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EXHIBIT 10.1
ASSET ACQUISITION AGREEMENT
by and among
Physicians' Specialty Corp.
PSC Management Corp.
and
Atlanta Ear, Nose & Throat Associates, P.C.
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TABLE OF CONTENTS
Page
SECTION 1. TERMS OF THE SALE AND ACQUISITION OF ASSETS 1
1.1 CONVEYANCE OF ASSETS 2
1.2 EXCLUDED ASSETS. 3
1.3 ACQUISITION PSC PRICE; ASSUMPTION OF LIABILITIES. 3
1.4 EMPLOYMENT ARRANGEMENTS. 4
1.5 MANAGEMENT SERVICES AGREEMENT. 5
1.6 SELLER'S FINANCIAL INFORMATION. 5
1.7 EACH PARTY TO BEAR COSTS. 5
1.8 ASSIGNMENT OF CONTRACTS AND ASSETS; CONSENTS. 5
1.9 COOPERATION WITH REGULATORY APPROVALS. 6
1.10 IRREVOCABLE GUARANTY BY PARENT. 6
1.11 TAX AND ACCOUNTING TREATMENT. 6
1.12 CLOSING 7
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS. 8
2.1 CORPORATE EXISTENCE; GOOD STANDING. 8
2.2 POWER AND AUTHORITY FOR TRANSACTIONS. 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. 11
2.9 PRINCIPAL PLACE OF BUSINESS. 11
2.10 LOCATION OF ASSETS. 11
2.11 INTELLECTUAL PROPERTY RIGHTS. 11
2.12 DIRECTORS AND OFFICERS; PAYROLL INFORMATION. 11
2.13 LEGAL PROCEEDINGS. 11
2.14 CONTRACTS. 12
2.15 SUBSEQUENT EVENTS. 12
2.16 ACCOUNTS RECEIVABLE. 13
2.17 TAX RETURNS. 14
2.18 COMMISSIONS AND FEES. 14
2.19 MATERIAL LIABILITIES. 14
2.20 INSURANCE POLICIES. 14
2.21 EMPLOYEE BENEFIT PLANS. 15
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. 16
2.25 BILLING PRACTICES AND REFERRAL SOURCES. 16
2.26 PHYSICIAN SELF-REFERRALS. 17
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND PSC. 17
3.1 CORPORATE EXISTENCE; GOOD STANDING; QUALIFICATION. 17
3.2 POWER AND AUTHORITY. 18
3.3 COMMISSIONS AND FEES. 18
3.4 CAPITALIZATION. 18
3.5 PSC COMMON STOCK. 18
3.6 PARENT DOCUMENTS. 19
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3.7 LEGAL PROCEEDINGS. 19
SECTION 4. ACCESS TO INFORMATION AND DOCUMENTS PRIOR TO CLOSING. 19
4.1 ACCESS TO SELLER'S INFORMATION. 19
4.2 ACCESS TO INFORMATION OF PSC AND PARENT. 19
4.3 RETENTION OF RECORDS. 19
SECTION 5. CONDITIONS TO OBLIGATION OF PARENT AND PSC TO CLOSE 20
5.1 REPRESENTATIONS AND WARRANTIES TRUE. 20
5.2 COVENANTS. 20
5.3 NO SUIT OR PROCEEDING. 20
5.5 CERTIFICATE. 20
5.6 CONSENTS AND APPROVALS. 21
5.7 COUNSEL OPINION. 21
5.8 OTHER AGREEMENTS EXECUTED. 21
5.9 RELEASE OF LIENS 21
5.10 CLOSING DATE FINANCIAL CERTIFICATE 21
5.11 CORPORATE DOCUMENTS. 21
5.12 INSTRUMENTS OF CONVEYANCE. 22
5.14 INVESTOR LETTER AND FINANCIAL DATA SHEET. 22
SECTION 6. CONDITIONS TO OBLIGATION OF SELLER AND THE SHAREHOLDERS 22
6.1 REPRESENTATIONS AND WARRANTIES TRUE. 22
6.2 COVENANTS. 22
6.3 NO SUIT OR PROCEEDING. 22
6.4 CERTIFICATE. 23
6.5 GOVERNMENT APPROVALS. 23
6.6 COUNSEL OPINION. 23
6.7 OTHER AGREEMENTS EXECUTED. 23
6.8 PARENT STOCK. 23
6.9 CORPORATE DOCUMENTS. 23
6.10 ASSUMPTION OF LIABILITIES. 23
SECTION 7. CERTAIN ADDITIONAL COVENANTS 24
7.1 CONDUCT OF BUSINESS PRIOR TO CLOSING. 24
7.2 FUNDING OF ACCRUED EMPLOYEE BENEFITS. 24
7.3 CREDITOR'S CLAIMS. 25
7.4 AFFILIATE AGREEMENTS. 25
7.5 WAIVER OF BULK TRANSFER COMPLIANCE. 25
7.6 LIQUIDATION OF SELLER. 25
7.7 COVENANT NOT TO COMPETE. 25
7.8 CONFIDENTIALITY. 26
7.9 POOLING AND TAX-FREE COMBINATION TREATMENT. 27
SECTION 8. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION. 27
8.1 NATURE AND SURVIVAL. 27
8.2 INDEMNIFICATION BY PSC AND PARENT. 28
8.3 INDEMNIFICATION BY SELLER AND SHAREHOLDERS. 28
8.4 INDEMNIFICATION PROCEDURE. 29
8.5 LIMITATIONS UPON OBLIGATIONS. 29
SECTION 9. TERMINATION. 30
9.1 RIGHT TO TERMINATE. 30
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9.2 EFFECT OF TERMINATION. 30
SECTION 10. MISCELLANEOUS. 31
10.1 NOTICES. 31
10.2 FURTHER ASSURANCES. 32
10.3 PUBLIC DISCLOSURES. 32
10.4 GOVERNING LAW. 32
10.5 "INCLUDING 32
10.6 "KNOWLEDGE 32
10.7 "MATERIAL". 32
10.8 "MATERIAL ADVERSE CHANGE" OR "MATERIAL ADVERSE EFFECT". 33
10.9 "HAZARDOUS MATERIALS". 33
10.10 "ENVIRONMENTAL LAWS". 33
10.12 CAPTIONS. 34
10.13 INTEGRATION OF EXHIBITS. 34
10.14 ENTIRE AGREEMENT. 34
10.15 COUNTERPARTS. 34
10.16 BINDING EFFECT. 34
10.17 NO RULE OF CONSTRUCTION. 34
10.18 COSTS OF ENFORCEMENT. 35
10.19 TRANSFER OF ASSETS; ASSIGNMENT. 35
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ASSET ACQUISITION AGREEMENT
ASSET ACQUISITION AGREEMENT (this "Agreement"), dated as of November 26,
1996, by and among PSC MANAGEMENT CORP., a Delaware corporation ("PSC");
PHYSICIANS' SPECIALTY CORP., a Delaware corporation ("PARENT"); ATLANTA EAR,
NOSE & THROAT ASSOCIATES, P.C., a Georgia professional corporation ("Seller");
and ▇▇▇▇▇ ▇. ▇▇▇▇▇ M.D.; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III; ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ M.D.; ▇▇▇▇▇
▇▇▇▇▇▇▇, M.D.; ▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D.; AND ▇▇▇ ▇. ▇▇▇▇▇, M.D., all individual
residents of the State of Georgia (individually a "Shareholder," and
collectively the "Shareholders").
W I T N E S S E T H:
WHEREAS, Seller operates a medical practice which provides otolaryngology
and other medical and surgical services from offices located in the metropolitan
Atlanta, Georgia area and surrounding communities ("Business");
WHEREAS, Shareholders are the only shareholders of Seller;
WHEREAS, Parent through its wholly-owned subsidiaries is engaged in the
business of acquiring the assets of and managing medical practices;
WHEREAS, PSC is a wholly-owned subsidiary of Parent;
WHEREAS, Seller wishes to convey to PSC, and PSC wishes to acquire from
Seller, substantially all of the properties and assets constituting the
Business, subject to certain liabilities set forth herein, all upon the terms
and subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the premises, the mutual promises and
covenants hereinafter set forth, and the contemplated delivery by PSC to Seller
of shares of the Common Stock of Parent, and for other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the parties
hereto do hereby agree as follows:
SECTION 1. TERMS OF THE SALE AND ACQUISITION OF ASSETS.
The sale of the assets of Seller hereunder and the acquisition thereof by
PSC shall be made at the Closing (as defined in Section 1.12) based on the
respective representations, warranties and agreements of the parties hereto and
subject to the terms and conditions herein stated.
1.1 CONVEYANCE OF ASSETS. Subject to the provisions of Section 1.2 hereof,
at the Closing Seller shall convey, transfer and assign to PSC and PSC shall
acquire from Seller all of Seller's right, title and interest in and to the
properties and assets of Seller as a going concern,
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including, without limitation, all items of personal property and other assets
used in connection with the Business (except as otherwise provided herein),
whether or not any of such assets have any value for accounting purposes
(individually "Asset," and collectively "Assets"), free and clear of all
obligations, security interests, liens, claims and encumbrances whatsoever,
except as specifically assumed by PSC pursuant to Section 1.3(b). Without
limiting the generality of the foregoing, the Assets specifically include:
(a) All real estate, personal property, plant, furniture, fixtures and
equipment owned by Seller which are utilized in or related to the Business,
including, but not limited to, all items owned by Seller identified on Exhibit
1.1(a) attached hereto.
(b) All contracts, agreements and commitments of Seller and/or the
Shareholders related to the Business identified on Exhibit 2.6 and Exhibit 2.14
attached hereto and set forth on Exhibit 1.3(b) and all contracts, agreements
and commitments of Seller and/or the Shareholders related to the Business and
entered into after the date hereof and prior to the Closing in the ordinary
course of business and not in violation of Section 7.1 hereof (but excluding
this Agreement and the agreements, instruments and documents executed and
delivered by PSC pursuant to this Agreement and also excluding physician
employment agreements of Seller and any contracts with nurse practitioners and
physician assistants of Seller) and all contract rights of Seller incident
thereto, and all general intangibles of Seller.
(c) Subject to applicable laws and regulations, all inventories
maintained by Seller as of the Closing Date as described in Exhibit 1.1(c).
(d) Subject to applicable laws and regulations, all accounts receivable
of Seller, notes receivable and other rights to receive payments owing to Seller
in existence on the Closing Date, and all cash arising from the collection of
same from and after the Closing Date.
(e) Subject to applicable laws and regulations, all patient accounts
receivable records of Seller.
