PURCHASE OPTION AGREEMENT
THIS PURCHASE OPTION AGREEMENT (the "Agreement"), dated as of March 4, 1998
(the "Execution Date") is by and among SHERIDAN HEALTHCARE, INC., a Delaware
corporation ("SHCR"), KENNETH TRIMMER, M.D., P.A., a Texas professional
association (the "Company"), and each of the owners of the stock of the Company
listed on Exhibit A of this Agreement (each a "Shareholder" and collectively,
the "Shareholders") and each of the Partner PA Shareholders (as defined below).
The Partner PA (as defined below) Shareholders are executing and delivering this
Agreement for the limited purpose of joining in the indemnification provisions
of this Agreement.
PRELIMINARY STATEMENTS
1. Each of the Shareholders is a physician, licensed and qualified
under the laws of the State of Texas ("State Law") to own all of the issued and
outstanding shares of capital stock (the "Shares") of the Company.
2. The Shareholders, SHCR and the Company each desire to enter into this
Agreement under which a person or entity, or to persons or entities qualified to
own the Shares of the Company as designated by SHCR (each a "Purchaser" and
collectively, the "Purchasers"), is given the right to acquire all of the Shares
for One Hundred Dollars ($100.00) in exchange for SHCR's payment of the Option
Consideration (as defined below) to the Shareholders.
3. Simultaneously with the execution and delivery of this Agreement each of
the Shareholders and SHCR have executed and delivered a Restrictive Covenant
Agreement (the "RCAs") in which the Shareholders have agreed to restrict certain
professional activities for five (5) years from the date of this Agreement.
Simultaneously with the execution and delivery of this Agreement each of the
Shareholders has entered into a Physician Employment Agreement with the Company
(collectively, the "PEAs"). One day after the execution and delivery of this
Agreement, Sheridan Healthcorp, Inc. ("Sheridan"), a Florida corporation and a
wholly-owned subsidiary of SHCR, will enter into a management services
arrangement with the Company pursuant to a Management Services Agreement dated
as of March 5, 1998 by and between Sheridan, the Company, the Partner PA and
each of the Shareholders and the Partner PA's Shareholders (the "MSA"). The
RCAs, PEAs, MSA and the VTA (as defined below) together with all schedules and
exhibits to each of them are collectively, the "Related Documents".
4. Prior to and as of the execution and delivery of this Agreement, Michael
Cavenee, M.D., P.A. and Kenneth Trimmer, M.D., P.A. are in partnership and SHCR
has decided to acquire each of them in parallel simultaneous transactions, which
shall remain separate except for certain rights to indemnification (as described
below) in which SHCR shall be entitled to joint and several indemnity from their
respective shareholders. Simultaneously with the execution and delivery of this
Agreement and the Related Documents, Kenneth Trimmer, M.D., P.A. (the "Partner
PA") and each of the Partner PA's Shareholders and SHCR have executed and
delivered an Additional Restrictive Covenant Agreement (the "ARCAs") in which
the Partner PA's Shareholders have agreed to restrict certain professional
activities for five (5) years from the date of the ARCA. Simultaneously with the
execution and delivery of this Agreement each of the Partner PA's Shareholders
has entered into a Partner PA's Physician Employment Agreement with the Partner
PA (collectively, the "APEAs"). Simultaneously with the execution and delivery
of this Agreement the Partner PA Shareholders and SHCR have executed and
delivered a Purchase Option Agreement (the "AOA") under which SHCR, its assignee
or nominee has been given the right to acquire all of the Partner PA
Shareholders' shares of stock in the Partner PA. The ARCAs, APEAs, and a Voting
Trust Agreement (the "AVTA") together with all schedules and exhibits to each of
them are collectively, the "Partner PA Related Documents".
6. In consideration of the mutual covenants and agreements contained in
this Agreement, and subject to the conditions contained in this Agreement, the
parties agree as follows:
AGREEMENT
SECTION 1. Grant of Option; Consideration.
Subject to the terms and conditions of this Agreement, each of the
Shareholders grants to SHCR an irrevocable, unconditional exclusive option (the
"Option") to cause all of the then outstanding Shares of the Company (the "Sale
Shares") to be acquired through the purchase from each of the Shareholders of
the portion of the Sale Shares owned by that Shareholder (i) by a Purchaser or
Purchasers to be selected by SHCR in its sole discretion; or, (ii) to the extent
permitted by law, by SHCR, in which case the Shareholders shall cause the
Company to promptly convert the Company from a professional association to a
corporation pursuant to the Texas Business Corporation Act (the "Texas Code").
To the extent permitted by law, the purchase price (the "Purchase Price") for
the Sale Shares shall be One Hundred Dollars ($100.00) for all of the Shares of
the Company, to be allocated pro rata among the Shareholders depending on the
respective number of Sale Shares owned by each of them as of the date of the
exercise of the Option.
The consideration payable to the Shareholders for their grant of the Option
is listed on Schedule 1.1 attached to this Agreement (the "Option
Consideration").
SECTION 2. Exercise of Option.
