAWS"....................................................................................30
10.12 APPOINTMENT OF ATTORNEY-IN-FACT.........................................................................30
10.12 CAPTIONS................................................................................................30
10.13 INTEGRATION OF EXHIBITS.................................................................................31
10.14 ENTIRE AGREEMENT........................................................................................31
10.15 COUNTERPARTS............................................................................................31
10.16 BINDING EFFECT..........................................................................................31
10.17 NO RULE OF CONSTRUCTION.................................................................................31
10.18 COSTS OF ENFORCEMENT....................................................................................31
10.19 TRANSFER OF ASSETS; ASSIGNMENT..........................................................................31
10.19 TRANSFER OF ASSETS; ASSIGNMENT..........................................................................32
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ASSET ACQUISITION AGREEMENT
ASSET ACQUISITION AGREEMENT (this "Agreement"), dated as of December
___, 1997 (the "Execution Date"), by and among PSC MANAGEMENT CORP., a Delaware
corporation ("PSC"), PHYSICIANS' SPECIALTY CORP., a Delaware corporation
("PARENT"), ▇▇▇▇ EAR, NOSE & THROAT ASSOCIATES, P.C., a Georgia professional
corporation ("Seller"), and ▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D., ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, M.D., ▇▇▇▇▇
▇▇▇▇▇, M.D., ▇▇▇▇ ▇▇▇▇▇▇▇▇, M.D., and ▇▇▇▇▇▇ ▇▇▇▇▇▇, M.D., residents of the
State of Georgia (collectively, the "Shareholders" and individually, a
"Shareholder"). Appendix A contains a master list of all defined terms used in
this Agreement.
W I T N E S S E T H:
WHEREAS, Seller operates a medical practice which provides
otolaryngology and other medical and surgical services from offices located in
▇▇▇▇ County, Georgia and surrounding communities (the "Medical Practice");
WHEREAS, Shareholders are the only shareholders of Seller;
WHEREAS, Parent through its wholly-owned subsidiaries is engaged in
the business of acquiring the assets of and managing medical practices;
WHEREAS, PSC is a wholly-owned subsidiary of Parent;
WHEREAS, Seller wishes to convey to PSC, and PSC wishes to acquire
from Seller, substantially all of the properties and assets constituting the
management function and business of the Medical Practice (the "Business"), all
upon the terms and subject to the conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the above premises, the mutual
promises and covenants hereinafter set forth, and for other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the parties
(together, the "Parties," individually, a "Party"), intending to be legally
bound, do hereby agree as follows:
SECTION 1. SALE AND ACQUISITION OF ASSETS.
1.1 CONVEYANCE OF ASSETS. At the Closing (as defined in Section
1.10), Seller shall convey, transfer and assign to PSC and PSC shall acquire
from Seller all of Seller's right, title and interest in and to substantially
all the properties and assets of Seller as a going concern, other than the
Excluded Assets identified in Section 1.2, including, without limitation, all
items of personal property and other assets used in connection with the Business
(except as otherwise provided in
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Section 1.2), whether or not any of such assets have any value for accounting
purposes (the "Assets"), free and clear of all obligations, security interests,
liens, claims and encumbrances whatsoever, except as specifically assumed by PSC
pursuant to Section 1.3(b). Seller shall deliver custody or control of the
Assets to PSC at the Closing. Without limiting the generality of the foregoing,
the Assets specifically include:
(a) All real estate, personal property, plant, furniture,
fixtures and equipment owned by Seller which are utilized in or related to the
Business, including, but not limited to, all items identified on Exhibit 1.1(a).
(b) All contracts, leases, agreements and commitments of Seller
and/or the Shareholder related to the Business identified on Exhibit 1.3(b), and
all contracts, agreements and commitments of Seller and/or the Shareholder
related to the Business entered into prior to the Closing in the ordinary course
of business and not in violation of Section 7.1 (but excluding this Agreement
and the agreements, instruments and documents executed and delivered by PSC
pursuant to this Agreement and also excluding physician employment agreements of
Seller and any contracts with nurse practitioners and physician assistants of
Seller) and all contract rights of Seller incident thereto, and all general
intangibles of Seller.
(c) Subject to applicable laws and regulations, all supplies
and inventories maintained by Seller as of the Closing Date as described in
Exhibit 1.1(c).
(d) Subject to applicable laws and regulations, all accounts
receivable of Seller, notes receivable and other rights to receive payments owed
to Seller in existence on the Closing Date, and all cash arising from the
collection of same from and after the Closing Date.
(e) The books and records of Seller relating to the Assets.
(f) Subject to applicable laws and regulations, all
transferable licenses and other regulatory approvals necessary for or incident
to the use of the Assets or the conduct of the Business.
(g) Any and all right Seller may have to the names "▇▇▇▇ Ear,
Nose & Throat Associates, P.C.," "▇▇▇▇ ENT," and all other trade and service
marks and names and goodwill associated therewith, all intellectual property
rights associated with the Business, and all customer lists, patient records
(subject to applicable laws and regulations), clinical and administrative policy
and procedure manuals, trade secrets, copyrights, patents, marketing and
promotional materials (including audiotapes, videotapes and printed materials)
and all other property rights required for or incident to the marketing of the
products and services of the Business, and all books and records relating
thereto.
(h) All of Seller's cash, prepaid expenses, prepaid insurance,
deposits and similar items.
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1.2 EXCLUDED ASSETS. Seller shall not sell to PSC and Seller shall
retain all of its right, title and interest in and to, the assets set forth on
Exhibit 1.2 and the following assets (collectively, the "Excluded Assets"):
(a) The original minute books of Seller and similar corporate
records of Seller, although PSC may require Seller to deliver copies of these
items to PSC at the Closing;
(b) All consideration to be delivered by PSC on the Closing
Date;
(c) Patient medical charts and confidential patient
information;
(d) Prescription medications, licenses to practice medicine,
and such other rights and benefits incident to and only usable by a licensed
physician;
(e) All provider contracts of the Medical Practice and any
equity interest of the Seller in Southern Otolaryngology LLC that is
non-transferable to PSC; and
(f) Assets of a personal nature owned by the Shareholders
individually, such as diplomas, listed on Exhibit 1.2 hereto.
1.3 ACQUISITION PRICE; ASSUMPTION OF LIABILITIES.
(a) Consideration. As consideration for the acquisition of the
Assets by PSC from Seller, PSC shall provide Seller with the following
consideration: (i) on or after the Closing Date but prior to January 5, 1998,
PSC shall pay Seller cash in the amount of $840,000, and (ii) PSC shall issue to
Seller shares of the Common Stock, par value $.001 per share, of Parent (the
"Parent Common Stock") with a value of $3,360,000 (the "Stock Value Amount");
provided, however, that in the event Seller acquires the fixed assets for a
proposed medical office in Douglasville, Georgia prior to Closing at a capital
cost of approximately $35,000, the consideration will be increased by the amount
of such capital cost by increasing the Stock Value Amount by the amount so paid
by Seller. The number of shares of Parent Common Stock that shall constitute the
Stock Value Amount shall be determined by dividing the Stock Value Amount by the
average closing price for the Parent Common Stock on NASDAQ for the twenty (20)
trading days ending on the day immediately prior to the Closing Date. The shares
of Parent Common Stock, as so determined, shall be delivered to Seller in two
equal installments, with the first installment of one-half of the shares to be
delivered at Closing and the second installment to be delivered on the first
anniversary date of the Closing. The shares delivered in the first installment
will not be registered under the Securities Act of 1933, as amended (the
"Securities Act") or any state securities laws and may not be transferred except
pursuant to an effective registration statement under the Securities Act and
applicable state securities laws or in a transaction that is exempt from the
registration requirements of the Securities Act and any applicable state
securities laws. The shares delivered in the second installment will be
registered for re-sale pursuant to an effective registration statement under the
Securities Act at the time of delivery.
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The "Acquisition Price," which includes the aggregate value of the
consideration being paid under this Section 1.3(a) by PSC for the Assets, shall
be allocated as set forth on Exhibit 1.3(a). The Parties shall use such
allocation in completing Form 8594 under the Internal Revenue Code and
satisfying any and all other reporting requirements of the Internal Revenue
Service or any other state or local taxing authority.
(b) Assumption of Liabilities. At the Closing PSC shall assume
and shall perform or discharge after the Closing Date (as defined in Section
1.11), only the amount of accrued employee vacation and sick pay liability and
those office leases of Seller that are specifically listed on Exhibit 1.3(b)
(collectively, the "Assumed Obligations"). PSC agrees to pay and discharge the
Assumed Obligations as they become due and payable or otherwise dischargeable.
(c) Liabilities Not Assumed. Notwithstanding any contrary
provision contained in this Agreement, PSC shall not be deemed to have assumed,
nor shall PSC assume: (i) any liability which may be incurred by reason of any
uncured material breach of or any monetary default under or in connection with
an Assumed Obligation which occurred prior to the Closing Date; (ii) any
liability for any employee benefits payable to employees of Seller, including,
but not limited to, liabilities arising under any Seller Plan (as defined in
Section 2.21), except for liabilities for accrued vacation days and sick pay
listed on Exhibit 1.3(b); (iii) any liability based upon or arising out of a
violation of any antitrust or similar restraint-of-trade laws by Seller,
including, without limiting the generality of the foregoing, any such antitrust
liability which may arise in connection with agreements, contracts, commitments
or orders for the sale of goods or provision of services by Seller reflected on
the books of Seller at or prior to the Closing Date; (iv) any liability based
upon or arising out of overpayments due to the Medicare and/or Medicaid
programs, any other third party payor, or any liability based upon or arising
out of a violation of any false claim, anti-kickback, prohibition or
self-referral laws or similar fraud and abuse laws by Seller; (v) any medical
malpractice liability associated with the Medical Practice, the Business or
Seller or any Shareholder or other person associated with the Medical Practice,
the Business or Seller; (vi) any liability based upon or arising out of any
tortious or wrongful actions of Seller or any Shareholder or other person
associated with the Medical Practice, the Business, or any liability for the
payment of any taxes imposed by law on Seller arising from or by reason of the
transactions contemplated by this Agreement (collectively, the "Transactions");
or (vii) any other liability of Seller other than the Assumed Obligations.
1.4 EMPLOYMENT ARRANGEMENTS.
(a) Following the Closing, PSC will offer employment as
employees-at-will to all persons who are non-medical employees of Seller on the
Closing Date. Seller's employees who become employed by PSC are hereinafter
referred to as "Transferred Employees."