(f) The books and records of Seller relating to the Assets, all of
which shall be delivered to PSC, or such person as PSC may designate, on the
Closing Date.
(g) Subject to applicable laws and regulations, all transferable
licenses and other regulatory approvals necessary for or incident to the
operation of the Assets.
(h) Seller's right to use the name "Atlanta Ear, Nose & Throat
Associates" and all other trade and service marks and names and goodwill
associated therewith, and all customer lists, clinical and administrative policy
and procedure manuals, trade secrets, copyrights, patents, marketing and
promotional materials (including audiotapes, videotapes and printed materials)
and all other property rights required for or incident to the marketing of the
products and services of the Business, and all books and records relating
thereto.
(i) All of Seller's prepaid expenses, prepaid insurance, deposits and
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similar items.
1.2 EXCLUDED ASSETS. There shall be excluded from the Assets transferred
and conveyed hereunder, and Seller shall retain all of its right, title and
interest in and to, the assets set forth on Exhibit 1.2 attached hereto and the
following assets:
(a) The minute books of Seller and similar corporate records of Seller.
(b) All considerations to be delivered by PSC on the Closing Date.
(c) All assets listed in Exhibit 1.2 hereto.
(d) Patient charts, records and files.
1.3 ACQUISITION PSC PRICE; ASSUMPTION OF LIABILITIES. As consideration
for the sale of the Assets by Seller, at Closing PSC shall provide Seller with
the following considerations:
(a) Parent Shares. At the Closing Parent shall issue to Seller shares
of the Common Stock, par value $.001 per share, of Parent (the "Parent Common
Stock") with a total value equal to [$15,773,748] subject to adjustments
described in Exhibit 1.3(a) (the "Acquisition Price"). The number of shares of
Parent Common Stock which shall constitute the Acquisition Price shall be
determined by dividing the Acquisition Price by the Initial Public Offering
Price of the Parent Common Stock. For purposes of this Section 1.3(a), the
"Initial Public Offering Price" shall mean the price for the shares of Parent
Common Stock as priced and sold on a gross basis before taking into account the
managing underwriters' commissions and costs associated with Parent's initial
public offering (the "IPO"). Assuming an IPO Price of [$8.50] per share and no
adjustments pursuant to Exhibit 1.3(a), a total of [1,885,737] shares of Parent
Common Stock would be issued as the Acquisition Price. The Acquisition Price
shall be allocated to the acquisition of the Assets as set forth on Exhibit
1.3(a)(1) attached hereto. The parties shall use such allocation in completing
Form 8594 and satisfying any and all other reporting requirements of the
Internal Revenue Service or any other state or local taxing authority.
(b) Assumption of Liabilities. Except as otherwise provided herein, at
the Closing PSC shall assume and shall perform or discharge on or after the
Closing Date (as defined in Section 1.12), only those contracts, leases,
commitments, obligations and liabilities of Seller which are listed on Exhibit
1.3(b), attached hereto (collectively, the "Obligations"), except to the extent
that such contracts, leases, commitments, obligations and liabilities are
excluded by virtue of the operation of other provisions of this Agreement. PSC
agrees to promptly pay and discharge such Obligations assumed by it as the same
become due and payable.
(c) Liabilities Not Assumed. Notwithstanding any contrary provision
contained herein, PSC shall not be deemed to have assumed, nor shall PSC assume
(i) any liability which may be incurred by reason of any uncured material breach
of or any monetary default under such contracts, leases, commitments or
obligations which occurred prior to the Closing Date; (ii)
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any liability for any employee benefits payable to employees of Seller,
including, but not limited to, liabilities arising under any Seller Plan (as
defined in Section 2.21 hereto) and liabilities for accrued sick leave or
vacation days; (iii) any liability based upon or arising out of a violation of
any antitrust or similar restraint-of-trade laws by Seller, including, without
limiting the generality of the foregoing, any such antitrust liability which
may arise in connection with agreements, contracts, commitments or orders for
the sale of goods or provision of services by Seller reflected on the books of
Seller at or prior to the Closing Date; (iv) any liability based upon or
arising out of overpayments due to the Medicare and/or Medicaid programs, any
other third party payor, or any liability based upon or arising out of a
violation of any false claim, anti-kickback, prohibition or self-referral laws
or similar fraud and abuse laws by Seller; (v) any medical malpractice
liability associated with the Business or Seller or any person associated with
the business or Seller; nor (vi) any liability based upon or arising out of any
tortious or wrongful actions of Seller or any Shareholder, 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.
1.4 EMPLOYMENT ARRANGEMENTS.
(a) Following the Closing PSC will offer employment as
employees-at-will to all persons (other than physicians and such personnel as
are specified in the Management Services Agreement, defined in Section 1.5
below) who are employees of Seller on the Closing Date; Seller's employees who
become employed by PSC are hereinafter referred to as "Transferred Employees"
and the physicians and such other personnel as are specified in the Management
Services Agreement, but who will not become employed by PSC are hereafter
referred to as the "Practice Employees."
(b) As of the Closing Date, Seller will use its best efforts to: (i)
terminate any employment contracts applicable to those persons who are employed
by PSC as Transferred Employees pursuant to Section 1.4(a) hereof; and (ii)
terminate the participation of all such employees in all Seller Plans, such
termination to be effected in accordance with and to the extent permitted by
applicable provisions of the Internal Revenue Code of 1986, as amended, (the
"Code") and the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and all other applicable laws, rules and regulations; and (iii) cause
the Seller Plans to make timely appropriate distributions, to the extent
required, to such employees in accordance with, and to the extent permitted by,
the terms and conditions of such Seller Plans. Seller will provide to PSC such
copies of documents and other information related to the termination of such
employees' participation in the Seller Plans as PSC may request.
1.5 MANAGEMENT SERVICES AGREEMENT. Prior to the effective date of the
registration statement governing the IPO, New Atlanta Ear, Nose & Throat
Associates, P.C. ("Practice"), Parent and PSC shall execute and deliver a
Management Services Agreement substantially in the form of Exhibit 1.5, pursuant
to which PSC will provide management services to Practice from and after the
Closing Date.
1.6 SELLER'S FINANCIAL INFORMATION. The agreement between the parties
evidenced by this Agreement has been reached based on financial information
about Seller, the Assets and the
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Business as of September 30, 1996, all provided to PSC by Seller. The unaudited
Balance Sheet of Seller as of September 30, 1996 ("Balance Sheet Date"), is
attached hereto as Exhibit 1.6 and is hereinafter referred to as the "Balance
Sheet".
1.7 EACH PARTY TO BEAR COSTS. Each of the parties to this Agreement shall
pay all of the costs and expenses incurred by such party in connection with the
transactions contemplated by this Agreement, except as otherwise provided
herein. Without limiting the generality of the foregoing, and whether or not
such liabilities may be deemed to have been incurred in the ordinary course of
business, neither party shall be liable for or required to pay, either directly
or indirectly, any of the following liabilities or expenses incurred by the
other party: (a) fees and expenses of any person for services as a finder, or
for fees and expenses of any persons for financial services rendered to such
other party in connection with negotiating and closing the sale contemplated by
this Agreement; (b) fees and expenses of legal counsel retained by such other
party for services rendered to such party in connection with negotiating and
closing the sale contemplated by this Agreement; (c) fees and expenses of any
auditors and accountants retained by such other party for services rendered to
such party in connection with negotiating and closing the sale contemplated by
this Agreement; (d) state and federal income taxes or other similar charges on
income incurred by such other party on any gain from the purchase and sale of
Assets hereunder; and (e) expenses and fees relating to feasibility studies,
appraisals and similar valuation services performed on behalf of such other
party in connection with the transactions contemplated hereby.
1.8 ASSIGNMENT OF CONTRACTS AND ASSETS; CONSENTS. Nothing in this Agreement
or delivered pursuant to this Agreement shall be construed as an attempt to
agree to assign any contract, certificate, license or other Asset which is in
law or by agreement nonassignable without the consent of the other party or
parties thereto, or of any governmental authority, as the case may be, unless
such consent shall be given. Seller will use its reasonable good faith efforts
to obtain all such necessary consents of the parties to any such contracts prior
to the Closing. In order, however, that the full value of every such contract,
certificate, license or other Asset included within the Assets and all claims
and demands in such contracts may be realized, Seller and the Shareholders
hereby covenant with PSC and Parent that Seller, by itself or by its agents,
will, at the request and expense and under the direction of PSC, in the name of
Seller or otherwise, as PSC shall specify and as shall be permitted by law, take
all such reasonable actions and do or cause to be done all such reasonable
things as shall, in the opinion of PSC, be necessary or proper (a) in order that
the rights and obligations of Seller under such contracts, certificates,
licenses and other Assets shall be preserved, and (b) for, and to facilitate,
from and after the Closing, the collection of the moneys due and payable, and to
become due and payable, to Seller in and under every such contract and in
respect of every such claim and demand, from and after the Closing, and Seller
shall hold the same for the benefit of, and shall pay the same over to, PSC.
1.9 COOPERATION WITH REGULATORY APPROVALS. Seller and the Shareholders
shall cooperate with and assist PSC, as PSC shall reasonably request, in
obtaining the approval of all regulatory agencies and officials whose approval
is required for the transfer of all licenses and other regulatory approvals
required to enable PSC to acquire the Assets and operate the Business.
1.10 IRREVOCABLE GUARANTY BY PARENT. To induce Seller to execute and
deliver this
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Agreement, Parent hereby unconditionally and irrevocably guarantees the Seller
and Shareholders the full, prompt and faithful performance by PSC of all
covenants and obligations to be performed by PSC under this Agreement,
including, but not limited to, the payment of all sums and delivery of all
property stipulated to be transferred by PSC pursuant to this Agreement and
PSC's obligation to indemnify the Seller and the Shareholders pursuant to
Section 8.2. This guaranty shall be a guaranty of payment, not merely
collection, and shall be unaffected by any subsequent modification or amendment
of this Agreement whether or not Parent has knowledge of or consented to such
modification or amendment. In the event that PSC fails to fully perform all such
covenants and obligations in accordance with their terms or pay all or any part
of such sums or deliver all or any part of such property when due, Parent will
perform all such covenants and obligations in accordance with their terms or
immediately pay or deliver to Seller (or such other payee or transferee as may
be provided in any such agreement) the amount due and unpaid or the property not
delivered, as the case may be, by PSC. In the event of bankruptcy, termination,
liquidation or dissolution of PSC, this unconditional guaranty shall continue in
full force and effect. In the event of any extension of time for payment or
performance or other modification of any guaranteed obligation or covenant, or
any waiver thereof or other compromise or indulgence with respect thereto or any
release or impairment of any security for any such obligation or covenant, or
any other circumstance which might otherwise constitute a legal or equitable
discharge of a surety or guarantor, no notice to, or consent of, Parent shall be
required.