The Option granted in this Agreement is exercisable by SHCR, or its
lawfully permitted designees or assignees (the "Designees"), in its sole
discretion at any time on or after the Execution Date; provided however, that
SHCR may not exercise this Option for reasons of peer review, utilization
review, quality assurance or credentialing. If SHCR shall determine that a peer
review, utilization review, quality assurance or credentialing issue has
occurred at the Company for which SHCR desires to exercise this Option, then
that decision shall be submitted to binding arbitration. SHCR shall appoint one
disinterested physician third party to an arbitration panel, and the
Shareholders shall appoint another disinterested physician third party to an
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arbitration panel. These two panelists shall then select another physician
panelist. These three panelists shall then decide whether the underlying reason
for which SHCR wishes to exercise the Option is valid. The decision of the panel
shall be final. If the panel agrees to allow SHCR to exercise this Option, or in
cases other than those based on peer review, utilization review, quality
assurance or credentialing, then in order to exercise the Option, SHCR or its
Designees shall deliver to each Shareholder or a Shareholder's legal
representative, written notice of (i) SHCR's or its Designee's election to
exercise the Option in favor of a Purchaser or Purchasers (a "Purchaser Exercise
Notice"); or, (ii) SHCR's or its Designee's election to exercise the Option and
acquire the Sale Shares for its own benefit (a "SHCR Exercise Notice"), and, in
each case, the number of Sale Shares of the Company to be purchased by each
Purchaser, SHCR or its Designee, as the case may be.
SECTION 3. Purchase of Shares by Purchaser.
Within ten (10) days of delivery of a Purchaser Exercise Notice, the
Purchaser, or, if applicable, each of the Purchasers, shall deliver to each of
the Shareholders or a Shareholder's legal representative, if applicable, by
check or by wire transfer of immediately available funds the Purchase Price for
the pro rata portion of the Sale Shares belonging to that Shareholder being sold
to that Purchaser, and each of the Shareholders or a Shareholder's legal
representative, if applicable, shall promptly deliver to each Purchaser a
certificate or certificates representing all of the issued and outstanding Sale
Shares of the Company being purchased by that Purchaser from that Shareholder,
duly endorsed for transfer, and with all necessary stock transfer stamps
attached, and if the Shareholder of the Sale Shares shall be deceased, any tax
waivers and other documents that SHCR or the Purchaser, as the case may be,
shall reasonably request.
SECTION 4. Purchase of Shares by SHCR or its Designee.
Upon receipt by the Shareholders of a SHCR Exercise Notice, if requested by
SHCR or its Designee, the Shareholders shall cause the Company to promptly file
a plan of conversion under Article 5.17 of the Texas Code and take all other
steps necessary and acceptable to SHCR or its Designee to convert the Company
from a professional association to a corporation pursuant to the Texas Code, and
shall deliver evidence of the conversion to SHCR or its Designee upon receipt
thereof. Within ten (10) days of receipt of evidence of the conversion, SHCR or
its Designee shall deliver to each of the Shareholders or a Shareholder's legal
representative, if applicable, by check or by wire transfer of immediately
available funds, the Purchase Price for the pro rata portion of the Sale Shares
being purchased from that Shareholder by SHCR or its Designee. Each of the
Shareholders or a Shareholder's legal representative, if applicable, shall
promptly deliver to SHCR or its Designee a certificate or certificates
representing all of the issued and outstanding Sale Shares being purchased from
that Shareholder, duly endorsed for transfer, and with all necessary stock
transfer stamps attached, and if the Shareholder of the Sale Shares shall be
deceased, any tax waivers and other documents that SHCR or its Designee shall
reasonably request. Each of the Shareholders shall also execute and deliver all
other documents or instruments and shall take all other actions as may be
requested by SHCR or its Designee in order to effect the purposes provided for
in this Section 4.
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SECTION 5. Sale of Shares by Shareholder.
In the event that any Shareholder, or any Shareholder's legal
representative, if applicable, shall desire to sell all or part of the Shares of
the Company owned by the Shareholder (also, the "Sale Shares"), the Shareholder
or the Shareholder's legal representative, shall first give notice (the "Sale
Notice") in writing to SHCR or its Designee to that effect. SHCR or its Designee
shall have a period of ninety (90) business days after receipt of the Sale
Notice in which to exercise its option to cause the purchase, in the manner set
forth in Sections 2, 3 and 4 of this Agreement, of all of the Shares of the
Company (including any Shares owned by the other Shareholders or by the selling
Shareholder which are not Sale Shares pursuant to the terms of this Section 5),
to a Purchaser or Purchasers to be selected by SHCR or its Designee in its sole
discretion or to be held in escrow for the benefit of a Purchaser or Purchasers
in accordance with Section 4 of this Agreement; provided, that any Purchaser so
selected be qualified under State Law to own all of the Shares of the Company;
and further provided, that SHCR or its Designee shall, upon written notice to
each of the Shareholders or a Shareholder's legal representative, as the case
may be, be granted an additional six (6) months to find a suitable Purchaser or
suitable Purchasers.
In the event that SHCR or its Designee fails within the time period
specified in this Section 5, to exercise its option to purchase the Shares of
any or all of the Shareholders of the Company, that Shareholder, or the
Shareholder's legal representative, may independently sell all, but not less
than all, the unsold Sale Shares to a third party who is not a party to this
Agreement (an "Outside Purchaser"); provided, however, that the Outside
Purchaser be qualified under State Law to own the Shares of the Company; and
further provided that SHCR or its Designee shall receive written notice, (also
the "Sale Notice") of any offer to an Outside Purchaser (the "Outside Offer") to
purchase the Sale Shares and further provided that the Outside Purchaser shall
have agreed to uphold the terms of the MSA and other related agreements in
effect regarding the Company and the medical practice conducted by the Company.