(b) As of the Closing Date, Seller will use its best efforts
to: (i) terminate any employment contracts of those persons who are employed by
PSC as Transferred Employees pursuant to Section 1.4(a); and (ii) terminate all
Seller Plans, such termination to be effected in accordance with and to the
extent permitted by applicable provisions of the Internal
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Revenue Code of 1986, as amended, (the "Code") and the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and all other applicable
laws, rules, governmental orders, statutes, decrees and regulations ("Laws");
and (iii) cause the Seller Plans to make timely appropriate distributions, to
the extent required, to such employees in accordance with, and to the extent
permitted by, the terms and conditions of such Seller Plans, ERISA and the Code.
Seller will provide to PSC such copies of documents and other information
related to the termination of such Seller Plans as PSC may request.
1.5 SELLER'S FINANCIAL INFORMATION. The agreement between the
Parties evidenced by this Agreement has been reached based on financial
information about Seller, the Assets, the Medical Practice and the Business as
of October 31, 1997, as provided to PSC by Seller. The unaudited Balance Sheet
of Seller as of October 31, 1997 (the "Balance Sheet Date") is attached as
Exhibit 1.5 and is hereinafter referred to as the "Balance Sheet".
1.6 EACH PARTY TO BEAR COSTS. Each of the Parties shall pay all of
the costs and expenses incurred by such Party in connection with the
Transactions, except as otherwise expressly provided herein. Without limiting
the generality of the foregoing, and whether or not such liabilities may be
deemed to have been incurred in the ordinary course of business, neither Party
shall be liable for or required to pay, either directly or indirectly, any of
the following liabilities or expenses incurred by the other Party: (a) fees and
expenses of any person for services as a finder, or for fees and expenses of any
persons for financial services rendered to such other Party in connection with
negotiating and closing the Transactions; (b) fees and expenses of legal counsel
retained by such other Party for services rendered to such Party in connection
with negotiating and closing the Transactions; (c) fees and expenses of any
auditors and accountants retained by such other Party for services rendered to
such Party in connection with negotiating and closing the Transactions; (d)
state and federal income taxes or other similar charges on income incurred by
such other Party on any gain from the purchase and sale of the Assets hereunder;
and (e) expenses and fees relating to feasibility studies, appraisals and
similar valuation services performed on behalf of such other Party in connection
with the Transactions.
1.7 ASSIGNMENT OF CONTRACTS AND ASSETS; CONSENTS. Nothing in this
Agreement or delivered pursuant to this Agreement shall be construed as an
attempt to agree to assign any contract, certificate, license or other Asset
which under Law or by agreement is nonassignable without the consent of the
other Party or parties thereto, or of any governmental authority, as the case
may be, unless such consent shall be given. Seller will use its reasonable good
faith efforts to obtain all such necessary consents of the Parties to any such
contracts prior to the Closing; provided, however, that Seller and the
Shareholders will not be required to pay more than $10,000 to any third party to
obtain the consent of such third party. In order, however, that the full value
of every such contract, certificate, license or other Asset included within the
Assets and all claims and demands in such contracts may be realized, Seller and
the Shareholders hereby jointly and severally covenant with PSC and Parent that
Seller, by itself or by its agents, will, at the request and expense and under
the direction of PSC, in the name of Seller or otherwise, as PSC shall specify
and as shall be permitted by Law, and subject to the proviso in the preceding
sentence, take all such reasonable actions and do or cause to be done all such
reasonable things as shall, in the opinion of PSC, be necessary or proper (a) in
order that the rights and obligations of Seller under such contracts,
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certificates, licenses and other Assets shall be preserved, and (b) for, and to
facilitate, from and after the Closing, the collection of the moneys due and
payable, and to become due and payable, to Seller in and under every such
contract and in respect of every such claim and demand, from and after the
Closing, and Seller shall hold the same for the benefit of, and shall pay the
same over to, PSC.
1.8 COOPERATION WITH REGULATORY APPROVALS. Seller and Shareholders
shall cooperate with and assist PSC, as PSC shall reasonably request, in
obtaining the approval of all regulatory agencies and officials whose approval
is required for the transfer of all licenses and other regulatory approvals
required to enable PSC to acquire the Assets and operate the Business.
1.9 IRREVOCABLE GUARANTY BY PARENT. To induce Seller to execute and
deliver this Agreement, Parent hereby unconditionally and irrevocably guarantees
the Seller and Shareholders the full, prompt and faithful performance by PSC of
all covenants and obligations to be performed by PSC under this Agreement,
including, but not limited to, the payment of all sums and delivery of all
property stipulated to be transferred by PSC pursuant to this Agreement and
PSC's obligation to indemnify the Seller and Shareholders pursuant to Section
8.2. In the event that PSC fails to fully perform all such covenants and
obligations in accordance with their terms or pay all or any part of such sums
or deliver all or any part of such property when due, Parent will perform all
such covenants and obligations in accordance with their terms or immediately pay
or deliver to Seller (or such other payee or transferee as may be provided in
any such agreement) the amount due and unpaid or the property not delivered, as
the case may be, by PSC. In the event of bankruptcy, termination, liquidation or
dissolution of PSC, this unconditional guaranty shall continue in full force and
effect. In the event of any extension of time for payment or performance or
other modification of any guaranteed obligation or covenant, or any waiver
thereof or other compromise or indulgence with respect thereto or any release or
impairment of any security for any such obligation or covenant, or any other
circumstance which might otherwise constitute a legal or equitable discharge of
a surety or guarantor, no notice to, or consent of, Parent shall be required.
1.10 CLOSING.
(a) CLOSING. Subject to the fulfillment of the conditions
precedent specified in Sections 5 and 6, the Transactions shall be consummated
at a closing (the "Closing") to be held on December 31, 1997 at the offices of
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP, Atlanta, Georgia, or at such other location, date and
time, as is mutually agreed upon by the Parties. The date on which the Closing
occurs shall be referred to as the "Closing Date," and the Closing shall be
effective as of 5:00 p.m. December 31, 1997.
(b) DOCUMENTS TO BE DELIVERED BY SELLER. At the Closing, Seller
shall deliver, or cause to be delivered, to PSC the following:
(i) The Shareholders' bring-down certificate described
in Section 5.5;
(ii) The legal opinion described in Section 5.7;
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(iii) The executed Employment Agreements described in
Section 5.8;
(iv) The UCC-3 release or termination statements or other
lien release documents described in Section 5.9;
(v) The Closing Date financial certificate described in
Section 5.10;
(vi) The certified Articles of Incorporation, the Bylaws,
Shareholder Agreements (if any), good standing certificates of
Seller, certified resolutions of Seller and of Shareholders,
all as described in Section 5.11;
(vii) The bills of sales, assignment and assumption
agreements and other instruments described in Section 5.12;
(viii) The Seller and Shareholders Investor Letters and
Financial Data Sheets described in Section 5.14;
(ix) Any other documentation required to be delivered
under this Agreement or otherwise requested to be delivered by
PSC that is necessary or appropriate to consummate the
Transactions; and
(x) The executed Amendment No. 4 to the New Atlanta Ear,
Nose & Throat Associates, P.C. ("NAENT") Stockholders'
Agreement described in Section 5.13.
(c) DOCUMENTS AND OTHER ITEMS TO BE DELIVERED BY PSC. At the
Closing, PSC shall deliver to Seller the following:
(i) The Acquisition Price consisting of the cash and a
stock certificate representing shares of Parent Common Stock
for one-half of the Stock Value Amount payable to Seller
pursuant to Section 1.3;
(ii) The PSC bring-down certificate described in Section
6.4; and
(iii) The legal opinion described in Section 6.6.
Simultaneously with such delivery, Seller and Shareholders jointly and
severally agree to use their best efforts and to take all action as may be
reasonably necessary to put PSC in possession and operating control of the
Assets at the locations of Seller's Medical Practice free and clear of all liens
or other restrictions or encumbrances, including the obtaining of such consents
of third Parties as may be reasonably necessary to effect the foregoing.
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1.11 TAX TREATMENT. It is intended by the Parties that the
acquisition contemplated by this Agreement qualify as a reorganization under the
provisions of Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as
amended.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER.
The Seller and Shareholders jointly and severally represent and
warrant to PSC and Parent as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Seller is a professional
corporation duly organized, validly existing and in good standing under the laws
of the State of Georgia. Seller has all necessary corporate powers to own all of
its assets and to carry on its business as such business is now being conducted.
Seller is not required to qualify to do business as a foreign corporation in any
other state or jurisdiction by reason of its business, properties or activities
in or relating to such other state or jurisdiction.
2.2 POWER AND AUTHORITY; ENFORCEABILITY.
(a) Seller has corporate power to execute, deliver and perform
its obligations under this Agreement and all agreements, certificates and other
documents to be executed and delivered by it pursuant to this Agreement and in
connection with the Transactions (collectively, the "Seller Documents"), and has
taken all action required by Law, its Articles of Incorporation, its Bylaws or
otherwise, to authorize the execution and delivery of and the performance of the
Seller Documents. The execution and delivery of the Seller Documents, do not,
and, subject to the receipt of consents to assignments of leases and other
contracts where required and the receipt of regulatory approvals where required,
the consummation of the Transactions will not, violate any provision of the
Articles of Incorporation or Bylaws of Seller or any provisions of, or result in
the acceleration of, any obligation under any mortgage, lien, lease, agreement,
instrument, order, arbitration award, judgment or decree to which Seller is a
party or by which Seller is bound, or violate any material restrictions of any
kind to which Seller is subject.
(b) The execution and delivery of the Seller Documents, do not,
and the consummation of the Transactions will not, violate any provisions of, or
result in the acceleration of, any obligation under any mortgage, lien, lease,
agreement, instrument, order, arbitration award, judgment or decree to which any
Shareholder is a party or by which any Shareholder is bound, or violate any
material restrictions of any kind to which Shareholder is subject.
(c) This Agreement has been duly and validly executed and
delivered by Seller and Shareholders and constitutes the valid and binding
agreement of Seller and Shareholders enforceable against each of them in
accordance with its terms, and each other Seller Document to be executed and
delivered at the Closing by Seller and/or a Shareholder will upon such execution
and delivery constitute the valid and binding agreement of Seller or such
Shareholder (or all of them, if all are parties) enforceable against Seller or
such Shareholder (or all of them, if all are parties) in accordance with its
terms.