1.11 TAX AND ACCOUNTING TREATMENT. It is intended by the parties that the
purchase and sale contemplated by this Agreement and related documents qualify
as a reorganization under the provisions of Section 368(a)(1)(C) of the Internal
Revenue Code of 1986, as amended, and that for accounting purposes, it is
intended that such transaction be accounted for by Parent as a "pooling of
interests".
1.12 CLOSING.
(a) Closing. Subject to the fulfillment of the conditions precedent
specified in Sections 5 and 6, the transaction contemplated by this Agreement
shall be consummated at a closing (the "Closing") to be held at 10:00 a.m. local
time simultaneously with the closing of the IPO at the offices of Bachnor,
Tally, Polevoy, & ▇▇▇▇▇▇ L.L.P., or at such other location, as is mutually
agreed upon by the Parties. The date on which the Closing occurs shall be
referred to as the "Closing Date."
(b) Documents to be Delivered by Seller. At the Closing, Seller shall
deliver, or cause to be delivered, to PSC the following:
(i) Such bills of sale, endorsements and assignments as
are necessary to vest in PSC good and valid title to the
Purchased Assets;
(ii) The certificate required to be delivered pursuant
to Section 5.5;
(iii) The legal opinion required to be delivered
pursuant to
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Section 5.7 of this Agreement;
(iv) The other agreements, documents and instruments
required by Sections 5.8 through 5.14;
(v) Any other documentation required to be delivered
under this Agreement or otherwise requested to be delivered by
PSC that is necessary or appropriate to consummate the
Transaction.
(c) Documents and Other Items to be Delivered by Purchaser.
At the Closing, PSC shall deliver to Seller the following:
(i) The Acquisition Price, payable by shares of Parent
Common Stock pursuant to Section 1.3;
(ii) The certificate required to be delivered pursuant
to Sections 6.4 of this Agreement;
(iii) The legal opinion required to be delivered
pursuant to Section 6.6 of this Agreement;
(iv) The other agreements, documents and instruments
required by Section 6.7, 6.9 and 6.10;
(v) Any other documentation required to be delivered
under this Agreement or otherwise reasonably requested to be
delivered by Seller or the Shareholders that is necessary or
appropriate to consummate the transaction.
Simultaneously with such delivery, Seller and Shareholders jointly and
severally agree to use their best efforts and to take all action as may be
reasonably necessary to put PSC in possession and operating control of the
Assets free and clear of all liens or other restrictions or encumbrances,
including the obtaining of such consents of third parties as may be reasonably
necessary to effect the foregoing.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS.
The Seller and Shareholders jointly and severally represent and warrant to
PSC and Parent as follows:
2.1 CORPORATE EXISTENCE; GOOD STANDING. Seller is a professional
corporation duly organized, validly existing and in good standing under the laws
of the State of 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
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relating to such other state or jurisdiction.
2.2 POWER AND AUTHORITY FOR TRANSACTIONS.
(a) Seller has corporate power to execute, deliver and perform its
obligations under this Agreement and all agreements and other documents executed
and delivered by it pursuant to this Agreement, and has taken all action
required by law, its Articles of Incorporation, its Bylaws or otherwise, to
authorize the execution and delivery of and the performance of this Agreement
and such related documents. The execution and delivery of this Agreement, and
the agreements related hereto executed and delivered pursuant to this Agreement,
do not, and, subject to the receipt of consents to assignments of leases and
other contracts where required and the receipt of regulatory approvals where
required, the consummation of the transactions contemplated hereby will not,
violate any provision of the Articles of Incorporation or Bylaws of Seller or
any provisions of, or result in the acceleration of, any obligation under any
mortgage, lien, lease, agreement, instrument, order, arbitration award, judgment
or decree to which Seller is a party or by which Seller is bound, or violate any
material restrictions of any kind to which Seller is subject which could have a
Material Adverse Effect.
(b) The execution and delivery of this Agreement, and the agreements
related hereto executed and delivered pursuant to this Agreement, do not, and
the consummation of the transactions contemplated hereby will not, violate any
provisions of, or result in the acceleration of, any obligation under any
mortgage, lien, lease, agreement, instrument, order, arbitration award, judgment
or decree to which any Shareholder is a party or by which any Shareholder is
bound, or violate any material restrictions of any kind to which any Shareholder
is subject and which could have a Material Adverse Effect.
2.3 SUBSIDIARIES AND AFFILIATES. Except as set forth in Exhibit 2.3
attached hereto, Seller does not own stock in or control, directly or
indirectly, any other corporation, association or business organization, nor is
Seller a party to any joint venture or partnership. The Shareholders are the
sole shareholders of Seller and own all the capital stock of Seller in the
respective proportionate amounts set forth in Exhibit 2.3. There are no
outstanding (a) securities of Seller convertible into equity interests in
Seller, or (b) commitments, options, rights or warrants to issue any such equity
interests in Seller, or to issue securities of Seller convertible into such
equity interests.
2.4 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. (a) All material
building or other permits, certificates of occupancy, concessions, grants,
franchises, licenses, certificates of need and other material governmental
authorizations and approvals necessary for the conduct of the Business, or
waivers thereof, have been duly obtained and are in full force and effect, and
there are no proceedings pending or, to the knowledge of Seller and
Shareholders, threatened which may result in the revocation, cancellation or
suspension, or any adverse modification, of any thereof. Any and all past
litigation concerning such building or other permits, certificates of occupancy,
concessions, grants, franchises, licenses, certificates of need and other
governmental authorizations and approvals, and all claims and causes of action
raised therein, have been finally adjudicated.
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(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 no contendere and participation in a first offender,
deferred adjudication, or other arrangement or program whereby a judgment of
conviction has been withheld.
2.5 SELLER'S FINANCIAL INFORMATION. Seller has heretofore furnished PSC and
Parent with copies of financial information about Seller as set forth on Exhibit
2.5 attached hereto, including, but not limited to, the Balance Sheet. All such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods indicated,
reflect all liabilities of Seller as of their respective dates, and present
fairly the financial position of Seller as of such dates and the results of
operations and cash flows for the period or periods reflected therein.
2.6 LEASES. Exhibit 2.6 attached hereto sets forth a list of all leases
pursuant to which Seller leases, as lessor or lessee, real or personal property
used in operating the Business or otherwise; however the parties understand and
agree that only those leases listed on Exhibit 1.3(b) will be assumed by PSC.
Except as indicated on Exhibit 2.16, all such leases listed on Exhibit 2.6 are
valid and effective in accordance with their respective terms, and there is not
under any such lease any existing default by Seller, as lessor or lessee, or any
condition or event of which Seller or any Shareholder has knowledge which with
notice or lapse of time, or both, would constitute a default, in respect of
which Seller has not taken adequate steps to cure such default or to prevent a
default from occurring.
2.7 PERSONAL PROPERTY. Seller owns all of the personal property reflected
on the
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Balance Sheet and included in the Assets, including, but not limited to, all
items of personal property identified on Exhibit 1.1(a) and Exhibit 1.1(c)
attached hereto, free and clear of any liens, claims, charges, exceptions or
encumbrances, except for those set forth in Exhibit 2.7 attached hereto. All
such personal property that comprises the Assets shall be transferred to PSC
subject to only claims, charges, exceptions or encumbrances set forth on Exhibit
2.7. Such personal property is in usable condition, normal wear and tear
excepted, and suitable for its purpose and intended use.
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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
attached hereto, Seller has no right, title or interest in or to patents, patent
rights, manufacturing processes, trade names, trademarks, service marks,
inventions, specialized treatment protocols, copyrights, formulas and trade
secrets. Except for off-the-shelf software licenses, Seller is not a licensee in
respect of any patents, trademarks, service marks, trade names, copyrights or
applications therefor, or manufacturing processes, formulas or trade secrets.
Seller owns and possesses adequate licenses or other rights to use all such
patents, trademarks, service marks, trade names, copyrights, manufacturing
processes, inventions, specialized treatment protocols, formulas and trade
secrets necessary to conduct its business as now operated. No claim is pending
or has been made to the effect that the present or past operations of Seller
infringe upon or conflict with the asserted rights of others to such patents,
patent rights, manufacturing processes, trade names, trademarks, service marks,
inventions, specialized treatment protocols, copyrights, formulas and trade
secrets.
2.12 DIRECTORS AND OFFICERS; PAYROLL INFORMATION. Set forth on Exhibit 2.12
attached hereto is a true and complete list, as of the date of this Agreement,
of: (a) the name of each Director and officer of Seller and the offices held by
each; and (b) the most recent payroll report of Seller, showing all current
employees of Seller and their current levels of compensation other than bonuses
and other extraordinary compensation.
2.13 LEGAL PROCEEDINGS. Except as set forth in Exhibit 2.13 attached
hereto, neither Seller nor any Shareholder has knowledge of any pending or
threatened litigation, governmental investigation, condemnation or other
proceeding against or relating to or affecting Seller, any Shareholder, the
Business, the Assets or the transactions contemplated by this Agreement,
including, but not limited to, claims for medical malpractice or negligence,
and, to the knowledge of Seller and Shareholders, no basis for any such action
exists, nor is there any legal impediment of which Seller or any Shareholder has
knowledge to the continued operation of the Business in the ordinary course.
2.14 CONTRACTS. Seller has delivered to PSC true copies of all written, and
disclosed to PSC all Material oral, outstanding contracts, obligations and
commitments of Seller and each Shareholder entered into in connection with the
Business, all of which are listed or incorporated by reference on Exhibit 2.6
(in the case of leases) and Exhibit 2.14 (in the case of managed care contracts,
third party payor contracts and contracts other than leases) attached hereto.
Except as
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otherwise indicated on such Exhibits, all of such contracts, obligations and
commitments are valid, binding and enforceable against Seller in accordance with
their terms and are in full force and effect, subject to limitations on
enforceability imposed by, bankruptcy, moratorium, creditors' rights or similar
laws. Except as set forth or incorporated by reference on such Exhibits, to
Seller's knowledge no default or alleged default by Seller exists thereunder.
Except as listed or incorporated by reference on Exhibit 2.6 and Exhibit 2.14,
neither Seller nor any Shareholder is a party to any Material written or oral
agreement, contract, lease or plan of a type described as follows:
(a) Contract related to the Assets, not made in the ordinary course of
business, other than this Agreement.
(b) Employment contract which is not terminable without cost or other
liability to Seller, or any successors or assigns thereof, upon notice of 30
days or less.