SHCR or its Designee shall have a period of ninety (90) business days from
receipt of that "Sale Notice" in which to exercise its option to match the
Outside Offer and cause the purchase of any or all of the Shares of the Company
(including any Shares owned by the other Shareholders or by the selling
Shareholder which are not Sale Shares pursuant to the terms of this Section 5),
by a qualified Purchaser or Purchaser(s) or to be held in escrow at the price
and terms specified in the Outside Offer, except that SHCR or its Designee shall
not be obligated to match any purchase price which exceeds the fair market value
of the Sale Shares. An Outside Purchaser shall enter into an option agreement
with the Company and SHCR containing substantially the same terms and conditions
of this Agreement in accordance with Section 10 hereto.
SECTION 6. Failure to Deliver Shares.
Notwithstanding anything to the contrary in this Agreement, in the event
that a Shareholder or a Shareholder's legal representative or any other person
or entity (each a "Seller") is required to or elects to sell Shares of the
Company to SHCR or its Designee or a Purchaser or Purchasers (each a "Buyer")
pursuant to the provisions of this Agreement, and in the further event that the
Seller refuses to, is unable to, or for any reason fails to deliver the
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certificate or certificates evidencing the Sale Shares of the Seller being sold
to the Buyer, then the Buyer may deposit the Purchase Price for the Sale Shares
with any bank doing business within fifty (50) miles of SHCR's principal office,
or with SHCR's independent public accounting firm, as agent or trustee, or in
escrow, for the Seller, to be held by the bank or accounting firm for the
benefit of and for delivery to the Seller upon delivery of the certificate or
certificates. SHCR or its Designee shall provide written notice to the Seller of
the location and amount of the escrow fund, together with the name and address
of the person or entity responsible for the escrow fund. Upon deposit by the
designated Buyer of the Purchase Price and upon notice to the Seller, the Sale
Shares shall be deemed to have been sold, assigned, transferred and conveyed to
the Buyer, and the Seller shall have no further rights to the Sale Shares (other
than the right to withdraw the payment for the Sale Shares held in escrow), and
the Company shall record the transfer in its stock transfer book or in any
appropriate manner except as may be required by law.
SECTION 7. Covenants of the Shareholders.
1. Each of the Shareholders covenants and agrees that he or she shall not
sell, assign, pledge or hypothecate any of the Shares of the Company owned by
him or her unless and until the provisions of Section 5 of this Agreement are
satisfied.
2. Each of the Shareholders covenants and agrees that for the period
commencing upon receipt of either a Purchaser Exercise Notice or a SHCR Exercise
Notice until the consummation of the sale of the Sale Shares to a Purchaser or
Purchasers, SHCR or its Designee, as the case may be, he or she shall, and shall
cause the Company to:
(a) conduct its business only in the ordinary course of business
and consistent with prior practices;
(b) deposit all monies received from services rendered by the Company
or its employees and agents, into the bank accounts designated for that purpose
consistent with prior practices and consistent with the terms of the MSA so long
as the MSA remains in effect;
(c) refrain from making any purchase, sale or disposition of any asset
or property other than in the ordinary course of business, and from mortgaging,
pledging, subjecting to a lien or otherwise encumbering any of its properties or
assets;
(d) refrain from incurring any contingent liability as a guarantor or
otherwise with respect to the obligations of others, and from incurring any
other contingent or fixed obligations or liabilities except in the ordinary
course of business;
(e) refrain from making any change or incurring any obligation to make
a change in its Articles of Association, By-laws or authorized or issued capital
stock;
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(f) refrain from declaring, setting aside or paying any dividend,
making any other distribution in respect of its capital stock or making any
direct or indirect redemption, purchase or other acquisition of its stock;
(g) refrain from making any change in the compensation payable or to
become payable to any of its officers, employees, agents or independent
contractors;
(h) refrain from prepaying any loans (if any) from its stockholders,
officers or directors or making any change in their borrowing arrangements;
(i) use its best efforts to keep intact its business organization, to
keep available its present officers, employees and health care providers and to
preserve the goodwill of all suppliers, customers, independent contractors and
others having business relations with it; and
(j) permit SHCR and its authorized representatives and agents to have
full access to all its properties, assets, records, tax returns, contracts and
documents and furnish to SHCR or their authorized representatives and agents,
all financial and other information with respect of its business or properties
as may from time to time be reasonably requested.
3. Simultaneously with the execution and delivery of this Agreement, each
of the Shareholders shall have executed and delivered to the Company a Physician
Employment Agreement in the form attached to this Agreement as Exhibit B (the
"Employment Agreement") pursuant to which each Shareholder shall be an Employee
of the Company, subject to the terms and conditions of the Employment Agreement,
until termination or expiration of the Employment Agreement. Each of the
Shareholders and the Company covenants and agrees that during the term of the
Shareholder's employment with the Company pursuant to the Employment Agreement,
no modifications or amendments shall be made to the Employment Agreement without
the prior written consent of SHCR. Each of the Shareholders and the Company
covenants and agrees that no amendments or modifications shall be made to any
employment agreements or arrangements, which are in effect as of the Execution
Date of this Agreement or which are subsequently entered into between the
Company and any employee or agent of the Company, including the Company's
Physician Employees (as defined in the MSA), without the prior written consent
of SHCR or Sheridan.