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2.3 SUBSIDIARIES AND AFFILIATES. Except as set forth in Exhibit
2.3, Seller does not own stock in or control, directly or indirectly, any other
corporation, association or business organization, nor is Seller a party to any
joint venture or partnership nor is Seller a member of any limited liability
entity. The Shareholders are all the shareholders of Seller and own all the
capital stock of Seller in the respective amounts set forth on Exhibit 2.3.
There are no outstanding (a) securities of Seller convertible into equity
interests in Seller, or (b) commitments, options, rights or warrants to issue
any such equity interests in Seller, or to issue securities of Seller
convertible into such equity interests.
2.4 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. (a) PERMITS.
All material building or other permits, certificates of occupancy, concessions,
grants, franchises, licenses, certificates of need and other material
governmental authorizations and approvals necessary for the conduct of the
Business, or waivers thereof, have been duly obtained and are in full force and
effect, and there are no proceedings pending or, to the knowledge of Seller and
Shareholders, threatened which may result in the revocation, cancellation or
suspension, or any adverse modification, of any thereof. Any and all past
litigation concerning such building or other permits, certificates of occupancy,
concessions, grants, franchises, licenses, certificates of need and other
governmental authorizations and approvals, and all claims and causes of action
raised therein, have been finally adjudicated.
(b) APPROVALS. Each Shareholder holds in full force and effect
all approvals, authorizations, licenses, and certifications required by law (the
"Approvals") to practice medicine. Evidence of such Approvals has been delivered
to PSC. There has been no lapse, revocation, or suspension of any Approval, or
any formal allegation (including any complaint, indictment or initiation of
proceedings) made before a court of law, licensing or regulatory authority,
professional organization, or the medical staff or committee of a hospital,
regarding any Shareholder's practice or fitness to practice medicine, including
any allegation of the following: alcohol abuse, a violation of any law or
regulation relating to controlled substances, professional malpractice or
misconduct, improper billing practices, or a crime involving moral turpitude.
The foregoing does not include any action taken as a result of failure to timely
complete medical records.
(c) PROVIDER NUMBERS. Each Shareholder holds a valid Medicare
provider number and valid uniform physician identification numbers. Evidence of
such numbers has been delivered to PSC.
(d) BOARD CERTIFICATION. Each Shareholder is certified by the
American Board of Otolaryngology and evidence of such board certification(s) has
been delivered to PSC.
(e) NO CONVICTION. No Shareholder has ever been convicted of a
criminal offense relating to the Medicare or any federally-funded state health
care program. For purposes of this Agreement, the term "conviction" includes the
entry of a plea of guilty or nolo contendere and participation in a first
offender, deferred adjudication, or other arrangement or program whereby a
judgment of conviction has been withheld.
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2.5 SELLER'S FINANCIAL INFORMATION. (a) Seller has prior to the
Execution Date furnished PSC and Parent with copies of financial information
about Seller as set forth on Exhibit 2.5, including, but not limited to, the
Balance Sheet and the Seller's unaudited cash basis financial statement for the
fiscal years ending August 31, 1997, August 31, 1996, and August 31, 1995. All
such financial statements have been prepared on the cash basis of accounting
consistently followed throughout the periods indicated, reflect all debt of
Seller as of their respective dates, and present fairly the cash basis financial
position of Seller as of such dates and the results of operations for the period
or periods reflected therein.
2.6 LEASES. Exhibit 2.6 sets forth a list of all leases pursuant to
which Seller leases, as lessor or lessee, real or personal property used in
operating the Business or otherwise. The Parties understand and agree that
liabilities arising after the Closing Date under only those leases listed on
Exhibit 1.3(b) will be assumed by PSC, subject to obtaining any necessary
landlord consent. Except as indicated on Exhibit 2.6, all such leases listed on
Exhibit 2.6 are valid and effective in accordance with their respective terms,
and there is not under any such lease any existing default by Seller, as lessor
or lessee, or any condition or event of which Seller or any Shareholder has
knowledge which with notice or lapse of time, or both, would constitute a
default, in respect of which Seller has not taken adequate steps to cure such
default or to prevent a default from occurring.
2.7 PERSONAL PROPERTY. Seller owns all of the personal property
reflected on the Balance Sheet and included in the Assets, including, but not
limited to, all items of personal property identified on Exhibit 1.1(a) and
Exhibit 1.1(c), free and clear of any liens, claims, charges, exceptions or
encumbrances, except for those set forth in Exhibit 2.7. All such personal
property that comprises the Assets shall be transferred to PSC subject to only
claims, charges, exceptions or encumbrances set forth on Exhibit 2.7. Such
personal property is in usable condition, normal wear and tear excepted, and
suitable for its purpose and intended use.
2.8 INVENTORIES. The items of Seller's inventory have been acquired
in the ordinary course of the Business and maintained at levels consistent with
past practices and are in all material respects adequate for the reasonable
requirements of the Business.
2.9 PRINCIPAL PLACE OF BUSINESS. The principal places of business
of Seller are, and have been for the previous five (5) years, in those counties
listed in Exhibit 2.9.
2.10 LOCATION OF ASSETS. Except as indicated in Exhibit 2.10, all of
the Assets are located in those counties listed in Exhibit 2.9.
2.11 INTELLECTUAL PROPERTY RIGHTS. Except as set forth in Exhibit
2.11, neither Seller nor any Shareholder has any right, title or interest in or
to patents, patent rights, manufacturing processes, trade names, trademarks,
service marks, inventions, specialized treatment protocols, copyrights, formulas
and trade secrets. Except for off-the-shelf software licenses, neither Seller
nor any Shareholder is a licensee in respect of any patents, trademarks, service
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marks, trade names, copyrights or applications therefor, or manufacturing
processes, formulas or trade secrets. Seller owns and possesses adequate
licenses or other rights to use all such patents, trademarks, service marks,
trade names, copyrights, manufacturing processes, inventions, specialized
treatment protocols, formulas and trade secrets necessary to conduct the
Business as now operated. No claim is pending or has been made to the effect
that the present or past operations of Seller infringe upon or conflict with the
asserted rights of others to such patents, patent rights, manufacturing
processes, trade names, trademarks, service marks, inventions, specialized
treatment protocols, copyrights, formulas and trade secrets. Neither Seller nor
any Shareholder is in violation of any non-competition, non-solicitation or
non-disclosure covenant or agreement, nor has any claim been made that there has
been such a violation.
2.12 DIRECTORS AND OFFICERS; PAYROLL INFORMATION. Set forth on
Exhibit 2.12 is a true and complete list, as of the date of this Agreement, of:
(a) the name of each Director and officer of Seller and the offices held by
each; and (b) the most recent payroll report of Seller, showing all current
employees of Seller and their current compensation other than bonuses and other
extraordinary compensation.
2.13 LEGAL PROCEEDINGS. Except as set forth in Exhibit 2.13, neither
Seller nor Shareholder has knowledge of any pending or threatened litigation,
governmental investigation, condemnation or other proceeding against or relating
to or affecting Seller, any Shareholder, the Medical Practice, the Business, the
Assets or the Transactions, including, but not limited to, claims for medical
malpractice or negligence, and, to the knowledge of Seller and the Shareholders,
no basis for any such action exists, nor is there any legal impediment of which
Seller or any Shareholder has knowledge to the continued operation of the
Medical Practice or Business in the ordinary course.
2.14 CONTRACTS. Seller has delivered to PSC true copies of all
written, and disclosed to PSC all material oral, outstanding contracts,
obligations and commitments of Seller and the Shareholders entered into in
connection with the Medical Practice or the Business, all of which are listed on
or incorporated by reference into Exhibit 2.6 (in the case of leases) and
Exhibit 2.14 (in the case of managed care contracts, third party payor contracts
and contracts other than leases). Except as otherwise indicated on such
Exhibits, all of such contracts, obligations and commitments are valid, binding
and enforceable against Seller in accordance with their terms and are in full
force and effect, subject to limitations on enforceability imposed by,
bankruptcy, moratorium, creditors' rights or similar laws. Except as set forth
or incorporated by reference on such Exhibits, to Shareholders' and Seller's
knowledge no default or alleged default by Seller exists thereunder. Except as
listed or incorporated by reference on Exhibit 2.6 and Exhibit 2.14, neither
Seller nor any Shareholder is a party to any material written or oral agreement,
contract, lease or plan of a type described as follows:
(a) Contract related to the Assets, not made in the ordinary
course of business, other than this Agreement.
(b) Employment contract which is not terminable without cost
or other liability to Seller, or any successors or assigns thereof, upon notice
of 30 days or less.
(c) Contract with any labor union.
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(d) Bonus, pension, profit-sharing, retirement, stock
acquisition, hospitalization, insurance or similar plan providing for employee
benefits.
(e) Lease with respect to any property, real or personal,
whether as lessor or lessee.
(f) Contract for the future acquisition of materials, supplies
or equipment (i) which is in excess of the requirements of the Business now
booked or for normal operating inventories, or (ii) which is not terminable
without material cost or liability to Seller, or any successors or assigns
thereof, upon notice of 30 days or less.
(g) Insurance contract with respect to the Medical Practice or
the Business.
(h) Contract continuing for a period of more than six months
from the Closing Date.
(i) Loan agreement or other contract for money borrowed with
respect to the Medical Practice or the Business.
(j) Contract containing non-competition, non-solicitation and
non-disclosure covenants.
2.15 SUBSEQUENT EVENTS. Except as set forth on Exhibit 2.15, Seller
has not, since the date of the Balance Sheet:
(a) Incurred any material uninsured obligation or liability
(absolute, accrued, contingent or otherwise), or any Material Adverse Change
except in connection with the performance of this Agreement, other than in the
ordinary course of business.
(b) Discharged or satisfied any material lien or encumbrance,
or paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet or (ii) liabilities incurred since the date of the Balance Sheet
in the ordinary course of business.
(c) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Seller.
(d) Mortgaged, pledged or subjected to any lien, charge or
other encumbrance any of the Assets, tangible or intangible.
(e) Sold or transferred any of the Assets, canceled any debts
or claims or waived any rights, except in the ordinary course of business.
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(f) Granted any general or uniform increase in the rates of pay
of employees or any substantial increase in salary payable or to become payable
by Seller to any officer or employee, consultant or agent (other than normal
merit increases), or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant or
agent.
(g) Authorized any capital expenditures in excess of $1,000.00.
(h) Except for this Agreement and any other agreement executed
and delivered pursuant to this Agreement, entered into any material Transactions
other than in the ordinary course of business or permitted under other Sections
hereof.