(c) Contract with any labor union.
(d) Bonus, pension, profit-sharing, retirement, stock acquisition,
hospitalization, insurance or similar plan providing for employee benefits.
(e) Lease with respect to any property, real or personal, whether as
lessor or lessee.
(f) Contract for the future acquisition of materials, supplies or
equipment (i) which is in excess of the requirements of the Business now booked
or for normal operating inventories, or (ii) which is not terminable without
material cost or liability to Seller, or any successors or assigns thereof, upon
notice of 30 days or less.
(g) Insurance contract.
(h) Contract continuing for a period of more than six months from the
Closing Date.
(i) Loan agreement or other contract for money borrowed.
2.15 SUBSEQUENT EVENTS. Except as set forth on Exhibit 2.15 attached
hereto, Seller has not, since the date of the Balance Sheet:
(a) Incurred any material uninsured obligation or liability (absolute,
accrued, contingent or otherwise), or any material adverse change except in
connection with the performance of this Agreement, other than in the ordinary
course of business.
(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance Sheet
or (ii) liabilities incurred since the date of the
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Balance Sheet in the ordinary course of business.
(c) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Seller.
(d) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible.
(e) Sold or transferred any of the Assets, canceled any debts or claims
or waived any rights, except in the ordinary course of business.
(f) Granted any general or uniform increase in the rates of pay of
employees or any substantial increase in salary payable or to become payable by
Seller to any officer or employee, consultant or agent (other than normal merit
increases), or by means of any bonus or pension plan, contract or other
commitment, increased the compensation of any officer, employee, consultant or
agent.
(g) Authorized any capital expenditures in excess of $1,000.00.
(h) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted under other Sections
hereof.
(i) Issued any stock, bonds or other securities.
(j) Experienced damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting any of its properties, assets or
business, or experienced any other material adverse change in its financial
condition, assets, liabilities or business.
(k) Paid bonuses, distributions, or advanced loans to shareholders or
employees outside of the ordinary course of business consistent with past
practices of Seller.
2.16 ACCOUNTS RECEIVABLE. Exhibit 2.16 reflects the amount of Seller's
accounts receivable as of the date of the Balance Sheet, net of allowances for
uncollectible and doubtful accounts, all in conformity with generally accepted
accounting principles. Seller maintains its accounting records in sufficient
detail to substantiate the accounts receivable reflected on Exhibit 2.16 and has
given and will give to PSC full and complete access to those records, including
the right to make copies therefrom. Since the date of the Balance Sheet, Seller
has not changed any principle or practice with respect to the recordation of
accounts receivable or the calculation of reserves therefor, or any material
collection, discount or write-off policy or procedure. To the best of the
knowledge of the Seller and the Shareholders, the Seller is in substantial
compliance with the terms and conditions of such third-party payor arrangements,
and to Seller's knowledge the reserves established by Seller are adequate to
cover any liability resulting from lack of
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compliance.
2.17 TAX RETURNS. Seller has filed all tax returns required to be filed by
it, and made all payments required to be made by it, with respect to income
taxes, real property taxes, sales taxes, use taxes, employment taxes and similar
taxes due and payable on or before the date of this Agreement. Seller has no tax
liability, except for ad valorem taxes for the year ending December 31, 1996,
taxes being contested in good faith, as set forth on Exhibit 2.17 attached
hereto, and sales, use, employment and similar taxes for periods as to which
such taxes have not yet become due and payable.
2.18 COMMISSIONS AND FEES. There are no valid claims for brokerage
commissions or finder's or similar fees in connection with the transactions
contemplated by this Agreement which may be now or hereafter asserted against
PSC or Parent resulting from any action taken by Seller or Shareholders or their
respective agents or employees, or any of them.
2.19 MATERIAL LIABILITIES. Except as set forth on Exhibit 2.15, or to the
extent reflected or reserved against on the Balance Sheet, Seller did not have,
as of the Balance Sheet Date, and has not incurred since that date, any material
uninsured liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due which would have a
Material Adverse Effect, other than those incurred in the ordinary course of
business. Except as set forth on Exhibit 2.15, Seller and Shareholders do not
know, or have reasonable grounds to know, of any basis for the assertion against
Seller as of the Balance Sheet Date, of any material claim or liability of any
nature in any amount not fully reflected or reserved against on the Balance
Sheet, or of any material uninsured claim or liability of any nature arising
since that date which would have a Material Adverse Effect other than those
incurred in the ordinary course of business or contemplated by this Agreement.
2.20 INSURANCE POLICIES. Seller or each Shareholder maintains policies of
comprehensive general liability and professional liability insurance in amounts
of not less than $3 million per occurrence and $5 million aggregate on a claims
made basis and property damage insurance on the Assets to be sold hereunder.
Valid policies in such amounts are outstanding and duly in force and will remain
duly in force through the Closing Date. All such policies are described in
Exhibit 2.20 attached hereto.
2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on Exhibit 2.21 attached
hereto, Seller has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of incentive compensation plan, program, agreement, policy, commitment,
contract or arrangement (whether or not set forth in a written document); (b)
any pension, profit sharing, retirement or other plan, program or arrangement;
or (c) any other employee benefit plan, fund or program, including, but not
limited to, those described in Section 3(3) of ERISA. All such plans listed on
Exhibit 2.21 (individually "Seller Plan," and collectively "Seller Plans") have
been operated and administered in all material respects in accordance with, as
applicable, ERISA, the Internal Revenue Code of 1986, as amended, title VII of
the Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended,
the Age Discrimination in Employment Act of 1967, as amended, and the related
rules and regulations
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adopted by those federal agencies responsible for the administration of such
laws. No act or failure to act by Seller has resulted in a "prohibited
transaction" (as defined in ERISA) with respect to the Seller Plans. No
"reportable event" (as defined in ERISA) has occurred with respect to any of the
Seller Plans. Seller has not previously made, is not currently making, and is
not obligated in any way to make, any contributions to any multi-employer plan
within the meaning of the Multi-Employer Pension Plan Amendments Act of 1980.
2.22 COMPLIANCE WITH LAWS IN GENERAL. Neither Seller nor any Shareholder
has knowledge of material violations of any federal, state and local laws,
regulations and ordinances relating to the operations of the Business and the
Assets, including, without limitation, the Federal Environmental Protection Act,
the Occupational Safety and Health Act, the Americans with Disabilities Act and
any Environmental Laws, and no notice of any pending inspection or violation of
any such law, regulation or ordinance has been received by Seller or any
Shareholder.
2.23 FRAUD AND ABUSE. Seller and Shareholders and all persons and entities
providing professional services for the Business have not, to the knowledge of
Seller and Shareholders, engaged in any activities which are prohibited under
Section 1320a-7b of Title 42 of the United States Code or the regulations
promulgated thereunder, or related state or local statutes or regulations, or
which are prohibited by rules of professional conduct, including, but not
limited to, the following: (a) knowingly and willfully making or causing to be
made a false statement or representation of a material fact for use in
determining rights to any benefit or payment; (b) knowingly and willfully making
or causing to be made any false statement or representations of a material fact
for use in determining rights to any benefit or payment; (c) any failure by a
claimant to disclose knowledge of the occurrence of any event affecting the
initial or continued right to any benefit or payment on its own behalf or on
behalf of another, with the intent to fraudulently secure such benefit or
payment; (d) knowingly and willfully soliciting or receiving any remuneration
(including any kickback, bribe or rebate) directly or indirectly, overtly or
covertly, in cash or in kind, or offering to pay or receive such remuneration
(i) in return for referring an individual to a person for the furnishing or
arranging for the furnishing of any item or service for which payment may be
made in whole or in part by Medicare or Medicaid, or (ii) in return for
purchasing, leasing or ordering or arranging for, or recommending, purchasing,
lease or ordering any good, facility, service or item for which payment may be
made in whole or in part by Medicare or Medicaid; (e) engaging in any activity
which is a basis for exclusion from the Medicare, Medicaid and other
federally-funded programs under Section 1320a-7a of Title 42 of the United
States Code; (f) any violation of the Medicare or Medicaid requirements,
including and fraud and abuse provisions, except where such circumstances would
not have a Material Adverse Effect.
2.24 MEDICARE, MEDICAID, AND OTHER THIRD-PARTY PAYOR PAYMENT LIABILITIES.
Except as described in Exhibit 2.24 neither Seller nor any Shareholder has, and
as of the Closing Date, will have, any liabilities to any third party fiscal
intermediary or carrier administering any state Medicaid program or the federal
Medicare program, or to any other third party payor for the recoupment of any
amounts previously paid to Seller (or any predecessor corporation) or any
Shareholder by any such third-party fiscal intermediary, carrier, Medicaid
program, Medicare program, or third party payor. There are no pending or
threatened actions by any third party fiscal intermediary or carrier
administering any state Medicaid or the federal Medicare program,
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by the Department of Health and Human Services, any state Medicaid agency, or
any third party payor to suspend payments to Seller or any Shareholder.
2.25 BILLING PRACTICES AND REFERRAL SOURCES. (a) Billing Practices
Generally. All billing practices by Seller and each Shareholder to all third
party payors, including, but not limited to, the federal Medicare program,
state Medicaid programs and private insurance companies, have been true, fair
and correct and in compliance with all applicable laws, regulations and
policies of all such third party payors, and neither Seller nor any Shareholder
has billed for or received any payment or reimbursement in excess amounts
allowed by law.
(b) Gratuitous Payments. Neither Seller nor any Shareholder, director,
or officer of Seller, nor to Seller's knowledge any employee or agent acting on
behalf of or for the benefit of Seller or any Shareholder, has directly or
indirectly (i) offered or paid any remuneration, in cash or in kind, to, or made
any financial arrangements with, any past or present customers, past or present
patients, past or present suppliers, contractors or third party payors of Seller
in order to obtain business or payments from such persons, other than
entertainment activities in the ordinary and lawful course of business; (ii)
given or agreed to give, or is aware that there has been made or that there is
any agreement to make, any gift or gratuitous payment of any kind, nature or
description (whether in money, property or services) to any customer or
potential customer, patient or potential patient, supplier or potential
supplier, contractors, third party payor or any other person other than in
connection with promotional or entertainment activities in the ordinary and
lawful course of business; (iii) made or agreed to make, or is aware that there
has been made or that there is any agreement to make, any contribution, payment
or gift of funds or property to, or for the private use of, any governmental
official, employee or agent where either the contribution, payment or gift or
the purpose of such contribution, payment or gift is or was illegal under the
laws of the United States or under the laws of any state thereof or any other
jurisdiction (foreign or domestic) under which such payment, contribution or
gift was made; (iv) established or maintained any unrecorded fund or asset for
any purpose or made any false or artificial entries on any of its books or
records for any reason or (v) made, or agreed to make, or is aware that there
has been made or that there is any agreement to make, any payment to any person
with the intention or understanding that any part of such payment would be used
for any purpose other than that described in the documents supporting such
payment.