4. Simultaneously with the execution and delivery of this Agreement, each
of the Shareholders has executed and delivered to SHCR a Voting Trust Agreement
and related exhibits (the "VTA"), substantially in the form of Exhibit D
attached to this Agreement.
5. Each of the Shareholders and the Company covenants and agrees that all
payables and other obligations of the Company arising prior to March 1, 1998
shall be satisfied by the Shareholders as of the Execution Date except for those
obligations which are continuing obligations of the Company in which case the
Shareholders shall satisfy that portion of the continuing obligations which
relate to the time period prior to the Execution Date.
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SECTION 8. Representations and Warranties of the Company and the Shareholders.
As a material inducement to Sheridan and SHCR to enter into this Agreement
and consummate the transactions contemplated by the MSA, each of the
Shareholders and the Company, jointly and severally hereby make to Sheridan the
representations and warranties contained in this Section 8 as of the Execution
Date, and as of the effective date of the closing of the purchase of any Sale
Shares pursuant to the terms of this Agreement (the "Acquisition Date");
provided, however, that no Shareholder shall have any right of indemnity or
contribution from the Company with respect to any breach of representation or
warranty under this Agreement.
1. Ownership of Stock. Each Shareholder owns all of the shares set forth
opposite his name in Exhibit A attached to this Agreement free and clear of any
and all liens, claims or encumbrances. Upon delivery to SHCR or its Designee or
the Purchaser on the Acquisition Date of the certificate(s) representing the
shares of the Company owned by each Shareholder with stock powers (or the
equivalent) duly executed in blank, against delivery of the applicable purchase
price therefor, good and marketable title to those shares shall be transferred
to the Purchaser or SHCR, as the case may be, free and clear of any and all
liens, claims or encumbrances. As of the Acquisition Date, no options, warrants
or other rights to purchase or otherwise acquire any unissued shares of the
common stock or any other equitable or legal interests of the Company will be
outstanding. All of the outstanding shares of the Company owned by the
Shareholders will have been validly issued and will be fully paid and
nonassessable.
2.Authority of Shareholders; Receipt of Information.
(a) Each Shareholder and the Company has full authority, power and
capacity to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by or on behalf of that Shareholder and
the Company pursuant to or as contemplated by this Agreement and to carry out
the contemplated transactions. This Agreement and each agreement, document and
instrument to be executed and delivered by that Shareholder and the Company or
pursuant to or as contemplated by this Agreement constitute, or when executed
and delivered by each Shareholder and the Company will constitute, valid and
binding obligations of that Shareholder and the Company, enforceable in
accordance with their respective terms.
(b) The execution, delivery and performance by each Shareholder and
the Company of this Agreement and each agreement, document and instrument
executed in connection with the contemplated transaction:
(i) do not violate any laws, rules or regulations of the United
States or any state or other jurisdiction applicable to any Shareholder or the
Company, or require any Shareholder or the Company to obtain any approval,
consent or waiver of, or to make any filing with, any individual, corporation,
association, partnership, estate, trust or any other entity or organization
(governmental or otherwise) (each a "Person") that has not been obtained or
made; and
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(ii) do not and will not result in a breach of, constitute a
default under, accelerate any obligation under or give rise to a right of
termination of any indenture or loan or credit agreement or any other agreement,
contract, instrument, mortgage, lien, lease, permit, authorization, order, writ,
judgment, injunction, decree, determination or arbitration award to which any
Shareholder or the Company is a party or by which the property of that
Shareholder or the Company is bound or affected, or result in the creation or
imposition of any mortgage, pledge, lien, security interest or other charge or
encumbrance on any of the assets or properties of that Shareholder or the
Company.
(c) Each Shareholder represents that he or she: (i) has received all
information as he or she has deemed relevant regarding the properties, assets,
8
business, condition (financial or otherwise), results of operations or prospects
of the Company; (ii) has sufficient knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of his
or her participation in the contemplated transactions under this Agreement;
(iii) has been afforded the opportunity to ask questions and receive answers
from management of the Company and from management of Sheridan, SHCR and its
advisers; and, (iv) understands that the prospects of the Company and the value
of the Company, Sheridan and their Affiliates may improve significantly and that
he or she will not, except through possible appreciation of SHCR Common Stock
they may own, participate in any such improvement after the Execution Date
(except as specifically provided in their employment agreements), although there
is no assurance that any improvement will occur. In furtherance and not in
limitation of the foregoing, each Shareholder represents that he or she has read
carefully, fully understood, and if appropriate, discussed with his or her legal
and financial advisers: (a) the materials described in clause (i) above; (b) the
financial statements and projections set forth in Sections 8.2(a) and 8.2(b) of
the Disclosure Schedule delivered by the Company and the Shareholders to
Sheridan under this Agreement (the "Disclosure Schedule"); and, (c) the
remainder of the Disclosure Schedule.
