1
EXHIBIT (c)(2)
STOCK OPTION EXERCISE AND TERMINATION AGREEMENT
STOCK OPTION EXERCISE AND TERMINATION AGREEMENT, dated as of June 14,
1999 (this "Agreement"), among Physicians' Specialty Corp., a Delaware
corporation ("Target"), and each of the individuals listed on Exhibit A hereto
(the "Optionholders" and each an "Optionholder").
WHEREAS, Target and TA MergerCo, Inc., a Delaware corporation
("MergerCo"), are entering into an Agreement and Plan of Merger, dated as of the
date hereof (as the same may be amended from time to time, the "Merger
Agreement"), which provides, upon the terms and subject to the conditions
thereof, for the merger of MergerCo with and into Target (the "Merger"); and
WHEREAS, certain of the Optionholders own beneficially or of record
shares of common stock of Target, par value $.001 per share ("Target Common
Stock"); and
WHEREAS, the Optionholders hold options to purchase shares of Target
Common Stock, the number and exercise price of which are set forth on Exhibit A
hereto (the "Target Options"); and
WHEREAS, certain Optionholders and MergerCo are entering into a
Roll-over Agreement dated as of the date hereof (the "Roll-over Agreement") and
a Stock Purchase Agreement dated as of the date hereof (the "Stock Purchase
Agreement"), which provide for such Optionholders to sell certain shares of
Target Common Stock (including shares issuable upon the exercise of target
Options that have an exercise price of less than $10.50 per share ("In the Money
Options")) to MergerCo for cash consideration and to receive shares of MergerCo
common stock in the Merger in exchange for the remainder of the shares of Target
Common Stock (including shares issuable upon the exercise of In the Money
Options) held by such Optionholders; and
WHEREAS, as a condition to the willingness of MergerCo to enter into
the Merger Agreement, MergerCo has requested that each Optionholder agree, and,
in order to induce MergerCo to enter into the Merger Agreement each Optionholder
is willing to agree, to exercise all In the Money Options held by such
Optionholder, and to terminate and cancel all Target Options held by such
Optionholder to the extent that such options have an exercise price greater than
or equal to $10.50 per share ("Out of the Money Options").
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements and covenants set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
2
1. Ownership. Each Optionholder hereby represents and warrants
that all options to acquire Target Common Stock that are held by such
Optionholder are set forth on Exhibit A hereto and that the information set
forth with respect to the Target Options held by such Optionholder on Exhibit A
is complete and correct.
2. Exercisability. Each Optionholder and Target acknowledge and
agree that prior to the consummation of the transactions contemplated by the
Stock Purchase Agreement all Target Options shall become fully exercisable,
either as a result of the operation of the option plans and agreements under
which such Target Options were issued or as a result of appropriate action of
the board of directors of Target.
3. Exercise; Termination. Each Optionholder hereby exercises all
of the In the Money Options set forth opposite such Optionholder's name on
Exhibit A hereto, effective simultaneously with the consummation of the
transactions contemplated by the Stock Purchase Agreement, and Target and such
Optionholder agree that Target shall effect such exercise by issuing to such
Optionholder for no cash consideration a number of shares of Target Common Stock
equal to (A) the number of shares of Target Common Stock issuable upon the
exercise of such In the Money Options as set forth on Exhibit A minus (B) the
aggregate exercise price of such In the Money Options as set forth on Exhibit A
divided by $10.50. Each Optionholder agrees that all Out of the Money Options
held by such Optionholder shall be canceled and terminated and become null, void
and of no further effect simultaneously with the consummation of the
transactions contemplated by the Stock Purchase Agreement and such Optionholder
shall not be entitled to receive any shares of Target Common Stock with respect
to such terminated and canceled Out of the Money Options.
4. No Additional Rights. Each Optionholder agrees that upon the
exercise or cancellation of the Target Options pursuant to Section 3 hereof,
such Optionholder shall not have any further rights with respect to the Target
Options or any further rights under any option plan, or option agreement of
Target or to which Target and such Optionholder are parties, including without
limitation the Target's 1996 Stock Option Plan and the Target's 1996 HealthCare
Professionals Stock Option Plan.
5. Investment Representation. Such Stockholder acknowledges that
it has been provided access to all information requested by it in order to
evaluate the merits and risks of the transactions contemplated by this
Agreement. Such Stockholder has relied solely upon the advice of his, her or its
own counsel, accountant and other advisors, with regard to the legal,
investment, tax and other considerations regarding this Agreement and the
transactions contemplated hereby.
6. General Provisions.
a. Successors and Assigns. All covenants and agreements
in this Agreement by or on behalf of any of the parties hereto
will bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so
expressed or not.