(c) Transactions with Referral Sources. Neither Seller nor any Shareholder,
director, or officer thereof, nor to Seller's knowledge any employee of Seller,
is a party to any contract, lease, agreement or arrangement, including, but not
limited to, any joint venture or consulting agreement with any physician,
hospital, nursing facility, home health agency or other person who is in a
position to make or influence referrals to or otherwise generate business for
Seller or any Shareholder to provide services, lease space, lease equipment or
engage in any other venture activity.
2.26 PHYSICIAN SELF-REFERRALS. Neither Seller nor any Shareholder has
submitted any claims in connection with any referrals which violated any
applicable self-referral law, including the ▇▇▇▇▇ Law (42 U.S.C. Section 1395nn)
or any applicable state self-referral law as those laws are currently
interpreted.
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2.27 NO UNTRUE REPRESENTATIONS. To the knowledge of Seller and
Shareholders, no representation or warranty by Seller or any Shareholder in this
Agreement, and no Exhibit or certificate issued by officers or Directors of
Seller or any Shareholder and furnished or to be furnished to PSC or Parent
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading. All information and information provided by
Seller or the Shareholders for valuation of the Business by PSC and Parent is
true, accurate and complete in all material respects.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND PSC.
PSC and Parent hereby jointly and severally represent and warrant to Seller
and Shareholders as follows:
3.1 CORPORATE EXISTENCE; GOOD STANDING; QUALIFICATION. EACH OF PSC and
Parent is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Each of PSC and Parent has all
necessary corporate power to own its properties and assets and to carry on its
business as presently conducted and is duly qualified to do business and is in
good standing in all jurisdictions in which the character of the property owned,
leased or operated or the nature of the business transacted by it makes
qualification necessary.
3.2 POWER AND AUTHORITY. Each of PSC and Parent has corporate power to
execute and deliver this Agreement and perform its obligations under this
Agreement and all agreements and other documents executed and delivered by it
pursuant to this Agreement, and has taken all actions required by law, its
Certificate of Incorporation, its By-laws or otherwise, to authorize the
execution, delivery and performance of this Agreement and such related
documents. The execution and delivery of this Agreement, and the agreements
related hereto executed and delivered pursuant to this Agreement do not and,
subject to the receipt of consents to assignments of leases and other contracts
where required and the receipt of regulatory approvals where required, the
consummation of the transactions contemplated hereby will not, violate any
provision of the Certificate of Incorporation or Bylaws of either PSC or Parent
or any provisions of, or result in the acceleration of, any obligation under any
mortgage, lien, lease, agreement, instrument, order, arbitration award, judgment
or decree to which PSC or Parent is a party or by which either of them is bound,
or violate any restrictions of any kind to which PSC or Parent is subject. The
execution and delivery of this Agreement have been approved by the respective
Boards of Directors of PSC and Parent.
3.3 COMMISSIONS AND FEES. There are no valid claims for brokerage
commissions or finder's or similar fees in connection with the transactions
contemplated by this Agreement which may be now or hereafter asserted against
Seller or Shareholders resulting from any action taken by PSC or Parent or their
respective officers, Directors or agents, or any of them.
3.4 CAPITALIZATION. Parent has an authorized capitalization of 10,000
shares of Preferred Stock, par value $1.00 per share, of which no shares are
issued and outstanding, and no
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shares are held in treasury, and 50,000,000 shares of common stock, par value
$.001 per share, of which 561,225 shares are issued and outstanding, and no
shares are held in treasury. All of the Parent Common Stock to be issued
pursuant to this Agreement will, when so delivered, be duly and validly issued
and fully paid and nonassessable. Except as disclosed in the draft Registration
Statement (as hereinafter defined), and except as described on Exhibit 3.4,
there are no options, warrants or similar rights granted by Parent or any other
agreements to which Parent is a party providing for the issuance or sale by it
of any additional securities. There is no liability for dividends declared or
accumulated but unpaid with respect to any shares of Parent Common Stock. Parent
has not paid any dividends to any holder of Parent Common Stock or participated
in or effected any issuance, exchange or retirement of Parent Common Stock, or
otherwise changed the equity interests of holders of Parent Common Stock, in
contemplation of effecting the transaction contemplated by this Agreement within
the two years immediately preceding the Closing Date.
3.5 PSC COMMON STOCK. Parent owns, beneficially and of record, all of the
issued and outstanding shares of Common Stock of PSC, free and clear of all
liens and encumbrances. Parent has taken all such actions as may be required in
its capacity as the sole shareholder of PSC to approve this transaction.
3.6 PARENT DOCUMENTS. Parent has heretofore furnished Seller with a draft
of its Registration Statement S-1 dated November 23, 1996, relating to the offer
and sale of 2,000,000 shares of Parent Common Stock in the IPO (the
"Registration Statement").
3.7 LEGAL PROCEEDINGS. Except as disclosed in the Registration Statement,
there is no material litigation, governmental investigation or other proceeding
pending or, so far as is known to Parent threatened against or relating to
Parent, its properties or business, or the transaction contemplated by this
Agreement and, so far as is known to Parent, no basis for any such action
exists.
SECTION 4. ACCESS TO INFORMATION AND DOCUMENTS PRIOR TO CLOSING.
4.1 ACCESS TO SELLER'S INFORMATION. Seller and Shareholders shall give to
PSC and its counsel, accountants, engineers and other representatives full
access to all the requested properties, documents, contracts, personnel files
and other records of Seller and the Business hereunder and shall furnish PSC
with copies of such requested documents and with such information with respect
to the affairs of Seller as PSC shall from time to time reasonably request.
Seller and Shareholders shall disclose and make available to Parent and its
representatives all requested books, contracts, accounts, personnel records,
letters of intent papers, records, communications with regulatory authorities
and other documents relating to the Assets and to the Business.
4.2 ACCESS TO INFORMATION OF PSC AND PARENT. PSC and Parent shall give to
Seller and Shareholders and their respective counsel, accountants and other
representatives such access to the documents, contracts and other records of
PSC, Parent and PSC and shall furnish Seller and Shareholders with copies of
such documents and with such information with respect to the
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affairs of PSC, Parent and PSC as Seller and Shareholders shall from time to
time reasonably request.
4.3 RETENTION OF RECORDS. Without cost to Seller, PSC shall retain all
books and records of Seller ("Records") transferred to it pursuant to this
Agreement for the greater of four years from the Closing Date or such longer
periods of time as required by applicable statutes, rules and regulations. For a
period of four years after the Closing Date, and for such longer period as the
Records are maintained, each party will, during normal business hours and so as
not to unreasonably disrupt normal business, afford any other party, its
counsel, its accountants or other parties who have a reasonable need for such
access full access (and copying at the expense of the requesting party, if
desired) to the books and records relating to the Assets in the possession of
such party as such other party may reasonably request.
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SECTION 5. CONDITIONS TO OBLIGATION OF PARENT AND PSC TO CLOSE
The obligation of PSC and Parent to consummate the transactions to be
performed by them in connection with this Agreement is subject to satisfaction
of the following conditions precedent (any of which may be waived in writing by
PSC or Parent):
5.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and warranties
set forth in Article 2 shall be true and correct in all material respects as of
the date made and at and as of the Closing, except as a result of changes
expressly permitted by this Agreement.
5.2 COVENANTS. The Shareholders and Seller shall have performed and
complied with all of their covenants and agreements in all material respects
through the Closing.
5.3 NO SUIT OR PROCEEDING. No action, suit, or proceeding shall be pending
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction in which an unfavorable injunction,
judgment, order, decree, ruling, or charge would (i) prevent consummation of any
of the transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (iii) affect adversely the right of PSC to operate the Business
(and no such injunction, judgment, order, decree, ruling, or charge shall be in
effect).
5.4 ABSENCE OF MATERIAL ADVERSE CHANGE.
(i) There shall have been no change in the condition (financial
or otherwise), business, assets, or prospects of Seller or the
Business from the Balance Sheet Date which has had or could
reasonably be expected to have a Material Adverse Effect on the
Seller, the Business, or the Assets.
(ii) Neither Seller nor the Assets shall have been, and shall
not be seriously threatened to be materially adversely affected in
any way as a result of fire, explosion, disaster, accident, labor
dispute, any action by the United States or any other government or
government authority, domestic or foreign, riot, act of war, civil
disturbance or Act of God.
5.5 CERTIFICATE. The Shareholders shall have delivered to PSC a certificate
to the effect that each of the conditions specified in Sections 5.1-5.4 is
satisfied in all respects.
5.6 CONSENTS AND APPROVALS. PSC and Parent shall have received all
authorizations, consents, and approvals of third parties and of governments and
governmental agencies, if any, that may be required for the acquisition of the
Assets by PSC, including, without limitation, the consent of the lessors to
transfer to PSC the leases listed on Exhibits 2.6 and/or 2.14.
5.7 COUNSEL OPINION. Parent and PSC shall have received from counsel to the
Seller and Shareholders an opinion dated as of the Closing Date, in form and
substance reasonably
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satisfactory to Parent and PSC.
5.8 OTHER AGREEMENTS EXECUTED. Each Shareholder and Other Physician
Practice Employees shall have executed and delivered an Employment Agreement
with Practice in the form required by the Management Services Agreement, which
will in the aggregate among all the physician shareholders of Practice provide
for liquidated damages in an amount equal to the Acquisition Price in the event
of breach by the physician of certain provisions therein, (ii) Practice shall
have executed and delivered the Management Services Agreement, and (iii) the
Shareholders shall have executed and delivered the Registration Rights Agreement
in substantially the form of Exhibit 5.8 (the "Registration Rights Agreement").
5.9 RELEASE OF LIENS. All liens encumbering the Assets other than those
listed on Exhibit 5.9, shall be duly released by the secured parties and other
lien holders, and UCC-3 release or termination statements and other lien release
documents, if any, shall have been recorded or the recording thereof provided
for.
5.10 CLOSING DATE FINANCIAL CERTIFICATE. Seller shall have delivered to PSC
a closing date financial certificate which shall certify as of the last day of
the month prior to the effective date of the Registration Statement an unaudited
cash basis balance sheet of Seller and for the period ended as of such date a
statement of operations of Seller, along with a detailed accounts receivable
aging analysis of Seller as of such date. The net worth of Practice as of the
Closing Date (defined as the net worth of assets acquired by PSC less assumed
liabilities) shall not be less than the amount shown on Practice's audited
balance sheet as of September 30, 1996.