3. Organization, Existence and Authority; Corporate Records.
(a) The Company is, and as of the Acquisition Date shall be, a Texas
professional association duly organized, validly existing and in good standing
under the laws of the State of Texas, duly qualified or registered as a foreign
corporation in each jurisdiction listed in (a) Section 8.3 of the Disclosure
Schedule; or, (b) in which the Company is required to be licensed or qualified
to conduct its business or own its property.
(b) The Company has, and as of the Acquisition Date shall have, all
requisite power and authority, and all material and necessary authorizations,
approvals, orders, licenses, certificates and permits to conduct its business as
presently conducted and to hold under lease the property it purports to own or
hold under lease. A true and complete copy of the articles of association and
by-laws of the Company has previously been delivered to Sheridan.
(c) Except as provided in the Disclosure Schedule, the Company is not
in violation of any term of its articles of association and by-laws, or in
violation, of any term of any agreement, instrument, judgment, decree, order,
statute, rule or government regulation applicable to it or to which it is a
party.
(d) The corporate record books of the Company accurately record all
corporate action taken by its respective Shareholders and board of directors and
committees. The copies of the corporate records of the Company, as made
available to Sheridan for review, are true and complete copies of the originals
of those documents.
4. Capitalization. The total authorized capital stock of the Company
consists of _________ shares of common stock, par value ________ Dollars
($_____) per share. As of the Execution Date of this Agreement, _________ shares
of Common Stock are issued and outstanding, all of which are duly and validly
issued, fully paid and nonassessable, were issued in compliance with all
applicable state and federal securities laws and are owned beneficially and of
record by the Shareholders, all as listed in Exhibit A. No shares of capital
stock of the Company are held in the treasury of the Company. Except as set
forth in Section 8.4 of the Disclosure Schedule, (i) there are no outstanding
subscriptions, options, warrants, commitments, agreements, arrangements or
commitments of any kind for or relating to the issuance, or sale of, or
outstanding securities convertible into or exchangeable for, any shares of
capital stock of any class or other equity interests of the Company; (ii) no
person has any preemptive right, right of first refusal or similar right to
acquire Common Stock or any additional shares of capital stock of the Company in
connection with the transactions contemplated by this Agreement or otherwise;
(iii) there are no restrictions on the transfer of the shares of capital stock
of the Company, other than those imposed by relevant state and federal
securities laws; (iv) no person has any right to cause the Company to effect the
registration under the Securities Act of 1933, as amended, of any shares of
capital stock of the Company or any other securities (including debt
securities); (v) the Company has no obligation to purchase, redeem or otherwise
acquire any of its equity securities or any interests therein, or to pay any
dividend or make any other distribution in respect thereto; and (vi) there are
no voting trusts, stockholders' agreements, or proxies relating to any
securities of the Company other than as provided for in Section 7, paragraph 4
of this Agreement.
5. Subsidiaries; Investments. Except as set forth in Section 8.5 of the
Disclosure Schedule, the Company does not own or have any direct or indirect
interest in or Control over any corporation, partnership, joint venture or other
entity of any kind. For purposes of this Agreement, Control means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership or voting of securities, by contract or otherwise.
6. Prior Transactions. Except as set forth in Section 8.6 of the Disclosure
Schedule, the Company is not a party to, or is otherwise obligated in any manner
under, any agreement, arrangement or understanding regarding acquisitions,
mergers, consolidations, asset sales, joint ventures or similar transactions.
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7. Financial Statements and Projections.
(a) Included as Section 8.7 of the Disclosure Schedule are the
following financial statements of the Company, all of which statements are
complete and correct in all material respects and fairly present the financial
position of the Company on the dates of those statements and the results of
their respective operations for the periods covered thereby all in accordance
with the cash basis of accounting: (a) unaudited internal balance sheets as at
December 31, 1996 and the related statements of operations, for the fiscal year
then ended, and (b) unaudited, internal balance sheets as at December 31, 1997
and the related statements of operations for the 12-month period then ended (the
"Base Balance Sheet").
(b) Attached as Section 8.7(b) of the Disclosure Schedule are the
estimates and projections prepared by the management of the Company which have
been delivered to all of the Shareholders and Sheridan (the "Projections").
These Projections are based upon good faith estimates or projections of, and
assumptions believed to be reasonable by the Company and the Shareholders as of
the date those estimates or Projections were made and on the Execution Date, and
the Company and the Shareholders believe that these assumptions remain
reasonable; provided, however, that the foregoing is not intended as a
representation or warranty that results identified in the Projections will be
achieved.
8. Absence of Undisclosed Liabilities.
(a) As of the date of the Base Balance Sheet, the Company had no
liability of any nature, whether accrued, absolute, contingent or otherwise
asserted or unasserted, known or unknown (including without limitation,
liabilities as guarantor or otherwise with respect to obligations of others, or
liabilities for taxes due or then accrued or to become due or contingent or
potential liabilities relating to activities of the Company or the conduct of
its business prior to the date of the Base Balance Sheet regardless of whether
claims in respect thereof had been asserted as of that date), except liabilities
stated or adequately reserved against on the Base Balance Sheet, or reflected in
Section 8.8 of the Disclosure Schedule.