(i) Issued any stock, bonds or other securities.
(j) Experienced damage, destruction or loss (whether or not
covered by insurance) materially and adversely affecting any of its properties,
assets or business, or experienced any other material adverse change in its
financial condition, assets, liabilities or business.
(k) Paid bonuses, distributions, or advanced loans to
shareholders or employees outside of the ordinary course of business consistent
with past practices of Seller.
2.16 ACCOUNTS RECEIVABLE. Exhibit 2.16 reflects the amount of
Seller's accounts receivable as of the date of the Balance Sheet, net of
allowances for uncollectible and doubtful accounts, all in conformity with
generally accepted accounting principles. Seller maintains its accounting
records in sufficient detail to substantiate the accounts receivable reflected
on Exhibit 2.16 and has given and will give to PSC full and complete access to
those records, including the right to make copies therefrom. Since the date of
the Balance Sheet, Seller has not changed any principle or practice with respect
to the recordation of accounts receivable or the calculation of reserves
therefor, or any material collection, discount or write-off policy or procedure.
To the best knowledge of the Seller and the Shareholders, Seller is in
substantial compliance with the terms and conditions of such third-party payor
arrangements, and to Seller's knowledge the reserves established by Seller are
adequate to cover any liability resulting from lack of compliance. Section 5.10
contains certain Closing conditions related to the amount of Seller's accounts
receivable and Seller's 1997 collections. Seller's realizable accounts
receivable (net of allowances for uncollectible and doubtful accounts) as of the
Closing Date are no less than $525,000 (the "Closing Accounts Receivable"), and
Seller's collections of accounts receivable have exceeded $3,850,000 for the
trailing 11 month period ended November 30, 1997.
2.17 TAX RETURNS. Seller has filed all tax returns required to be
filed by it, and made all payments required to be made by it, with respect to
income taxes, real property taxes, sales taxes, use taxes, employment taxes and
similar taxes due and payable on or before the date of this Agreement. Seller
has no tax liability, except for taxes being contested in good faith, as set
forth on Exhibit 2.17, and sales, use, employment and similar taxes for periods
as to which such taxes
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have not yet become due and payable. True and correct copies of Seller's tax
returns for the fiscal years ending August 31, 1997, August 31, 1996 and August
31, 1995 are attached hereto on Exhibit 2.17.
2.18 COMMISSIONS AND FEES. There are no valid claims for brokerage
commissions or finder's or similar fees in connection with the Transactions
contemplated by this Agreement which may be now or hereafter asserted against
PSC or Parent resulting from any action taken by Seller or any Shareholder or
their respective agents or employees, or any of them.
2.19 MATERIAL LIABILITIES. Except as set forth on Exhibit 2.15, or
to the extent reflected or reserved against on the Balance Sheet, Seller did not
have, as of the Balance Sheet Date, and has not incurred since that date, any
liabilities or obligations of any nature, whether accrued, absolute, contingent
or otherwise, and whether due or to become due which could reasonably be
expected to have a Material Adverse Effect. Except as set forth on Exhibit 2.15,
Seller and Shareholders do not know, or have reasonable grounds to know, of any
basis for the assertion against Seller as of the Balance Sheet Date, of any
claim or liability of any nature in any amount not fully reflected or reserved
against on the Balance Sheet, or of any claim or liability of any nature arising
since that date which could reasonably be expected to have a Material Adverse
Effect.
2.20 INSURANCE POLICIES. Seller or Shareholders maintain policies of
comprehensive general liability and professional liability insurance in amounts
of not less than $2,000,000 per occurrence and $4,000,000 aggregate on a claims
made basis and property damage insurance on the tangible Assets to be sold
hereunder. Valid policies in such amounts are outstanding and duly in force and
will remain duly in force through the Closing Date. All such policies have been
provided to PSC.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on Exhibit 2.21,
Seller has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of incentive compensation plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in Section 3(3) of ERISA. All such plans listed on
Exhibit 2.21 (individually "Seller Plan," and collectively "Seller Plans") have
been (i) furnished to PSC along with a copy of each material document prepared
in connection with each such Seller Plan, and (ii) to the best of Seller's
knowledge operated and administered in all material respects in accordance with,
as applicable, ERISA, the Code, as amended, and any other applicable law,
including but not limited to, title VII of the Civil Rights Act of 1964, as
amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in
Employment Act of 1967, as amended, and the related rules and regulations
adopted by those federal agencies responsible for the administration of such
laws. No act or failure to act by Seller has resulted in a "prohibited
transaction" (as defined in ERISA) with respect to the Seller Plans. No
"reportable event" (as defined in ERISA) has occurred with respect to any of the
Seller Plans. Seller has not previously made, is not currently making, and is
not obligated in any way to make, any contributions to any multi-employer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
None of the Seller Plans provides for the payment of separation,
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severance, termination or similar-type benefits to any person or obligates the
Seller to pay such benefits solely as a result of any transaction contemplated
by this Agreement, or as a result of a "change of control" within the meaning of
Section 280G of the Code. None of the Seller Plans provides for or promises
retiree, medical, disability or life insurance benefits to any current or former
employee of the Seller. Each Seller Plan which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the IRS that it is so qualified and no fact or event has occurred since the date
of such determination letter to adversely affect the qualified status of any
such Seller Plan.
2.22 COMPLIANCE WITH LAWS IN GENERAL. Neither Seller nor any
Shareholder has knowledge of material violations of any Law by Seller or any
Shareholder relating to the operations of the Medical Practice, the Business or
the Assets, including, without limitation, the Federal Environmental Protection
Act, the Occupational Safety and Health Act, the Americans with Disabilities Act
and any Environmental Laws, and no notice of any pending inspection or violation
of any such law, regulation or ordinance has been received by Seller or any
Shareholder.
2.23 FRAUD AND ABUSE. Seller and Shareholder and all persons and
entities providing professional services for the Medical Practice or the
Business have not, to the knowledge of Seller and the Shareholders, engaged in
any activities which are prohibited under Section 1320a-7b of Title 42 of the
United States Code or the regulations promulgated thereunder, or related state
or local statutes or regulations, or which are prohibited by rules of
professional conduct, including, but not limited to, the following: (a)
knowingly and willfully making or causing to be made a false statement or
representation of a material fact for use in determining rights to any benefit
or payment; (b) any failure by a claimant to disclose knowledge of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; (c) knowingly and willfully
soliciting or receiving any remuneration (including any kickback, bribe or
rebate) directly or indirectly, overtly or covertly, in cash or in kind, or
offering to pay or receive such remuneration (i) in return for referring an
individual to a person for the furnishing or arranging for the furnishing of any
item or service for which payment may be made in whole or in part by Medicare or
Medicaid, or (ii) in return for purchasing, leasing or ordering or arranging
for, or recommending, purchasing, leasing or ordering any good, facility,
service or item for which payment may be made in whole or in part by Medicare or
Medicaid; (d) engaging in any activity which is a basis for exclusion from the
Medicare, Medicaid and other federally-funded programs under Section 1320a-7a of
Title 42 of the United States Code; (e) any violation of the Medicare or
Medicaid requirements, including any fraud and abuse provisions, except where
such circumstances could not reasonably be expected to have a Material Adverse
Effect.
2.24 MEDICARE, MEDICAID, AND OTHER THIRD-PARTY PAYOR PAYMENT
LIABILITIES. Except as described in Exhibit 2.24, to the best of Seller's
knowledge neither Seller nor any Shareholder has, and as of the Closing Date,
will have, any liabilities to any third party fiscal intermediary or carrier
administering any state Medicaid program or the federal Medicare program, or to
any other third party payor for the recoupment of any amounts previously paid to
Seller (or any predecessor corporation) or any Shareholder by any such
third-party fiscal intermediary, carrier, Medicaid program, Medicare program, or
third party payor. There are no pending or
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threatened actions by any third party fiscal intermediary or carrier
administering any state Medicaid or the federal Medicare program, by the
Department of Health and Human Services, any state Medicaid agency, or any third
party payor to suspend payments to Seller or any Shareholder.
2.25 BILLING NEW PRACTICES AND REFERRAL SOURCES.
(a) BILLING NEW PRACTICES GENERALLY. All billing practices by
Seller and all Shareholders to all third party payors, including, but not
limited to, the federal Medicare program, state Medicaid programs and private
insurance companies, have been true, fair and correct and in material compliance
with all applicable laws, regulations and policies of all such third party
payors, and, to the knowledge of Seller and the Shareholders, neither Seller nor
any Shareholder has billed for or received any payment or reimbursement in
excess of amounts allowed by law.
(b) GRATUITOUS PAYMENTS. Neither Seller, Shareholders, a
director, or an officer of Seller, nor to Seller's knowledge any employee or
agent acting on behalf of or for the benefit of Seller or any Shareholder, has
directly or indirectly (i) offered or paid any remuneration, in cash or in kind,
to, or made any financial arrangements with, any past or present customers, past
or present patients, past or present suppliers, contractors or third party
payors of Seller in order to obtain business or payments from such persons,
other than entertainment activities in the ordinary and lawful course of
business; (ii) given or agreed to give, or is aware that there has been made or
that there is any agreement to make, any gift or gratuitous payment of any kind,
nature or description (whether in money, property or services) to any customer
or potential customer, patient or potential patient, supplier or potential
supplier, contractor, third party payor or any other person other than in
connection with promotional or entertainment activities in the ordinary and
lawful course of business; (iii) made or agreed to make, or is aware that there
has been made or that there is any agreement to make, any contribution, payment
or gift of funds or property to, or for the private use of, any governmental
official, employee or agent where either the contribution, payment or gift or
the purpose of such contribution, payment or gift is or was illegal under the
laws of the United States or under the laws of any state thereof or any other
jurisdiction (foreign or domestic) under which such payment, contribution or
gift was made; (iv) established or maintained any unrecorded fund or asset for
any purpose or made any false or artificial entries on any of its books or
records for any reason or (v) made, or agreed to make, or is aware that there
has been made or that there is any agreement to make, any payment to any person
with the intention or understanding that any part of such payment would be used
for any purpose other than that described in the documents supporting such
payment.
(c) TRANSACTIONS WITH REFERRAL SOURCES. Neither Seller nor any
Shareholder, nor any director or officer of Seller, nor to Seller's knowledge
any employee of Seller, is a party to any contract, lease, agreement or
arrangement, including, but not limited to, any joint venture or consulting
agreement with any physician, hospital, nursing facility, home health agency or
other person who is in a position to make or influence referrals to or otherwise
generate business for Seller or Shareholders to provide services, lease space,
lease equipment or engage in any other venture activity.