5.11 CORPORATE DOCUMENTS. Seller shall have furnished PSC with copies of
the following documents: the Articles of Incorporation and all amendments
thereto of Seller and of Practice, duly certified by the Secretary of State of
the State of Georgia; certificates, executed by the proper officials of the
State of Georgia, as to the valid existence and good standing of Seller and of
Practice in the State of Georgia; resolutions authorizing this Agreement and the
transactions provided for herein, duly adopted by the Board of Directors or
other governing body of Seller and duly adopted by all the Shareholders, all as
duly certified by the Secretary of Seller; and resolutions of the Practice
authorizing the execution, delivery and performance of the Management Services
Agreement by the Practice, as duly certified by the Secretary of the Practice.
5.12 INSTRUMENTS OF CONVEYANCE. Simultaneously with the execution of this
Agreement and in order to effect the conveyance, transfer and assignment of the
Assets and the Business and the assumption of certain liabilities, Seller shall
have executed and delivered to PSC all such bills of sale, assignment and
assumption agreements and other documents or instruments of conveyance, transfer
or assignment as shall be necessary or appropriate to vest in or confirm to PSC
Seller's right, title and interest in and to the Assets, free and clear of all
obligations, security interests, liens and encumbrances whatsoever, except as
specifically assumed by PSC pursuant to Section 1.3(b).
5.13 PRACTICE ACQUISITION. The Practice shall have acquired from the Seller
the
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excluded assets referred to in Section 1.2(c) (other than those personally owned
items identified as such on Exhibit 1.2(c)) and (d) (the "Medical Excluded
Assets") for the purpose of acquiring and owning such assets, subject to and in
accordance with the provisions of a ▇▇▇▇ of Sale and Assignment by and from the
Seller in form and substance reasonably satisfactory to PSC.
5.14 INVESTOR LETTER AND FINANCIAL DATA SHEET. Seller and each Shareholder
shall have provided to Parent prior to the Closing Date a fully-completed and
executed Investor Letter and Financial Data Sheet in form and substance
reasonably satisfactory to Parent.
5.15 LISTING OF SHARES IN NASDAQ. Shares of common stock of Parent shall
have been listed for trading on NASDAQ.
SECTION 6. CONDITIONS TO OBLIGATION OF SELLER AND THE SHAREHOLDERS
The obligation of Seller and the Shareholders to consummate the
transactions to be performed by them in connection with this Agreement is
subject to satisfaction of the following conditions (any one of which may be
waived in writing by Seller or the Shareholder);
6.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties set forth in Article 3 above shall be true and correct in all
material respects at and as of the Closing;
6.2 COVENANTS. Parent and PSC shall have performed and complied with all
of their covenants and agreements in all material respects through the Closing;
6.3 NO SUIT OR PROCEEDING. No action, suit or proceeding shall be pending
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (a) prevent consummation of any
of the transactions contemplated by this Agreement or (b) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
6.4 CERTIFICATE. PSC shall have delivered to Seller a certificate to the
effect that each of the conditions specified in Sections 6.1-6.3 is satisfied
in all respects;
6.5 GOVERNMENT APPROVALS. Seller, Parent and PSC shall have received all
authorizations, consents, and approvals of governments and governmental
agencies, if any, that may be required;
6.6 COUNSEL OPINION. The Seller shall have received from counsel to
Parent and PSC an opinion dated as of the Closing Date in form and substance
reasonably satisfactory to Seller;
6.7 OTHER AGREEMENTS EXECUTED. (i) The Practice shall have executed and
delivered an Employment Agreement with each Shareholder and Other Physicians
Practice Employees in the form required by the Management Services Agreement,
(ii) PSC shall have executed and delivered the Management Services Agreement,
and (iii) meeting the requirements of Section 5.8 above, Parent
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shall have executed and delivered the Registration Rights Agreement.
6.8 PARENT STOCK. Parent or PSC shall have delivered at the closing the
Parent Common Stock required as the Acquisition Price under Section 1.3(a).
6.9 CORPORATE DOCUMENTS. (a) PSC shall have furnished Seller with copies of
the following documents: the Certificate of Incorporation and all amendments
thereto of PSC, duly certified by the Delaware Secretary of State; certificates,
executed by the proper Delaware officials, as to the good standing of PSC in
Delaware; and resolutions authorizing this Agreement and the transactions
provided for herein, duly adopted by the Board of Directors of PSC and duly
certified by the Secretary of PSC.
(b) Parent shall have furnished Seller with copies of the following
documents; the Certificate of Incorporation and all amendments thereto of
Parent, duly certified by the Delaware Secretary of State; certificates,
executed by the proper Delaware officials, as to the good standing of Parent in
Delaware; and resolutions authorizing this Agreement and the transactions
provided for herein, duly adopted by the Board of Directors of Parent and duly
certified by the Secretary of Parent.
6.10 ASSUMPTION OF LIABILITIES. PSC shall have assumed the Obligations in
accordance with Section 1.3(b) pursuant to an assumption agreement in form and
substance reasonably satisfactory to Seller.
6.11 ABSENCE OF MATERIAL ADVERSE CHANGE. There shall have been no change in
the condition (financial or otherwise), business, assets, or prospects of PSC or
Parent from the date of this Agreement which has had or could reasonably be
expected to have a material adverse effect on PSC or Parent.
6.12 LISTING OF SHARES. Shares of the common stock of Parent shall have
been listed for trading on NASDAQ.
SECTION 7. CERTAIN ADDITIONAL COVENANTS
7.1 CONDUCT OF BUSINESS PRIOR TO CLOSING. During the period from and
after the date of this Agreement and until the Closing Date:
(a) Seller and the Shareholders will carry on the Business in
substantially the same manner as heretofore carried on and will not make any
purchase or sale, incur any indebtedness or liens, or introduce any method of
management or operation in respect to such Business or otherwise engage in any
transaction except in the ordinary course of business and in the manner not
inconsistent with prior practice and the terms of this Agreement, other than
with the prior written consent of PSC;
(b) Neither Seller nor the Shareholders will permit any change to be
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made in the articles of incorporation or by-laws or, if applicable, shareholder
agreement of Seller, other than with the prior written consent of PSC.
(c) Neither Seller nor the Shareholders will acquire or dispose of any
capital assets having an initial cost or current value in excess of $1,000 other
than with the prior written consent of PSC;
(d) Neither Seller nor the Shareholders will increase the compensation
payable or to become payable to any of its employees or agents other than (a)
with the prior written consent of PSC or (b) cash bonuses by Seller to the
Shareholders consistent with the past practice of Seller;
(e) Neither Seller nor the Shareholders will take, or permit or suffer
to be taken, any action which is represented and warranted in Section 2.15 not
to have occurred since the Balance Sheet Date other than with the prior written
consent of PSC.
7.2 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Except as set forth on Exhibit
7.2, Seller hereby covenants and agrees that it will take whatever steps are
necessary to pay or fund completely or reserve completely for any accrued
benefits, where applicable, or vested accrued benefits for which Seller or any
entity might have any liability whatsoever arising from any salary, wage,
benefit, bonus, vacation pay, sick leave, insurance, employment tax or similar
liability of Seller to any employee or other person or entity (including,
without limitation, any Seller Plan and any liability under employment contracts
with Seller) allocable to services performed prior to the Closing Date. Seller
acknowledges that the purpose and intent of this covenant is to assure that PSC
shall have no liability whatsoever at any time in the future with respect to any
of Seller's employees or similar persons or entities, including, without
limitation, any Seller Plan, except as indicated on Exhibit 7.2.
7.3 CREDITOR'S CLAIMS. Seller and Shareholders represent, covenant and
agree that all of the creditors with respect to the Business will be paid in
full by Seller prior to the Closing Date, or within such other period as is
normally permitted by such creditors in the ordinary course of business, except
to the extent that any liability to such creditors is assumed by PSC pursuant to
this Agreement. If required by PSC, Seller and Shareholders shall furnish PSC
with proof of payment of all creditors with respect to the Assets.
Notwithstanding the foregoing, Seller may dispute the amount or validity of any
such creditor's claim without being deemed to be in violation of this Section
7.3, provided that such dispute is in good faith.
7.4 AFFILIATE AGREEMENTS. Seller will use its reasonable, good faith
efforts to cause its Directors and its executive officers and "affiliates"
(within the meaning of Rule 145 under the Securities Act of 1933, as amended) to
execute and deliver to Parent as soon as practicable instructions in the form
attached hereto as Exhibit 7.4 relating to the disposition of the shares of
Parent issued to the Seller.
7.5 WAIVER OF BULK TRANSFER COMPLIANCE. Seller, the Shareholders and PSC
hereby waive any compliance with the Georgia Bulk Transfers Act. Seller and the
Shareholders jointly
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and severally represent, covenant and agree that all of the creditors with
respect to the Business will be paid in full by the Seller prior to the Closing
Date, or within such other period as is normally permitted by such creditors in
the ordinary course of business, except to the extent that any liability to such
creditors is assumed by PSC pursuant to this Agreement. If required by PSC, the
Seller and the Shareholders shall furnish PSC with proof of payment of all
creditors with respect to the Business. Notwithstanding the foregoing, the
Seller may dispute the amount of validity of any such creditor's claim without
being deemed to be in violation of this Section 7.5, provided that such dispute
is in good faith and does not unreasonably delay the resolution of the claim.
7.6 LIQUIDATION OF SELLER. As soon as practical, but in no event later than
12 months following the Closing Date, Seller will dissolve and liquidate in
accordance with applicable law.