(b) As of the Execution Date, the Company does not have and will not
have any liabilities of any nature, whether accrued, absolute, contingent or
otherwise, asserted or unasserted, known or unknown (including without
limitation, liabilities as guarantor or otherwise with respect to obligations of
others, or liabilities for taxes due or then accrued or to become due or
contingent or potential liabilities relating to activities of the Company or the
conduct of its business prior to the Execution Date, as the case may be,
regardless of whether claims in respect thereof had been asserted as of that
date), except liabilities (i) stated or adequately reserved against on the Base
Balance Sheet or the notes thereto, or (ii) reflected in Section 8.8 of the
Disclosure Schedule.
9. Absence of Certain Developments. Since the date of the Base Balance
Sheet, the Company has conducted its business only in the ordinary course
consistent with past practice and, except as set forth in Section 8.9 of the
Disclosure Schedule and except as permitted under the MSA, there has not been:
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(a) any material adverse change in the financial condition,
properties, assets, liabilities, business or operations of the Company, which
change by itself or in conjunction with all other changes creates a material
adverse change;
(b) any contingent liability incurred by the Company as guarantor or
otherwise with respect to the obligations of others or any cancellation of any
debt or claim owing to, or waiver of any right of the Company;
(c) any mortgage, encumbrance or lien placed on any of the properties
of the Company which remains in existence on the Execution Date or will remain
on the Closing Date and the Acquisition Date (as defined in the MSA);
(d) any obligation or liability of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, known or unknown
(including without limitation, liabilities for taxes due or to become due or
contingent or potential liabilities relating to services provided by the
Company, including without limitation, any claims or potential claims for
malpractice, or the conduct of the business of the Company since the date of the
Base Balance Sheet regardless of whether claims in respect thereof have been
asserted), incurred by the Company other than obligations and liabilities
incurred in the ordinary course of business consistent with the terms of this
Agreement (it being understood that claims in connection with services provided
by the Company, including without limitation, malpractice claims, shall not be
deemed to be incurred in the ordinary course of business);
(e) any purchase, sale or other disposition, or any agreement or other
arrangement for the purchase, sale or other disposition, of any of the
properties or assets of the Company other than in the ordinary course of
business;
(f) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the properties, assets or business of the
Company;
(g) any declaration, setting aside or payment of any dividend by the
Company, or the making of any other distribution in respect of the capital stock
of the Company, or any direct or indirect redemption, purchase or other
acquisition by the Company of its own capital stock;
(h) any labor trouble or claim of unfair labor practices involving the
Company; any change in the compensation payable or to become payable by the
Company to any of its respective officers, employees, agents or independent
contractors other than normal merit increases in accordance with its usual
practices, or any bonus payment or arrangement made to or with any of those
officers, employees, agents or independent contractors;
11
(i) any change with respect to the officers or management of the
Company;
(j) any payment or discharge of a lien or liability of the Company
which was not shown on the Base Balance Sheet or incurred in the ordinary course
of business thereafter;
(k) any obligation or liability incurred by the Company to any of its
officers, directors, stockholders or employees, or any loans or advances made by
the Company to any of its respective officers, directors, stockholders or
employees, except normal compensation and expense allowances payable to officers
or employees;
(l) any change in accounting methods or practices, credit practices or
collection policies used by the Company;
(m) any compensation paid by the Company to Shareholders in excess of
Five Thousand Dollars ($5,000.00) in the aggregate;
(n) any capital expenditure by the Company in excess of Five Thousand
Dollars ($5,000.00) in the aggregate;
(o) any borrowings or entering into any leases;
(p) any other transaction entered into by the Company other than
transactions in the ordinary course of business; or
(q) any agreement or understanding whether in writing or otherwise,
for the Company to take any of the actions specified in paragraphs (a) through
(p) above.
10. Accounts Receivable. Except to the extent reserved against in the Base
Balance Sheet or disclosed in Section 8.10(a) of the Disclosure Schedule, all of
the accounts receivable of the Company as of March 1, 1998, which are listed in
Section 8.10(b) to the Disclosure Schedule, are valid and enforceable claims,
are subject to no set-off or counterclaim, and are, in the commercially
reasonable judgment of the Company, fully collectable in the normal course of
business, after deducting the allowance for doubtful accounts stated in the
respective Base Balance Sheet and adjusted since the date thereof in accordance
with generally accepted accounting principles consistently applied. Except as
disclosed in Section 8.10(c) of the Disclosure Schedule, the Company has no
accounts receivable from any person, firm or corporation which is affiliated
with it or from any of its directors, officers, employees, or stockholders.
11. Transactions with Affiliates. Except as set forth in Section 8.11 of
the Disclosure Schedule, there are no loans, leases or other continuing
transactions between the Company and any present or former stockholder,
director, or officer of the Company, or any member of that officer's, director's
or stockholder's immediate family, or any person controlled by that officer,
director or stockholder or his or her immediate family. Except as set forth in
Section 8.11 of the Disclosure Schedule, no stockholder, director or officer of
the Company or any of their respective spouses or family members, owns directly
or indirectly on an individual or joint basis any material interest in, or
serves as an officer or director or in another similar capacity of, any
competitor or supplier of the Company, or any organization which has a contract
or arrangement with the Company. For purposes of the foregoing, "control" means
the possession, direct or indirect, or the power to direct or cause the
direction of the management and policies of an entity or individual, whether
through the ownership of voting securities, by contract, or otherwise.