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2.26 PHYSICIAN SELF-REFERRALS. To the best of Seller's knowledge,
neither Seller nor any Shareholder has submitted any claims in connection with
any referrals which violated any applicable self-referral law, including the
▇▇▇▇▇ Law (42 U.S.C. ss. 1395nn) or any applicable state self-referral law as
those laws are currently interpreted.
2.27 NO UNTRUE REPRESENTATIONS. To the knowledge of Seller and the
Shareholders, no representation or warranty by Seller or any Shareholder in any
Seller Document, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements or facts contained therein not misleading. All information and
information provided by Seller or Shareholders for valuation of the Medical
Practice and the Business by PSC and Parent is true, accurate and complete in
all material respects.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND PSC.
PSC and Parent hereby jointly and severally represent and warrant
to Seller and Shareholders as follows:
3.1 CORPORATE EXISTENCE; GOOD STANDING; QUALIFICATION. EACH OF PSC
and Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of PSC and Parent has all
necessary corporate power to own its properties and assets and to carry on its
business as presently conducted and is duly qualified to do business and is in
good standing in all jurisdictions in which the character of the property owned,
leased or operated or the nature of the business transacted by it makes
qualification necessary.
3.2 POWER AND AUTHORITY; ENFORCEABILITY. Each of PSC and Parent has
corporate power to execute and deliver this Agreement and perform its
obligations under this Agreement and all agreements, certificates and other
documents executed and delivered by it pursuant to this Agreement and in
connection with the Transactions (collectively, the "PSC Documents"), and has
taken all actions required by law, its Certificate of Incorporation, its Bylaws
or otherwise, to authorize the execution, delivery and performance of the PSC
Documents. The execution and delivery of the PSC Documents do not and, subject
to the receipt of consents to assignments of leases and other contracts where
required and the receipt of regulatory approvals where required, the
consummation of the Transactions contemplated hereby will not, violate any
provision of the Certificate of Incorporation or Bylaws of either PSC or Parent
or any provisions of, or result in the acceleration of, any obligation under any
mortgage, lien, lease, agreement, instrument, order, arbitration award, judgment
or decree to which PSC or Parent is a party or by which either of them is bound,
or violate any restrictions of any kind to which PSC or Parent is subject. The
execution and delivery of the PSC Documents have been approved, to the extent
required, by the respective Boards of Directors of PSC and Parent. This
Agreement has been duly and validly executed and delivered by PSC and Parent and
constitutes the valid and binding agreement of PSC and Parent enforceable
against each of them in accordance with its terms, and each other PSC Document
to be executed and delivered at the Closing by PSC and/or Parent will upon such
execution and delivery constitute the valid and binding agreement of PSC or
Parent (or both of them, if both are parties) enforceable against PSC or Parent
(or both of them, if both are parties) in accordance with its terms.
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3.3 COMMISSIONS AND FEES. There are no valid claims for brokerage
commissions or finder's or similar fees in connection with the Transactions
contemplated by this Agreement which may be now or hereafter asserted against
Seller or any Shareholder resulting from any action taken by PSC or Parent or
their respective officers, directors or agents.
3.4 CAPITALIZATION. Parent has an authorized capitalization of
10,000 shares of Preferred Stock, par value $1.00 per share, of which no shares
are issued and outstanding, and no shares are held in treasury, and 50,000,000
shares of common stock, par value $.001 per share, of which 6,326,584 shares are
issued and outstanding prior to giving effect to this transaction, and no shares
are held in treasury. All of the Parent Common Stock to be issued pursuant to
this Agreement will, when so delivered, be duly and validly issued and fully
paid and nonassessable, and the shares delivered in the second installment under
Section 1.3(a) shall be registered under the Securities Act.
3.5 PSC COMMON STOCK. Parent owns, beneficially and of record, all
of the issued and outstanding shares of Common Stock of PSC, free and clear of
all liens and encumbrances. Parent has taken all such actions as may be required
in its capacity as the sole shareholder of PSC to approve this Transactions.
3.6 PARENT DOCUMENTS. Parent has heretofore furnished Seller with
its Prospectus dated March 20, 1996 with respect to the offer and sale of
2,200,000 shares of Parent Common Stock (the "Prospectus"); SEC Form 10Q of
Parent for the quarters ended March 31, 1997; June 30, 1997 and September 30,
1997; and its draft Registration Statement on Form S-1 dated [December __, 1997]
relating to the offer and sale of [2,000,000] shares of PSC Common Stock.
3.7 LEGAL PROCEEDINGS. There is no material litigation,
governmental investigation or other proceeding pending or, so far as is known to
Parent, threatened against or relating to Parent that would affect its
performance in the Transactions contemplated by this Agreement and, so far as is
known to Parent, no basis for any such action exists.
SECTION 4. ACCESS TO INFORMATION AND DOCUMENTS.
4.1 ACCESS TO SELLER'S INFORMATION. Seller and Shareholders shall
give to PSC and its counsel, accountants, engineers and other representatives
full access to all the requested properties, documents, contracts, personnel
files and other records of Seller and the Business hereunder and shall furnish
PSC with copies of such requested documents and with such information with
respect to the affairs of Seller as PSC shall from time to time reasonably
request. Seller and Shareholder shall disclose and make available to Parent and
its representatives all requested books, contracts, accounts, personnel records,
letters of intent papers, records, communications with regulatory authorities
and other documents relating to the Assets and to the Business.
4.2 RETENTION OF RECORDS. Without cost to Seller, PSC shall retain
all books and records of Seller ("Records") transferred to it pursuant to this
Agreement for a period of at least four
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years from the Closing Date. For a period of four years after the Closing Date,
and for such longer period as the Records are maintained, each Party will,
during normal business hours and so as not to unreasonably disrupt normal
business, afford any other Parties, their counsel, their accountants or other
parties who have a reasonable need for such access full access (and copying at
the expense of the requesting Party, if desired) to the books and records
relating to the Assets in the possession of such Party as such other Party may
reasonably request.
SECTION 5. CONDITIONS TO ASSUMED OBLIGATION OF PARENT AND PSC TO CLOSE
The obligation of PSC and Parent to consummate the Transactions is
subject to satisfaction of the following conditions precedent (any of which may
be waived in writing by PSC or Parent) at or prior to the Closing:
5.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties set forth in Article 2 shall be true and correct in all material
respects as of the date made and at and as of the Closing, except as a result of
changes expressly permitted by this Agreement.
5.2 COVENANTS. The Shareholders and Seller shall have performed and
complied with all of their covenants and agreements in all material respects
through the Closing.
5.3 NO SUIT OR PROCEEDING. No action, suit, or proceeding shall be
pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction in which an unfavorable
injunction, judgment, order, decree, ruling, or charge would (i) prevent
consummation of any of the Transactions, (ii) cause any of the Transactions to
be rescinded following consummation, (iii) affect adversely the right of PSC to
operate the Business (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect).
5.4 ABSENCE OF MATERIAL ADVERSE CHANGE.
(a) There shall have been no change in the
condition (financial or otherwise), business, assets, or
prospects of Seller or the Business from the Balance Sheet
Date which has had or could reasonably be expected to have a
Material Adverse Effect on the Seller, the Business, or the
Assets.
(b) Neither Seller nor the Assets shall have
been, and shall not be seriously threatened to be materially
adversely affected in any way as a result of fire, explosion,
disaster, accident, labor dispute, any action by the United
States or any other government or government authority,
domestic or foreign, riot, act of war, civil disturbance or
Act of God.
5.5 CERTIFICATE. The Shareholders shall have delivered to PSC a
bring-down certificate to the effect that each of the conditions specified in
Sections 5.1-5.4 is satisfied in all respects.
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5.6 CONSENTS AND APPROVALS. PSC and Parent shall have received all
authorizations, consents, and approvals of third Parties and of governments and
governmental agencies, if any, that may be required for the acquisition of the
Assets by PSC, including, without limitation, the consent of the lessors to
transfer to PSC the leases listed on Exhibit 2.6 and/or Exhibit 2.14.
5.7 COUNSEL OPINION. Parent and PSC shall have received from
counsel to the Seller and Shareholders an opinion dated as of the Closing Date,
in substantially the form attached hereto as Exhibit 5.7.
5.8 OTHER AGREEMENTS EXECUTED. Each of the Shareholders shall have
executed and delivered an Employment Agreement with NAENT in the form attached
hereto as Exhibit 5.8(i).
5.9 RELEASE OF LIENS. All liens encumbering the Assets other than
those listed on Exhibit 5.9, shall be duly released by the secured Parties and
other lien holders, and UCC-3 release or termination statements and other lien
release documents, if any, shall have been recorded or the recording thereof
provided for.
5.10 CLOSING DATE FINANCIAL CERTIFICATE; CLOSING DATE FINANCIAL
STATUS. Seller shall have delivered to PSC a closing date financial certificate
which shall certify as of the last day of the month prior to the Closing Date an
unaudited cash basis balance sheet of Seller and for the period ended as of such
date a statement of operations of Seller, along with a detailed accounts
receivable aging analysis of Seller as of the Closing Date. Seller's cash
collections of accounts for the 11 month period ending November 30, 1997 shall
have been in excess of $3,850,000, and the net realizable value of Seller's
accounts receivable measured in accordance with GAAP, at Closing shall be at
least $525,000.
5.11 CORPORATE DOCUMENTS. Seller shall have furnished PSC with
copies of the following documents: the Articles or Certificate of Incorporation,
duly certified by the ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇; the Bylaws and
Shareholder Agreements (if any) of Seller and all amendments thereto,
certificates, executed by the proper officials of the State of Georgia; as to
the valid existence and good standing of Seller in the State of Georgia; and
resolutions authorizing this Agreement and the Transactions, duly adopted by the
Board of Directors or other governing body of Seller and duly adopted by all the
Shareholders, all as duly certified by the Secretary of Seller.
5.12 INSTRUMENTS OF CONVEYANCE. Simultaneously with the execution of
this Agreement and in order to effect the conveyance, transfer and assignment of
the Assets and the Business and the assumption of certain liabilities, Seller
and Shareholder shall have executed and delivered (i) to PSC all such bills of
sale, assignment and assumption agreements and other documents or instruments of
conveyance, transfer or assignment as shall be necessary or appropriate to vest
in or confirm to PSC Seller's and Shareholder's right, title and interest in and
to the Assets, free and clear of all obligations, security interests, liens and
encumbrances whatsoever, except as specifically assumed by PSC pursuant to
Section 1.3(b), and (ii) to NAENT such bills of sale and other documents or
instruments of conveyance, transfer or assignment as PSC shall determine to be
necessary to vest in NAENT all of Seller's and the Shareholders' right, title
and interest in and to
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the excluded assets referred to in Sections 1.2(c), (d) and (e), free and clear
of all security interests, liens, claims or encumbrances.