2
3
b. Further Assurance. After the consummation of the
transactions contemplated hereby, as and when requested by
MergerCo, the Optionholders shall, without further
consideration, execute and deliver all such documents and
instruments and shall take such further actions as MergerCo
may deem reasonably necessary or desirable in order to carry
out fully the provisions and purposes of this Agreement.
c. Survival of Representations and Warranties. All
representations and warranties contained herein or made in
writing by any party in connection herewith shall survive the
execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby.
d. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision
of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule
in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any
other jurisdiction, but this Agreement shall be reformed,
construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been
contained herein.
e. Complete Agreement. This Agreement, those documents
expressly referred to herein and other documents of even date
herewith embody the complete agreement and understanding among
the parties and supersede and preempt any prior
understandings, agreements or representations by or among the
parties, written or oral, which may have related to the
subject matter hereof in any way.
f. Counterparts. This Agreement may be executed in
separate counterparts each of which shall be an original and
all of which taken together shall constitute one and the same
agreement.
g. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of
this Agreement was not performed in accordance with the terms
hereof or was otherwise breached. It is accordingly agreed
that the parties shall be entitled to specific relief
hereunder, including, without limitation, an injunction or
injunctions to prevent and enjoin breaches of the provisions
of this Agreement and to enforce specifically the terms and
provisions hereof, in any state or federal court in the State
of Delaware, in addition to any other remedy to which they may
be entitled at law or in equity. Any requirements for the
securing or posting of any bond with respect to any such
remedy are hereby waived.
h. Governing Law. Choice of Law/Consent to Jurisdiction.
All disputes,
3
4
claims or controversies arising out of or relating to this
Agreement, or the negotiation, validity or performance of this
Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to its
rules of conflict of laws. Each Optionholder, the Company and
MergerCo hereby irrevocably and unconditionally consents to
submit to the sole and exclusive jurisdiction of the courts of
the State of Delaware and of the United States located in the
State of Delaware (the "Delaware Courts") for any litigation
arising out of or relating to this Agreement, or the
negotiation, validity or performance of this Agreement (and
agrees not to commence any litigation relating thereto except
in such courts), waives any objection to the laying of venue
of any such litigation in the Delaware Courts and agrees not
to plead or claim in any Delaware Court that such litigation
brought therein has been brought in any inconvenient forum.
Each of the parties hereto agrees, (a) to the extent such
party is not otherwise subject to service of process in the
State of Delaware, to appoint and maintain an agent in the
State of Delaware as such party's agent for acceptance of
legal process, and (b) that service of process may also be
made on such party by prepaid certified mail with a proof of
mailing receipt validated by the United States Postal Service
constituting evidence of valid service. Service made pursuant
to (a) or (b) above shall have the same legal force and effect
as if served upon such party personally within the State of
Delaware. For purposes of implementing the parties' agreement
to appoint and maintain an agent for service of process in the
State of Delaware, each such party does hereby appoint CT
Corporation, Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, as such agent.
i. Construction. Whenever the context requires, each
term stated in either the singular or the plural shall include
the singular and the plural and pronouns stated in either the
masculine, the feminine or the neuter gender shall include the
masculine, feminine and neuter. All references to Sections and
Paragraphs refer to sections and paragraphs of this Agreement.
The use of the word "including" in this Agreement shall be by
way of example rather than limitation.
j. Amendment and Waiver. The provisions of this
Agreement may be amended and waived only with the prior
written consent of each of the parties hereto, provided,
however, that the Company and MergerCo may together in writing
waive or consent to a modification of any provision of this
Agreement with respect to any Stockholder without the
agreement of any other party hereto. Notwithstanding anything
to the contrary herein, the provisions of this Agreement may
not be amended or waived in a manner that would adversely
affect the rights of MergerCo hereunder without the prior
written consent of MergerCo.
k. Third Party Beneficiary. MergerCo is a third-party
beneficiary of this Agreement and shall be entitled to enforce
this Agreement against each of the Optionholders in the same
manner as if it were a party hereto.
4
5
l. No Agreement Until Executed. Irrespective of
negotiations among the parties or the exchanging of drafts of
this Agreement, this Agreement shall not constitute or be
deemed to evidence a contract, agreement, arrangement or
understanding among the parties hereto unless and until this
Agreement is executed by the parties hereto.
m. Exculpation. No Optionholder shall have any liability
or obligation whatsoever under or by reason of this Agreement
because of a breach by any other Optionholder of its
obligations, representations or warranties hereunder.
n. Termination. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall terminate upon
the termination of the Merger Agreement pursuant to Section
9.1 thereof.
5
6
IN WITNESS WHEREOF, the parties hereto have executed this Stock Option
Exercise Agreement on the date first written above.
PHYSICIANS' SPECIALTY CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
-----------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇, M.D.
Title: Chairman and President
6
7
EXHIBIT A
_________
TARGET OPTION INFORMATION
_________________________
In the Money Options
Out of the Money
Name No. Target Shares Issuable Exercise Price Options to be Terminated
------------------- -------------------------- -------------- ------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 179,968 $ 6.80
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 40,000 $10.00
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 150,000 $ 7.75
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 40,000 $10.00
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 150,000 $ 7.75
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 119,980 $ 6.80
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 30,000 $10.00
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 50,000 $ 7.75
▇▇▇▇▇ ▇▇▇▇▇▇ 59,992 $ 6.80
▇▇▇▇▇ ▇▇▇▇▇▇ 50,000 $10.00
▇▇▇▇▇ ▇▇▇▇▇▇ 125,000 $ 7.75
▇▇▇▇▇ ▇▇▇▇▇, M.D 200,000 $8.525
▇▇▇▇▇ ▇▇▇▇▇, M.D 50,000
7
8
[OPTIONHOLDER SIGNATURE PAGES OMITTED]
8