12
12. Title to Properties. Except as set forth in Section 8.12 of the
Disclosure Schedule, the Company has good and marketable title to all of its
properties and assets reflected on the latest balance sheet included in Section
8.7 of the Disclosure Schedule or acquired thereafter, free and clear of all
liens, restrictions or encumbrances. All equipment included in those properties
which is necessary to the business of the Company is in good condition and
repair, ordinary wear and tear excepted. All leases of real or personal property
to which the Company is a party are fully effective and afford the Company
peaceful and undisturbed possession of the subject matter of those leases. The
Company is not in violation of any zoning, building or safety ordinance,
regulation or requirement or other law or regulation applicable to the operation
of its owned or leased properties, nor has it received any notice of a
violation. The Company does not own any real property or, except as set forth in
Section 8.12 of the Disclosure Schedule, have any interests in real property. As
of the Execution Date, the Company shall have good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by it, in each case free and clear of all liens, encumbrances and
defects except such as will not materially affect the value of the property and
will not interfere with the use made and proposed to be made of the property by
the Company; and any real property and buildings held at the time under lease by
the Company will be held by it under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of the property and buildings.
13. Tax Matters. The Company has filed all federal, state, local and
foreign tax returns required to be filed through the Execution Date, and has
paid or caused to be paid all Taxes (as defined below) required to be paid by it
through the Execution Date whether disputed or not, except Taxes which have not
yet accrued or otherwise become due, for which adequate provision has been made
in the pertinent financial statements referred to in Section 8.7 above. The
provisions for taxes on the Base Balance Sheet and on the latest balance sheet
included in Section 8.7 of the Disclosure Schedule are sufficient as of its date
for the payment of all accrued and unpaid Taxes of any nature of the Company and
any applicable Taxes owing by that Person to any jurisdiction, whether or not
assessed or disputed. All taxes and other assessments and levies which the
Company is required to withhold or collect have been withheld and collected and
have been paid over to the proper governmental authorities. Neither the I.R.S.
nor any other governmental authority is now asserting or, to the knowledge of
any Shareholder, threatening to assert against the Company any deficiency or
claim for additional Taxes. Except as set forth in Section 8.13 of the
Disclosure Schedule, there has not been any audit of any tax return filed by the
Company. Except as set forth in Section 8.13 of the Disclosure Schedule, no
waiver or agreement by the Company is in force for the extension of time for the
assessment or payment of any Taxes. The Company is not a party to any agreement,
contract or arrangement that would result individually or in the aggregate, in
the payment of any "excess parachute payment" within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended. For purposes of this
Agreement, "Taxes" means federal, state, local, foreign and other taxes,
including without limitation, income taxes, estimated taxes, excise taxes, sales
taxes, use taxes, gross receipts taxes, franchise taxes, employment and
payroll-related taxes, withholding taxes, stamp taxes, transfer taxes and
property taxes, whether or not measured in whole or in part by net income.
13
14. Contracts and Commitments.
(a) The Company is not a party to any contract, obligation or
commitment which involves a potential commitment in excess of $10,000 or which
is otherwise material to the business of the Company and, except as set forth in
Section 8.14 of the Disclosure Schedule, the Company has no: (i) employment or
consulting contracts; (ii) stock redemption or purchase agreements; (iii)
agreements providing for the indemnification of others against any liabilities
or the sharing of the tax liability of others; (iv) license agreements (as
licensor or licensee); (v) distributor or sales agreements; (vi) contracts,
agreements or understandings with officers, managers, directors, employees, or
stockholders of the Company or persons or organizations related to or affiliated
with any such persons; (vii) leases; (viii) agreements with customers of the
Company; (ix) plans or contracts providing for bonuses, pensions, options, stock
purchases, deferred compensation, retirement payments, profit sharing,
collective bargaining or the like, or any contract or agreement with any labor
union; (x) agreements for the purchase of any commodity, material or equipment;
(xi) agreements regarding the provision of medical services to patients,
including without limitation, agreements with any patients, HMOs, PPOs, third
party payors, IPAs, PHOs, MSOs (or similar arrangements), employers, labor
unions, hospitals, clinics and ambulatory surgery centers, Medicare
intermediaries and Medicaid intermediaries (collectively, "Medical Customers");
(xii) contracts, agreements or understandings with physicians, nurses,
technicians or allied healthcare providers; (xiii) other agreements creating any
obligations of the Company with respect to any contract or agreement not
specifically disclosed elsewhere herein or in the Disclosure Schedule; (xiv)
agreements containing covenants limiting the freedom of the Company to compete
in any line of business or territory or with any person or entity; or (xv)
indentures, mortgages, promissory notes, loan agreements, guaranties or other
agreements or commitments for the borrowing of money or any related security
agreements.