5.13 STOCKHOLDERS AGREEMENT. Amendment No. 4 to the NAENT
Stockholders' Agreement shall have been executed by all necessary parties
admitting Shareholders as shareholders in NAENT.
5.14 INVESTOR LETTER AND FINANCIAL DATA SHEET. Seller and all
Shareholders shall have provided to Parent prior to the Closing Date a
fully-completed and executed Investor Letter and Financial Data Sheet in form
and substance reasonably satisfactory to Parent.
SECTION 6. CONDITIONS TO ASSUMED OBLIGATION OF SELLER AND THE SHAREHOLDER.
The obligation of Seller and the Shareholders to consummate the
Transactions is subject to satisfaction of the following conditions (any one of
which may be waived in writing by Seller or the Shareholders) at or prior to
Closing;
6.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties set forth in Article 3 above shall be true and correct in all
material respects at and as of the Closing;
6.2 COVENANTS. Parent and PSC shall have performed and complied
with all of their covenants and agreements in all material respects through the
Closing;
6.3 NO SUIT OR PROCEEDING. No action, suit or proceeding shall
be pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (a) prevent
consummation of any of the Transactions or (b) cause any of the Transactions to
be rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
6.4 CERTIFICATE. PSC shall have delivered to Seller a bring-down
certificate to the effect that each of the conditions specified in Sections
6.1-6.3 is satisfied in all respects;
6.5 GOVERNMENT APPROVALS. Seller, Parent and PSC shall have
received all authorizations, consents, and approvals of governments and
governmental agencies, if any, that may be required;
6.6 COUNSEL OPINION. The Seller shall have received from
counsel to Parent and PSC an opinion dated as of the Closing Date in
substantially the form attached hereto as Exhibit 6.6;
6.7 ACQUISITION PRICE. Parent or PSC shall have delivered at the
Closing the cash and shares of the Parent Common Stock for at least one-half of
the Stock Value Amount pursuant to Section 1.3.
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6.8 EMPLOYMENT CONTRACT. PSC shall have offered to execute an
employment agreement with ▇▇▇▇▇▇▇▇ ▇▇▇▇ substantially in the form attached
hereto as Exhibit 6.8.
SECTION 7. CERTAIN ADDITIONAL COVENANTS
7.1 CONDUCT OF BUSINESS PRIOR TO CLOSING. During the period from
and after the Execution Date and until the Closing Date:
(a) Seller and the Shareholders will carry on the Business in
substantially the same manner as heretofore carried on and will not make any
purchase or sale, incur any indebtedness or liens, or introduce any method of
management or operation in respect to such Business or otherwise engage in any
Transactions except in the ordinary course of business and in the manner not
inconsistent with prior practice and the terms of this Agreement, other than
with the prior written consent of PSC;
(b) Neither Seller nor any Shareholder will permit any change
to be made in the articles of incorporation or bylaws or shareholder agreement
of Seller, other than with the prior written consent of PSC;
(c) Neither Seller nor any Shareholder will acquire or dispose
of any capital assets having an initial cost or current value in excess of
$1,000 other than with the prior written consent of PSC;
(d) Neither Seller nor any Shareholder will increase the
compensation payable or to become payable to any of its employees or agents
other than (i) with the prior written consent of PSC or (ii) cash bonuses by
Seller to the Shareholders consistent with the past practice of Seller; and
(e) Neither Seller nor the Shareholders will take, or permit or
suffer to be taken, any action which is represented and warranted in Section
2.15 not to have occurred since the Balance Sheet Date other than with the prior
written consent of PSC.
7.2 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Except as is otherwise
expressly provided in Section 1.3(b), Seller hereby covenants and agrees that it
will take whatever steps are necessary to pay or fund completely any and all
accrued benefits, where applicable, or vested accrued benefits for which Seller
or any entity might have any liability whatsoever arising from any salary, wage,
benefit, bonus, vacation pay, sick leave, insurance, employment tax or similar
liability of Seller to any employee or other person or entity (including,
without limitation, any Seller Plan and any liability under employment contracts
with Seller) allocable to services performed prior to the Closing Date. Seller
and Shareholders acknowledge and agree that PSC shall have no liability
whatsoever now or at any time in the future with respect to (i) any of Seller's
employees or similar persons or entities arising from services performed prior
to the Closing Date, or (ii) any Seller Plan, except as expressly provided in
Section 1.3(b).
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7.3 CREDITOR'S CLAIMS. Seller and Shareholders jointly and
severally represent, covenant and agree that all of the creditors with respect
to the Business will be paid in full by Seller prior to the Closing Date, or by
Seller within such other period as is normally permitted by such creditors in
the ordinary course of business, except to the extent of any contractual
liabilities assumed by PSC under Section 1.3(b). If required by PSC, Seller and
Shareholders shall furnish PSC with proof of payment of all creditors of Seller.
Notwithstanding the foregoing, Seller may dispute the amount or validity of any
such creditor's claim without being deemed to be in violation of this Section
7.3, provided that such dispute is in good faith and does not unreasonably delay
the resolution of the claim.
7.4 Intentionally Omitted.
7.5 COVENANT NOT TO COMPETE. In consideration of the purchase of
the Assets and Business by PSC, for a period of five (5) years from and after
the Closing Date, Seller and each Shareholder severally agrees that it and he
will not: (a) directly or indirectly, alone or in conjunction with others,
engage in, manage, operate, control, conduct, consult for or be employed in a
management capacity by, provide services to or invest in any business or venture
in competition with the Business or the Medical Practice in the No-compete
Territory (as defined below); provided however, that ownership of less than 1%
of the outstanding stock of any publicly traded corporation or ownership of more
than 1% of Parent Common Stock shall not by itself be deemed to violate this
clause; (b) within the No-compete Territory directly or indirectly, solicit or
attempt to solicit any customer or client of PSC or Parent or any PSC managed
practice or any patient of NAENT or any PSC managed practice, where the purpose
of such solicitation is to provide or have the party being solicited provided
with products or services competitive with those provided by PSC or Parent or
any PSC managed medical practice; or (c) solicit, hire away or employ or attempt
to solicit or hire away or employ any employee of PSC or Parent or NAENT or any
PSC managed practice. If the final judgment of a court of competent jurisdiction
declares that any term or provision of this Section is invalid or unenforceable,
the Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified. As
used herein, the term "No-compete Territory" shall mean all areas within an
eight (8) mile radius of each of the office locations of Seller listed on
Exhibit 7.5. The Parties agree that the restraints set forth above in this
Section 7.5 are reasonable in respect to subject matter, length of time and
geographic area. Seller and each Shareholder agrees that the restrictions on
their activities contained in this Section are reasonable and necessary to
enable PSC to obtain the full value of the Assets and the Business and to
protect the goodwill and relationships, economic advantage and other legitimate
interests of PSC and Parent, and that, were it, he or she to breach any of the
covenants contained in this Section 7.5, PSC would be harmed and the damage to
PSC would be irreparable. Accordingly, Seller and the Shareholders acknowledge
and agree that, as PSC's legal remedies may be inadequate in the event of a
breach of the covenants in this Section 7.5, in addition to damages and other
remedies available to PSC, such covenants may be enforced by injunction or other
equitable remedies.
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7.6 CONFIDENTIALITY.
(a) Seller and the Shareholders shall, and shall use their
diligent efforts to cause their respective employees, agents and representatives
to, for a period of five (5) years after the Closing, hold in confidence all
non-public financial information about Seller, the Business and the Assets,
except such disclosure as may be required by law or governmental order or
regulation, or by subpoena or other legal process (provided PSC will be provided
advance notice if reasonably possible of such disclosure in order to afford it
the opportunity to seek an appropriate protective order); provided that to the
extent any information that is the subject of this non-disclosure covenant
constitutes a "trade secret" under applicable law, then the non-disclosure
covenant shall last for as long as such information is a trade secret.
(b) Seller and the Shareholder further agree to, and shall use
their reasonable efforts to cause their respective employees, agents and
representatives who are not hired by PSC at Closing, to keep confidential for a
period of five (5) years after the Closing, any and all non-public information
relating to services, products, marketing information, sources of supply,
pricing and patients of Seller on the date hereof or developed by or for Seller,
except such disclosure as may be required by law or governmental order or
regulation, or by subpoena or other legal process (provided PSC will be provided
advance notice if reasonably possible of such disclosure in order to seek an
appropriate protective order); provided that to the extent any information that
is the subject of this non-disclosure covenant constitutes a "trade secret"
under applicable law, then the non-disclosure covenant shall last for as long as
such information meets the definitions of a trade secret.
(c) The restrictions in this Section 7.6 shall not apply to any
information that comes into the public domain through no fault of Seller or the
Shareholder.
7.7 SHORTFALL IN COLLECTION OF ACCOUNTS. In the event that
during the six-month period following the Closing the amount realized from
collection of the Closing Accounts Receivable is less than $525,000, in addition
to and not in lieu of any other rights it may have under this Agreement or any
other agreement with Seller or Shareholders or under law, Shareholders shall pay
PSC upon demand in cash an amount equal to the shortfall. Upon reasonable
notice, Seller and the Shareholders will have the right to examine the books and
records of PSC with respect to its accounts receivable for the limited purpose
of determining the current status of the collection of the Closing Accounts
Receivable.
7.8 ACKNOWLEDGEMENT OF MSA. Shareholders acknowledge and agree that
PSC shall be paid a management fee of 12.5% of consolidated NAENT net practice
revenues under the Management Services Agreement ("MSA") between NAENT and PSC.
7.9 AUDIT OF FINANCIAL STATEMENTS. From and after the Execution
Date, Seller and Shareholders will cooperate with Parent in the audit to be
conducted by Parent's accountants, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, of Seller's financial
statements for the years ending August 31, 1996 and August 31, 1997 and, at
Parent's election, the short period ending December 31, 1997. Seller will make
available and instruct and authorize its accountants, Habif, Arogeti & ▇▇▇▇▇,
P.C., to
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make available to Parent and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP all of Seller's accounting
records, compilations, tax returns and related work papers to facilitate said
audits. The costs of such audits shall be borne solely by Parent. Following the
Closing Date, Seller will provide the month end financial statements of Seller
for the months of November and December 1997.