7.7 COVENANT NOT TO COMPETE. For a period of five (5) years from and after
the Closing Date, each of Seller and the Shareholders agrees that it, he or she
will not (i) directly or indirectly, engage in, manage, operate, control,
conduct, consult for or be employed in a management capacity by, provide
services to or invest in any business or venture in competition with the
Business or PSC or Parent in the Geographic Territory (as defined below);
provided however, that ownership of less than 1% of the outstanding stock of any
publicly traded corporation shall not be deemed to violate this clause, (ii)
within the Geographic Territory, directly or indirectly, solicit or attempt to
solicit any customer or client of PSC or Parent or patient of Practice other
than in the course of a Shareholder's normal performance of services and duties
for Practice as a physician-shareholder thereof; or (iii) solicit or employ or
attempt to solicit or hire away or employ any employee of PSC or Parent or
Practice. If the final judgment of a court of competent jurisdiction declares
that any term or provision of this Section is invalid or unenforceable, the
Shareholders and PSC agree that the court making the determination of invalidity
or unenforceability shall have the power to reduce the scope, duration, or area,
to delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified. The
parties agree that the Business currently serves territories each with greater
than an eight (8) mile radius of Seller's various office locations. Accordingly,
as used herein, the term "Geographic Territory" shall mean each area within an
eight (8) mile radius of each of the office locations of Seller. The parties
agree that the restraints set forth above in this Section 7.7 are reasonable in
respect to subject matter, length of time and geographic area. Each of Seller
and the Shareholders agrees that the restrictions on their activities contained
in this Section are reasonable and necessary to protect the goodwill and
relationships, economic advantage and other legitimate interests of PSC and
Parent, and that, were it, he or she to breach any of the covenants contained in
this Section 7.7, PSC would be harmed and the damage to PSC would be
irreparable. Accordingly, Seller and the Shareholders acknowledge and agree
that, as PSC's legal remedies may be inadequate in the event of a breach of the
covenants in this Section 7.7, in addition to damages and other remedies
available to PSC, such covenants may be enforced by injunction or other
equitable remedies.
7.8 CONFIDENTIALITY.
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(a) Seller and the Shareholders shall, and shall use their reasonable
efforts to cause their respective employees, agents and representatives to, for
a period of five (5) years after the Closing, hold in confidence all financial
information about Seller, the Business and the Assets, except such disclosure as
may be required by law or governmental order or regulation, or by subpoena or
other legal process (provided PSC will be provided advance notice of such
disclosure in order to afford it the opportunity to seek an appropriate
protective order).
(b) Seller and the Shareholders further agree to, and shall use their
reasonable efforts to cause their respective employees, agents and
representatives who are not hired by PSC at Closing, to keep confidential for a
period of five (5) years after the Closing, any and all information relating to
services, products, marketing information, sources of supply, pricing and
patients of Seller on the date hereof or developed by or for Seller, except such
disclosure as may be required by law or governmental order or regulation, or by
subpoena or other legal process (provided PSC will be provided advance notice of
such disclosure in order to seek an appropriate protective order).
(c) The restrictions in this Section 7.8 shall not apply to any
information that comes into the public domain through no fault of Seller or the
Shareholders.
7.9 POOLING AND TAX-FREE COMBINATION TREATMENT. Neither Parent, Seller or
Shareholders shall intentionally take or cause to be taken any action, which
would disqualify the combination as a "pooling of interests" under generally
accepted accounting principles and applicable SEC requirements or as a
"reorganization" within the meaning of Section 368(a)(1)(C) of the Code. Each
Shareholder represents and warrants to Parent that he or she has no present
intention or plan or design to dispose of the shares of Parent Common Stock that
he or she will receive pursuant to the liquidation of Seller. Further, each of
the Shareholders hereby covenants and agrees with Parent that he or she will not
sell, convey or otherwise transfer any shares of Parent Common Stock distributed
to such Shareholder pursuant to the liquidation of Seller until the expiration
of not less than one (1) month following the release by Parent of consolidated
financial statements of Parent to the public that reflect at least one (1) month
of joint operations of Parent and Seller's business. Each Party hereto agrees to
take such further action or action and to execute such other documents,
agreements, certificates or instruments as may be necessary or desirable to
maintain pooling of interests accounting treatment of the transactions
contemplated by this Agreement in accordance with all applicable financial
accounting standards.
SECTION 8. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.
8.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Seller and
Shareholders, jointly and severally, or of PSC and Parent, jointly and
severally, as the case may be. All such representations and warranties, all
representations and warranties expressly labeled as such in this Agreement and
the obligations of the parties to indemnify any other party pursuant to Section
8.2 or 8.3(a), shall survive the date of
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this Agreement and the Closing Date (i) with respect to the representations and
warranties in Sections 2.1 through 2.4 and Sections 2.23 through 2.26, for the
period of the applicable statute of limitations, and (ii) with respect to all
other representations and warranties until the earlier of (A) a period of one
(1) year following the Closing Date or (B) the date of issuance of the first
audited consolidated financial statements for Parent and its subsidiaries which
contain combined operations of Parent and the Business. Each party covenants
with the other parties not to make any claim with respect to such
representations or warranties against any party after the date on which such
survival period shall terminate. No party shall be entitled to bring suit
against any other party pursuant to Section 8.2 or 8.3(a) hereof, unless such
party has timely given the notice required in Section 8.4 hereof. Each party
hereby releases, acquits and discharges the other party from any and all claims
and demands, actions and causes of action, damages, costs, expenses and rights
of setoff with respect to which the notice required by Section 8.4 is not timely
provided.
8.2 INDEMNIFICATION BY PSC AND PARENT. PSC and Parent jointly and severally
(for purposes of this Section 8.2 and, to the extent applicable, Section 8.4,
"Indemnitor"), shall indemnify and hold Seller and Shareholders, and their
respective agents, employees, legal representatives, successors and assigns
(each of the foregoing, including Seller and Shareholders, for purposes of this
Section 8.2 and, to the extent applicable, Section 8.4, an "Indemnified
Person"), harmless from and against any and all liabilities, losses, claims,
damages, actions, suits, costs, deficiencies and expenses (including, but not
limited to, reasonable fees and disbursements of counsel through appeal) arising
from or by reason of or resulting from any breach by Indemnitor of any
representation, warranty, agreement or covenant made by Indemnitor contained in
this Agreement (including the Exhibits hereto) and each document, certificate or
other instrument furnished or to be furnished by Indemnitor hereunder,
excluding, however, any and all liabilities of Seller or the Shareholders which
are not expressly assumed by PSC under this Agreement.
8.3 INDEMNIFICATION BY SELLER AND SHAREHOLDERS. (a) Seller and Shareholders
(for purposes of this Section 8.3(a) and, to the extent applicable, Section
8.3(b) and Section 8.4, "Indemnitor"), shall indemnify and hold PSC and Parent
and their respective officers, directors, shareholders, affiliates, agents,
employees, legal representatives, successors and assigns (each of the foregoing,
including PSC and Parent, for purposes of this Section 8.3(a) and, to the extent
applicable, Sections 8.3(b) and Section 8.4, an "Indemnified Person") harmless
from and against any and all liabilities, losses, claims, damages, actions,
suits, costs, deficiencies and expenses (including, but not limited to,
reasonable fees and disbursements of counsel through appeal), in an aggregate
amount not to exceed the Acquisition Price arising from or by reason of or
resulting from any breach by Indemnitor (or any of them) of any representation
or warranty contained in this Agreement (including the Exhibits hereto) and each
document, certificate or other instrument furnished or to be furnished by
Indemnitor hereunder, and with respect to all times prior to the Closing Date,
arising from or by reason of or resulting from the Indemnitor's management and
conduct of the ownership or operation of the Business or the Assets and from any
alleged act of negligence of Indemnitor or its employees, agents and independent
contractors in or about the Business or the Assets.
(b) The Seller and the Shareholders severally agree to indemnify and
hold
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harmless each Indemnified Person from and against any and all liabilities,
losses, claims, damages, actions, suits, costs, deficiencies and expenses,
including, but not limited to, reasonable fees and disbursements of counsel
through appeal, resulting from, arising out of, relating to or caused by any
breach of any covenant or agreement of the Seller or a Shareholder contained in
this Agreement.
(c) It is specifically acknowledged and agreed that the obligations of
the Shareholders under this Section 8.3 shall be several only and not joint and,
as to each Shareholder with respect to any claim arising under Section 8.3(a)
other than any claim based on or arising out of any breach of a representation
or warranty contained in Sections 2.23 through 2.26, shall be limited to 150% of
the value (such value to be the value set forth in Section 1.3(a)) of the shares
of the Parent Common Stock received by such Shareholder individually in the
liquidation and dissolution of Seller.
8.4 INDEMNIFICATION PROCEDURE. Within 60 days after Indemnified Person
receives written notice of the commencement of any action or other proceeding,
or otherwise becomes aware of any claim or other circumstance, in respect of
which indemnification or reimbursement may be sought under Section 8.2 or
Section 8.3(a), such Indemnified Person shall notify Indemnitor thereof. If any
such action or other proceeding shall be brought against any Indemnified Person,
Indemnitor shall, upon written notice given within a reasonable time following
receipt by Indemnitor of such notice from Indemnified Person, be entitled to
assume the defense of such action or proceeding with counsel chosen by
Indemnitor and reasonably satisfactory to Indemnified Person; provided, however,
that any Indemnified Person may at its own expense retain separate counsel to
participate in such defense. Notwithstanding the foregoing, Indemnified Person
shall have the right to employ separate counsel at Indemnitor's expense and to
control its own defense of such action or proceeding if, in the reasonable
opinion of counsel to such Indemnified Person, (a) there are or may be legal
defenses available to such Indemnified Person or to other Indemnified Persons
that are different from or additional to those available to Indemnitor and which
could not be adequately advanced by counsel chosen by Indemnitor, or (b) a
conflict or potential conflict exists between Indemnitor and such Indemnified
Person that would make such separate representation advisable; provided,
however, that in no event shall Indemnitor be required to pay fees and expenses
hereunder for more than one firm of attorneys in any jurisdiction in any one
action or proceeding or group of related actions or proceedings. Indemnitor
shall not, without the prior written consent of any Indemnified Person, settle
or compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding to which such Indemnified Person is a
party unless such settlement compromise or consent includes an unconditional
release of such Indemnified Person from all liability arising or potentially
arising from or by reason of such claim, action or proceeding.
8.5 LIMITATIONS UPON OBLIGATIONS. Anything in this Section 8 to the
contrary notwithstanding, it is expressly acknowledged and agreed that no
payment shall be made hereunder by PSC or Parent (individually and collectively
a "Parent Party") to Seller or Shareholders (individually and collectively a
"Selling Party") or, by a Selling Party to a Parent Party, on claims for
indemnification under Sections 8.2 or 8.3(a) until the aggregate of all such
claims of a Parent Party against a Selling Party under Section 8.3(a), or by a
Selling Party against
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a Parent Party under Section 8.2, shall exceed $25,000.00, 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 a Selling
Party under Section 8.3(a) shall be limited as set forth in Section 8.3(c)
above. In the event that such claims do not aggregate in excess of $25,000.00,
then neither the Parent Parties nor the Selling Parties shall have any claim for
indemnification against the other under Section 8.2 or Section 8.3(a).
SECTION 9. TERMINATION.