SECTION 8. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
8.1 NATURE AND SURVIVAL. This Agreement and the obligations of
the Parties to indemnify any other Party pursuant to Section 8.2 or 8.3, shall
survive the date of this Agreement and the Closing Date (a) with respect to the
representations and warranties in Sections 2.1 through 2.4, Section 2.7, and
Sections 2.22 through 2.26, for the period of the applicable statute of
limitations, (b) with respect to all other representations and warranties until
the date that is two (2) years following the Closing Date. Each Party covenants
with the other Parties not to make any claim with respect to such
representations or warranties against any Party after the date on which such
survival period shall terminate.
8.2 INDEMNIFICATION BY PSC AND PARENT. PSC and Parent jointly
and severally (for purposes of this Section 8.2 and, to the extent applicable,
Section 8.4, "Indemnitor"), shall indemnify and hold Seller and Shareholder, and
their respective agents, employees, legal representatives, successors and
assigns (each of the foregoing, including Seller and Shareholder, for purposes
of this Section 8.2 and, to the extent applicable, Section 8.4, an "Indemnified
Person"), harmless from and against any and all liabilities, losses, claims,
damages, actions, suits, costs, deficiencies and expenses (including, but not
limited to, reasonable fees and disbursements of counsel through appeal) arising
from or by reason of or resulting from (a) any breach by Indemnitor of any
representation or warranty contained in Section 3 of this Agreement or (b) any
failure by Indemnitor to pay or discharge any of the Assumed Obligations assumed
at Closing pursuant to Section 1.3(b).
8.3 INDEMNIFICATION BY SELLER AND SHAREHOLDER. Seller and the
Shareholders (for purposes of this Section 8.3 and, to the extent applicable,
Section 8.4, "Indemnitor"), shall jointly and severally indemnify and hold PSC
and Parent and their respective officers, directors, shareholders, affiliates,
agents, employees, legal representatives, successors and assigns (each of the
foregoing, including PSC and Parent, for purposes of this Section 8.3 and, to
the extent applicable, Section 8.4, an "Indemnified Person") harmless from and
against any and all liabilities, losses, claims, damages, actions, suits, costs,
deficiencies and expenses (including, but not limited to, reasonable fees and
disbursements of counsel through appeal), arising from or by reason of or
resulting from (a) any breach by any Indemnitor of any representation or
warranty contained in Section 2 of this Agreement (including the Exhibits
hereto) or (b) the Indemnitor's management and conduct of the ownership or
operation of the Medical Practice, the Business or the Assets or any alleged act
of negligence or malpractice or violation of law of Indemnitor or its employees,
agents and independent contractors in or about the Medical Practice, the
Business or the Assets prior to the Closing Date.
8.4 INDEMNIFICATION PROCEDURE. Within 60 days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding, or otherwise becomes
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aware of any claim or other circumstance, in respect of which indemnification or
reimbursement may be sought under Section 8.2 or Section 8.3, such Indemnified
Person shall notify Indemnitor thereof. If any such action or other proceeding
shall be brought against any Indemnified Person, Indemnitor shall, upon written
notice given within a reasonable time following receipt by Indemnitor of such
notice from Indemnified Person, be entitled to assume the defense of such action
or proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to employ
separate counsel at Indemnitor's expense and to control its own defense of such
action or proceeding if, in the reasonable opinion of counsel to such
Indemnified Person, (a) there are or may be legal defenses available to such
Indemnified Person or to other Indemnified Persons that are different from or
additional to those available to Indemnitor and which could not be adequately
advanced by counsel chosen by Indemnitor, or (b) a conflict or potential
conflict exists between Indemnitor and such Indemnified Person that would make
such separate representation advisable; provided, however, that in no event
shall Indemnitor be required to pay fees and expenses hereunder for more than
one firm of attorneys in any jurisdiction in any one action or proceeding or
group of related actions or proceedings. Indemnitor shall not, without the prior
written consent of any Indemnified Person, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding to which such Indemnified Person is a party unless such settlement
compromise or consent includes an unconditional release of such Indemnified
Person from all liability arising or potentially arising from or by reason of
such claim, action or proceeding.
8.5 LIMITATIONS UPON OBLIGATIONS. Anything in this Section 8 to
the contrary notwithstanding, it is expressly acknowledged and agreed that no
payment shall be made hereunder by PSC or Parent (individually and collectively
a "PSC Party") to Seller or the Shareholders (individually and collectively a
"Selling Party") or, by a Selling Party to a PSC Party, on claims for
indemnification under Sections 8.2 or 8.3 until the aggregate of all such claims
of a PSC Party against a Selling Party under Section 8.3, or by a Selling Party
against a PSC Party under Section 8.2, shall exceed $10,000.00, in which event
the Party holding such claim shall be entitled to indemnification with respect
to all such claims in the aggregate; provided that the obligations of Selling
Party under Section 8.3(a) shall be limited to the Acquisition Price. In the
event that such claims do not aggregate in excess of $10,000.00, then neither
the PSC Parties nor the Selling Parties shall have any claim for indemnification
against the other under Section 8.2 or Section 8.3(a).
8.6 RIGHT OF OFFSET. In the event that following the Closing,
Parent or PSC has a claim for indemnification, payment or reimbursement from
Seller or Shareholders under Section 7.7 or Section 8.3 or any other provision
of this Agreement or other Transaction Document, then Parent or PSC may elect to
offset the amount of any such claim against the remaining Stock Value Amount
payable in shares of Parent Common Stock under Section 1.3 or against any other
amounts that Parent or PSC may owe to the Seller or the Shareholders under this
or any other agreement. In the event PSC wrongfully asserts an offset, it shall
be liable to Seller for the amount of such offset plus interest thereon from the
date of such wrongful assertion at the prime rate of interest announced or
published from time to time by NationsBank, N.A. plus three percent (3%) per
annum.
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SECTION 9. TERMINATION.
9.1 RIGHT TO TERMINATE. This Agreement may be terminated at any
time prior to the Closing Date:
(a) by the mutual written consent of PSC and Seller;
(b) by either PSC, Parent or Seller upon prior written notice
to the other Parties
(i) if any court or governmental or regulatory
agency, authority or body shall have enacted, promulgated or
issued any statute, rule, regulation, ruling, writ or
injunction, or taken any other action, restraining, enjoining
or otherwise prohibiting the Transactions contemplated hereby
and all appeals and means of appeal therefrom have been
exhausted; or
(ii) if the Closing shall not have occurred on
or before January 31, 1998 or such later date as the Parties
may agree to; provided, however, that the right to terminate
this Agreement pursuant to this Section 9.1(b)(ii) shall not
be available to any Party whose breach of any representation
or warranty or failure to perform or comply with any
obligation or condition under this Agreement has been the
cause of, or resulted in, the failure of the Closing to occur
on or before such date;
(c) by PSC or Parent, upon prior written notice to
Seller, if any of the conditions specified in Section 5 have not
been met or waived prior to the Closing Date (or any extension
thereof pursuant to Section 9.1(b)(ii) above); or
(d) by Seller, upon prior written notice to PSC, if any
of the conditions specified in Section 6 shall not have been met or
waived prior to the Closing Date (or any extension thereof pursuant
to Section 9.1(b)(ii) above).
9.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to this Section 9, this Agreement shall forthwith become null
and void and there shall be no liability on the part of any of the Parties
hereto or their respective officers or directors with respect to this Agreement,
except for Section 1.6 which shall remain in full force and effect after any
such termination of this Agreement, and except that nothing herein shall relieve
any Party from liability for a breach of this Agreement prior to the termination
thereof.
SECTION 10. MISCELLANEOUS.
10.1 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand delivery,
or by facsimile and overnight courier, to the Parties hereto at the following
addresses, or at such other address as a Party may advise the others in writing
from time to time:
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If to PSC:
PSC MANAGEMENT CORP.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Parent:
PHYSICIANS' SPECIALTY CORP.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy of each notice directed to PSC or Parent to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Seller or Shareholders:
▇▇▇▇ Ear, Nose & Throat Associates, P.C.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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All such communications shall be deemed to have been delivered on the date of
delivery or on the next business day following the deposit of such
communications with the overnight courier.
10.2 FURTHER ASSURANCES. Each Party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement. Seller and Shareholders
will execute and deliver from time to time thereafter, at the request of PSC,
all such further instruments of conveyance, assignment and further assurance as
may reasonably be required in order to vest in and confirm to PSC all of
Seller's right, title and interest in and to the Assets.
10.3 PUBLIC DISCLOSURES. Except as advised by counsel or as
otherwise required by law, no Party shall make any public or other disclosure of
this Agreement or the Transactions without the prior consent of the other
Parties. The Parties shall cooperate with respect to the form and content of any
such disclosures. Notwithstanding the foregoing, Seller agrees that PSC will be
entitled to issue a press release regarding the proposed Transactions on or
before the filing of its S-1 registration statement contemplated to be filed
with the Securities and Exchange Commission in December 1997.
10.4 GOVERNING LAW. This Agreement shall be interpreted, construed
and enforced in accordance with the laws of the State of Georgia, applied
without giving effect to any conflict-of-laws principles.
10.5 "INCLUDING". The word "including," when following any general
statement, term or matter, shall not be construed to limit such statement, term
or matter to the specific terms or matters as provided immediately following the
word "including" or to similar items or matters, whether or not non-limiting
language (such as "without limitation," "but not limited to" or words of similar
import) is used with reference to the word "including" or the similar items or
matters, but rather shall be deemed to refer to all other items or matters that
could reasonably fall within the broadest possible scope of the general
statement, term or matter.
10.6 "KNOWLEDGE". "To the knowledge," "to the best knowledge,
information and belief" or any similar phrase, shall be deemed to include the
assurance that such knowledge is based upon a reasonable investigation, unless
otherwise expressly provided. Unless otherwise expressly provided herein, Seller
shall be deemed to have knowledge of any facts known to any Shareholder, and
each Shareholder shall be deemed to have knowledge of any facts known to Seller.
10.7 "MATERIAL". An individual claim, obligation or liability shall
be deemed to be "material" if the amount thereof exceeds $5,000.00 or involves
the violation of any federal or state statute, rule or regulation. A contract or
lease shall be deemed to be "material" if it requires a single payment in excess
of $5,000.00 or payment for any future 12-month period in excess of $5,000.00,
except that no contract for the acquisition of inventory items or consumable
supplies shall be deemed material unless such contract cannot be terminated
without cause by Seller on not more than 30 days notice, or has, as of the
Closing Date, an amount payable with respect thereto of more than $5,000.00.