9.1 RIGHT TO TERMINATE. This Agreement may be terminated at any time
prior to the Closing Date:
(a) by the mutual written consent of Parent, PSC and Seller;
(b) by either PSC, Parent or Seller upon prior written notice to the
other party
(i) if any court or governmental or regulatory agency,
authority or body shall have enacted, promulgated or issued any
statute, rule, regulation, ruling, writ or injunction, or taken any
other action, restraining, enjoining or otherwise prohibiting the
transactions contemplated hereby and all appeals and means of appeal
therefrom have been exhausted; or
(ii) if the Closing shall not have occurred on or before March
31, 1997 or such later date as the parties may agree to; provided,
however, that the right to terminate this Agreement pursuant to this
Section 9.1(b)(ii) shall not be available to any party whose breach
of any representation or warranty or failure to perform or comply
with any obligation or condition under this Agreement has been the
cause of, or resulted in, the failure of the Closing to occur on or
before such date;
(c) by PSC or Parent, upon prior written notice to Seller and the
Shareholders, if any of the conditions specified in Section 5 have not
been met or waived prior to the Closing Date (or any extension thereof
pursuant to Section 9.1(b)(ii) above); or
(d) by Seller, upon prior written notice to PSC, if any of the
conditions specified in Section 6 shall not have been met or waived prior
to the Closing Date (or any extension thereof pursuant to Section
9.1(b)(ii) above).
9.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
pursuant to this Section 9, this Agreement shall forthwith become null and void
and there shall be no liability on the part of any of the parties hereto or
their respective officers or directors with respect to this Agreement, except
for Section 1.7 which shall remain in full force and effect after any such
termination of this Agreement, and except that nothing herein shall relieve any
party from liability for a breach of this Agreement prior to the termination
thereof.
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SECTION 10. MISCELLANEOUS.
10.1 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile and overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:
If to PSC:
PSC MANAGEMENT CORP.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Parent:
PHYSICIANS SPECIALTY CORP.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy of each notice directed to PSC or Parent to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Seller or Shareholders:
Atlanta Ear, Nose & Throat Associates, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Ellis, Funk, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & Dokson, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
All such communications shall be deemed to have been delivered on the date of
delivery or on the next business day following the deposit of such
communications with the overnight courier.
10.2 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement. Seller and Shareholders will
execute and deliver from time to time thereafter, at the request of PSC, all
such further instruments of conveyance, assignment and further assurance as may
reasonably be required in order to vest in and confirm to PSC all of Seller's
right, title and interest in and to the Assets.
10.3 PUBLIC DISCLOSURES. Except as otherwise required by law, no party to
this Agreement shall make any public or other disclosure of this Agreement or
the transactions contemplated hereby (other than Parent's disclosures in the
Registration Statement) without the prior consent of the other parties. The
parties to this Agreement shall cooperate with respect to the form and content
of any such disclosures.
10.4 GOVERNING LAW. This Agreement shall be interpreted, construed and
enforced in accordance with the laws of the State of Georgia, applied without
giving effect to any conflict-of-laws principles.
10.5 "INCLUDING". The word "including," when following any general
statement, term or matter, shall not be construed to limit such statement, term
or matter to the specific terms or matters as provided immediately following the
word "including" or to similar items or matters, whether or not non-limiting
language (such as "without limitation," "but not limited to" or words of similar
import) is used with reference to the word "including" or the similar items or
matters, but rather shall be deemed to refer to all other items or matters that
could reasonably fall with the broadest possible scope of the general statement,
term or matter.
10.6 "KNOWLEDGE". "To the knowledge," "to the best knowledge, information
and belief' or any similar phrase, shall be deemed to include the assurance that
such knowledge is based upon a reasonable investigation, unless otherwise
expressly provided. Unless otherwise expressly provided herein, Seller shall be
deemed to have knowledge of any facts known to any Shareholder.
10.7 "MATERIAL". An individual claim, obligation or liability shall be
deemed to be "material" if the amount thereof exceeds $15,000.00 or involves the
violation of any federal, state or local statute, rule or regulation. A contract
or lease shall be deemed to be material if it requires a single payment in
excess of $15,000.00 or payment for any future 12-month period in excess of
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$15,000.00, 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
$15,000.00.
10.8 "MATERIAL ADVERSE CHANGE" OR "MATERIAL ADVERSE EFFECT". "Material
Adverse Change" or "Material Adverse Effect" means, when used in connection with
the parties to this Agreement, any change, effect, event or occurrence that has,
or is reasonably likely to have individually or in the aggregate, a material
adverse impact on the business or financial position of such party and its
subsidiaries taken as a whole; provided, however, that "Material Adverse Change"
and "Material Adverse Effect" shall be deemed to exclude the impact of (i)
changes in generally accepted accounting principles, (ii) changes in applicable
law, and (iii) any changes resulting from any restructuring or other similar
charges or write-offs taken by Seller with the consent of PSC.
10.9 "HAZARDOUS MATERIALS". The term "Hazardous Materials" means any
material which is or may potentially be hazardous to the health or safety of
human or animal life or vegetation, regardless of whether such material is found
on or below the surface of the ground, in any surface or underground water,
airborne in ambient air or in the air inside any structure built or located upon
or below the surface of the ground or in building materials or in improvements
of any structures, or in any personal property located or used in any such
structure, including, but not limited to, all hazardous substances, imminently
hazardous substances, hazardous wastes, toxic substances, infectious wastes,
pollutants and contaminants from time to time defined, listed, identified,
designated or classified as such under any Environmental Laws (as defined in
Section 10.10) regardless of the quantity of any such material.
10.10 "ENVIRONMENTAL LAWS". The term "Environmental Laws" means any
federal, state or local statute, regulation, rule or ordinance, and any judicial
or administrative interpretation thereof, regulating the use, generation,
handling, storage, transportation, discharge, emission, spillage or other
release of Hazardous Materials or medical waste or relating to the protection of
the environment or the disposal of medical waste.
10.11 APPOINTMENT OF ATTORNEY-IN-FACT. Effective at the Closing, Seller
hereby constitutes and appoints PSC, and its successors and assigns, the true
and lawful attorneys for Seller, with full power of substitution, in the name of
Seller, but on behalf of and for the benefit of and at the expense of PSC, to
institute and prosecute, in the name of Seller or otherwise, all proceedings
which PSC may deem proper in order to collect, assert or enforce any claim,
right or title of any kind in or to the Assets, to defend and compromise any and
all actions, suits or proceedings in respect of any such Assets, and to do all
such acts and things in relation thereto as PSC shall deem advisable, subject to
applicable laws and regulations. Seller agrees that the foregoing powers shall
be coupled with an interest and shall be irrevocable by Seller or by its
dissolution or in any manner or for any reason. PSC shall retain for its own
account any amounts collected pursuant to the foregoing powers, including any
sums payable in respect thereof, and Seller shall pay to PSC, when received, any
amounts which shall be received by Seller in respect of any Assets.
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10.12 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
10.13 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced; provided, however, that any liabilities or obligations to be assumed
by PSC shall be set forth on Exhibit 1.3(b), and the inclusion of any
liabilities or obligations in any other Exhibits shall not be deemed or
construed to incorporate such liabilities or obligations into Exhibit 1.3(b).
10.14 ENTIRE AGREEMENT. This instrument, including all Exhibits attached
hereto, contains the entire agreement of the parties and supersedes any and all
prior or contemporaneous agreements between the parties, written or oral, with
respect to the transactions contemplated hereby. It may not be changed or
terminated orally, but may only be changed by an agreement in writing signed by
the party or parties against whom enforcement of any waiver, change,
modification, extension, discharge or termination is sought.
10.15 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which when so executed shall be deemed to be an original, and such
counterparts shall together constitute and be one and the same instrument.
10.16 BINDING EFFECT. This Agreement shall be binding on, and shall inure
to the benefit of, the parties hereto, and their respective successors and
assigns, and no other person shall acquire or have any right under or by virtue
of this Agreement. No party may assign any right or obligation hereunder without
the prior written consent of the other parties.
10.17 NO RULE OF CONSTRUCTION. The parties acknowledge that this Agreement
was initially prepared by PSC and that all parties have read and negotiated the
language used in this Agreement. The parties agree that, because all parties
participated in negotiating and drafting this Agreement, no rule of construction
shall apply to this Agreement which construes ambiguous language in favor of or
against any party by reason of that party's role in drafting this Agreement.
10.18 COSTS OF ENFORCEMENT. In the event that PSC or Parent on the one
hand, or Seller or Shareholders, on the other hand, file suit in any court
against any other party to enforce the terms of this Agreement against the other
party or to obtain performance by it hereunder, the prevailing party will be
entitled to recover all reasonable out of pocket costs, including reasonable
attorneys' fees, from the other party as part of any judgment in such suit. The
term "prevailing party" shall mean the party in whose favor final judgment after
appeal (if any) is rendered with respect to the claims asserted in the
Complaint. "Reasonable attorneys' fees" are those attorneys' fees actually
incurred in obtaining a judgment in favor of the prevailing party.
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10.19 TRANSFER OF ASSETS; ASSIGNMENT. The parties also hereby agree that
this Agreement shall not be assigned or transferred by either party without the
prior written consent of the other; provided, however, that this Agreement may
be assigned, in whole or in part, by PSC or Parent, in its sole discretion, to
any parent, subsidiary or affiliate of PSC or Parent or to any party acquiring
all or substantially all PSC's or Parent's assets. Any such assignment shall not
affect Parent's obligations hereunder or under any documents executed by Parent
pursuant to this Agreement.
39
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
"PSC"
PSC MANAGEMENT CORP.
By
Authorized Signature: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
"PARENT"
PHYSICIANS' SPECIALTY CORP.
By
Authorized Signature: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title:
"SELLER"
ATLANTA EAR, NOSE & THROAT
ASSOCIATES, P.C.
By
Title:
"SHAREHOLDERS"
▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III, M.D.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, M.D.
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▇▇▇▇▇ ▇▇▇▇▇▇▇, M.D.
▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
▇▇▇ ▇. ▇▇▇▇▇, M.D.
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The purchase price for the AENT assets shall be $18,541,254 based upon an
anticipated IPO price of $9.50 per share. Should the IPO price differ, the
adjusted purchase price shall be computed as follows:
X=IPO price
A=Shares paid for ENT Networks ($7,750,000 / X)
B=Shares paid for AENT assets
C=Shares issued for both AENT and Networks (2,767,500 shares)
For example, an IPO price of $8.50 per share reduces the purchase price paid for
the AENT assets to $15,773,748, computed as follows:
X=$8.50 per share
A=911,765 ($7,750,000 / $8.50)
B=2,767,500 - 911,765 or 1,855,735
1,855,735 shares @ $8.50 per share =$15,773,748