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10.8 "MATERIAL ADVERSE CHANGE" OR "MATERIAL ADVERSE EFFECT".
"Material Adverse Change" or "Material Adverse Effect" means, when used in
connection with the Parties to this Agreement, any change, effect, event or
occurrence that has, or is reasonably likely to have individually or in the
aggregate, a material adverse impact on the business or financial position of
any Party and/or its subsidiaries or affiliates taken as a whole or the ability
of any Party to meet any of its obligations in connection with this Agreement or
the Transactions; provided, however, that "Material Adverse Change" and
"Material Adverse Effect" shall be deemed to exclude the impact of (a) changes
in generally accepted accounting principles, (b) changes in applicable law, and
(c) any changes resulting from any restructuring or other similar charges or
write-offs taken by Seller with the consent of PSC.
10.9 "HAZARDOUS MATERIALS". The term "Hazardous Materials" means
any material which is or may potentially be hazardous to the health or safety of
human or animal life or vegetation, regardless of whether such material is found
on or below the surface of the ground, in any surface or underground water,
airborne in ambient air or in the air inside any structure built or located upon
or below the surface of the ground or in building materials or in improvements
of any structures, or in any personal property located or used in any such
structure, including, but not limited to, all hazardous substances, imminently
hazardous substances, hazardous wastes, toxic substances, infectious wastes,
pollutants and contaminants from time to time defined, listed, identified,
designated or classified as such under any Environmental Laws (as defined in
Section 10.10) regardless of the quantity of any such material.
10.10 "ENVIRONMENTAL LAWS". The term "Environmental Laws" means any
federal, state or local statute, regulation, rule or ordinance, and any judicial
or administrative interpretation thereof, regulating the use, generation,
handling, storage, transportation, discharge, emission, spillage or other
release of Hazardous Materials or medical waste or relating to the protection of
the environment or the disposal of medical waste.
10.11 APPOINTMENT OF ATTORNEY-IN-FACT. Effective at the Closing,
Seller and Shareholder hereby constitute and appoint PSC, and its successors and
assigns, the true and lawful attorneys for Seller and Shareholder, with full
power of substitution, in the name of Seller and Shareholder, but on behalf of
and for the benefit of and at the expense of PSC, to institute and prosecute, in
the name of Seller and Shareholder or otherwise, all proceedings which PSC may
deem proper in order to collect, assert or enforce any claim, right or title of
any kind in or to the Assets, to defend and compromise any and all actions,
suits or proceedings in respect of any such Assets, and to do all such acts and
things in relation thereto as PSC shall deem advisable, subject to applicable
laws and regulations. Seller and Shareholder agree that the foregoing powers
shall be coupled with an interest and shall be irrevocable by Seller and
Shareholder or, in the case of Seller, its dissolution or in any manner or for
any reason. PSC shall retain for its own account any amounts collected pursuant
to the foregoing powers, including any sums payable in respect thereof, and
Seller and Shareholder shall pay to PSC, when received, any amounts which shall
be received by Seller in respect of any Assets.
10.12 CAPTIONS. The captions or headings in this Agreement are made
for convenience
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and general reference only and shall not be construed to describe, define or
limit the scope or intent of the provisions of this Agreement.
10.13 INTEGRATION OF EXHIBITS. All Exhibits and Schedules attached
to this Agreement are integral parts of this Agreement as if fully set forth
herein, provided, however, that any liabilities or obligations to be assumed by
PSC shall be set forth on Exhibit 1.3(b), and the inclusion of any liabilities
or obligations in any other Exhibits shall not be deemed or construed to
incorporate such liabilities or obligations into Exhibit 1.3(b) unless such is
expressly set forth on Exhibit 1.3(b).
10.14 ENTIRE AGREEMENT. This Agreement, including any and all
Exhibits and appendices or schedules attached hereto, contains the entire
agreement of the Parties and supersedes any and all prior or contemporaneous
agreements between the Parties, written or oral, with respect to the
Transactions contemplated hereby and may not be changed or terminated orally,
but may only be changed by an agreement in writing signed by the Party or
Parties against whom enforcement of any waiver, change, modification, extension,
discharge or termination is sought.
10.15 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an original,
and such counterparts shall together constitute and be one and the same
instrument.
10.16 BINDING EFFECT. This Agreement shall be binding on, and shall
inure to the benefit of, the Parties hereto, and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement.
10.17 NO RULE OF CONSTRUCTION. The Parties acknowledge that this
Agreement was initially prepared by PSC and that all Parties have read and
negotiated the language used in this Agreement. The Parties agree that, because
all Parties participated in negotiating and drafting this Agreement, no rule of
construction shall apply to this Agreement which construes ambiguous language in
favor of or against any Party by reason of that Party's role in drafting this
Agreement.
10.18 COSTS OF ENFORCEMENT. In the event that PSC or Parent on the
one hand, or Seller or Shareholder, on the other hand, file suit in any court
against any other Party to enforce the terms of this Agreement against the other
Party or to obtain performance by it hereunder, the prevailing Party will be
entitled to recover all reasonable out of pocket costs, including reasonable
attorneys' fees, from the other Party as part of any judgment in such suit. The
term "prevailing Party" shall mean the Party in whose favor final judgment after
appeal (if any) is rendered with respect to the claims asserted in the
Complaint. "Reasonable attorneys' fees" are those attorneys' fees actually
incurred in obtaining a judgment in favor of the prevailing Party.
10.19 TRANSFER OF ASSETS; ASSIGNMENT. The Parties also hereby agree
that this Agreement shall not be assigned or transferred by any party without
the prior written consent of the other; provided, however, that this Agreement
may be assigned, in whole or in part, by PSC or Parent, in its sole discretion,
to any parent, subsidiary or affiliate of PSC or Parent or to any Party
acquiring all or a substantially part of PSC's or Parent's assets. Any such
assignment shall not affect Parent's obligations hereunder or under any
documents executed by Parent pursuant to this
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Agreement. Notwithstanding the foregoing, each of the Seller and the Shareholder
agrees and consents to each of the Parent and PSC granting to their factor(s) or
lender(s) who provide senior debt financing to PSC or the Parent for their
general corporate needs (whether one or more, the "Lender") a security interest
in all of their respective right, title and interest in and under this Agreement
and the other documents, instruments and agreements executed by the Parties in
connection with this Agreement as security for each of the Parent's and PSC's
indebtedness and other obligations owing to the Lender.
10.20 ALTERNATIVE DISPUTE RESOLUTION. In the event of any claim or
dispute among the parties arising out of the indemnification provisions of
Section 8 of this Agreement, upon the request of either PSC and Parent on the
one hand, or Seller and the Shareholders on the other, the parties may, but
shall not be obligated to, agree to mediation or other alternative dispute
resolution procedures applicable to all the parties.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the day and
year first above written.
"PSC"
PSC MANAGEMENT CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
Title: Vice President
-------------------------------------
"PARENT"
PHYSICIANS' SPECIALTY CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------
Title: Vice Chairman & Secretary
-------------------------------------
"SELLER"
▇▇▇▇ EAR, NOSE & THROAT
ASSOCIATES, P.C.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D.
----------------------------------------
Title: President
-------------------------------------
"SHAREHOLDERS"
/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.
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APPENDIX A
DEFINITIONS
DEFINED TERM SECTION
------------ -------
Acquisition Price 1.3(a)
Agreement Preamble
Approvals 2.4(b)
Assets 1.1
Assumed Obligations 1.3(b)
Balance Sheet Date 1.5
Balance Sheet 1.5
Business Background
Closing Accounts Receivable 2.16
Closing 1.10(a)
Closing Date 1.10(a)
Code 1.4(b)
Execution Date Preamble
Environmental Laws 10.10
ERISA 1.4(b)
Excluded Assets 1.2
Hazardous Materials 10.9
Indemnified Person 8.2
Indemnitor 8.2
Laws 1.4(b)
Lender 10.19
Material 10.7
MSA 7.8
Material Adverse Change 10.8
Material Adverse Effect 10.8
Medical Practice Background
NAENT 1.10(b)(x)
No-compete Territory 7.5
Note 1.3(a)
Parent Preamble
Parent Common Stock 1.3(a)
Parties Background
Party Background
Prevailing Party 10.18
Prohibited Transaction 2.21
PSC Preamble
PSC Documents 3.2
PSC Party 8.5
Reasonable attorneys fees 10.18
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Records 4.2
Reportable Event 2.21
Seller Preamble
Seller Documents 2.2(a)
Seller Plan 2.21
Seller Plans 2.21
Selling Party 8.5
Shareholder Preamble
Stock Value Amount 1.3(a)
Trade Secret 7.6(a)
Transactions 1.3(c)
Transferred Employees 1.4(a)
EXHIBITS
Exhibit l.1(a) Assets
Exhibit 1.1(c) Inventories
Exhibit 1.2 Excluded Personal Assets
Exhibit 1.3(a) Allocation of Purchase Price
Exhibit 1.3(b) Liabilities Assumed
Exhibit 1.5 Balance Sheet of Seller
Exhibit 2.3 Subsidiaries and Affiliates
Exhibit 2.5 Seller's Financial Statement
Exhibit 2.6 Leases
Exhibit 2.7 Permitted Encumbrances
Exhibit 2.9 Principal Place of Business
Exhibit 2.10 Other Location of Assets
Exhibit 2.11 Intellectual Property Rights
Exhibit 2.12 Directors and Officers; Payroll Information
Exhibit 2.13 Legal Proceedings
Exhibit 2.14 Contracts (Other than Leases)
Exhibit 2.15 Subsequent Events
Exhibit 2.16 Accounts Receivable
Exhibit 2.17 Tax Liabilities and Tax Returns
Exhibit 2.21 Employee Benefit Plans
Exhibit 2.24 Medicare, Medicaid and Other Third Party Payor Payment Liabilities
Exhibit 5.7 Form of Seller's Counsel Opinion
Exhibit 5.8(i) Form of Employment Agreement - Shareholder/NAENT
Exhibit 5.9 Release of Liens
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Exhibit 6.6 Form of Purchaser's Counsel Opinion
Exhibit 6.8 Form of Employment Contract
Exhibit 7.5 Seller's Office Locations for Covenant not to Compete
3