(b) All contracts, agreements, leases and instruments to which the
Company is a party or by which the Company is obligated are valid and are in
full force and effect and constitute legal, valid and binding obligations of the
Company or, as the case may be, and, to the knowledge of the Company and each
Shareholder, of the other parties thereto, enforceable in accordance with their
respective terms. Neither the Company nor any Shareholder knows of any notice or
threat of or basis for the termination, expiration or modification of those
agreements within one year from the Execution Date, which termination,
expiration or modification would reasonably br expected to have a Material
Adverse Effect (as defined below). Neither the Company and, to the knowledge of
the Company and each Shareholder, nor any other party to any material contract,
agreement or instrument of the Company, is in default in complying with any
provisions thereof, and no condition or event or fact exists which, with notice,
lapse of time or both would constitute a default thereunder on the part of the
Company or, to the knowledge of the Company and each Shareholder, any other
party thereto, except for any default, condition, event or fact that,
individually or in the aggregate, would not have a Material Adverse Effect (as
defined below). For purposes of this Agreement, Material Adverse Effect means
any change or effect that is or would be materially adverse to the properties,
assets, business, condition (financial or otherwise) results of operation or
business prospects of the Company.
14
(c) The Company is not a party to any contract, agreement,
understanding or arrangement which under circumstances now foreseeable is likely
to have a Material Adverse Effect.
(d) Neither the Company, nor any Shareholder, nor any physician,
nurse, technician or allied health care provider providing medical services on
behalf of the Company on a full or part-time basis or as an independent
contractor or consultant (a "Health Care Provider"): (i) has any direct or
indirect liability for renegotiation of government contracts or subcontracts;
(ii) has been suspended or debarred from bidding on contracts or subcontracts
with any federal, state or local agency or governmental authority; (iii) has
been audited or investigated by any such agency or authority with respect to
contracts entered into or goods and services provided by the Company or any
Health Care Provider; or, (iv) has had a contract terminated by any such agency
or authority for default or failure to perform in accordance with applicable
standards.
15. Intellectual Property Rights; Employee Restrictions. Except as set
forth in Section 8.15 of the Disclosure Schedule, the Company owns or possesses
adequate license or other rights to use, free and clear of claims or rights of
any other person, all Intellectual Property (as defined below) material to the
conduct of its businesses as presently conducted and as proposed to be
conducted. The rights of the Company in all of its Intellectual Property is
freely transferable. Neither the Company nor any of the Shareholders are aware
of any infringement by any other person of any rights of the Company under any
of its Intellectual Property. No claim is pending or threatened against the
Company to the effect that any of its Intellectual Property infringes upon or
conflicts with the asserted rights of any other person and, to the knowledge of
each Shareholder and the Company, there is no basis for any of these claims
(whether or not pending or threatened). No claim is pending or threatened
against the Company to the effect that any of its Intellectual Property is
invalid or unenforceable, and, to the knowledge of each Shareholder and the
Company, there is no basis for any of these claims (whether or not pending or
threatened). All proprietary information developed by or belonging to the
Company and which is material to the business of the Company which has not been
patented has been kept confidential. The Company is not making unlawful use of
any Intellectual Property of any other person, including without limitation, any
former employer or any past or present employees of the Company. Neither the
Company nor any of their respective employees have any agreements or
arrangements with former employers of those employees relating to any
Intellectual Property of those employers, which interfere or conflict with the
performance of those employee's duties. All Intellectual Property, to the extent
applicable, of the Company are subsisting and have not been abandoned. Except as
set forth in Section 8.15 to the Disclosure Schedule, none of the Intellectual
Property is the subject of any outstanding assignments, grants, liens, licenses,
15
obligations or agreements, whether written, oral or implied. All required
annuities, renewal fees, maintenance fees, royalty payments, amendments and/or
other filings or payments which are necessary to preserve and maintain the
Intellectual Property have been filed and/or made. For purposes of this
Agreement, Intellectual Property means patents, patent applications, trademarks,
trade secrets, trademark applications, logos, service marks, service mark
applications, trade names, assumed names, copyrights, copyright registrations,
know-how, manufacturing processes, programming processes, formulae, trade
secrets, customer lists, patient lists, or other intellectual property rights.
16. Litigation. Except as otherwise provided in Section 8.16 of the
Disclosure Schedule, there is no litigation or governmental or administrative
proceeding or investigation (including without limitation, any malpractice
claims, Department of Professional Regulation or Board of Medicine (or
equivalent) investigation, suit, notice of intent to institute, arbitration or
other proceeding) pending or, to the knowledge of the Company and each
Shareholder, threatened against the Company or affecting any of its properties
or assets, or against any officer, director or stockholder or employee of the
Company or which would prevent or hinder the consummation of the contemplated
transactions, nor has there occurred any event, nor does there exist any
condition on the basis of which any such claim may be asserted. No claim has
been asserted against the Company for renegotiation or price redetermination of
any material business transaction, and there are no facts upon which any such
claim could be based. All the actions, suits, claims, proceedings, arbitrations
or investigations described in Section 8.16 to the Disclosure Schedule are being
diligently prosecuted and are adequately covered by insurance or adequate
reserves have been set aside therefor on the financial statements. As of the
Execution Date, there will be no actions, suits or proceedings pending or, to
the knowledge of the Shareholders, threatened against or affecting the Company,
or any property of the Company in any court or before any arbitrator of any kind
or before or by any governmental body, except for malpractice incurred in the
ordinary course of business which will be disclosed to SHCR by the Company and
the Shareholders prior to the closing of the purchase of any Sale Shares
pursuant to this Agreement. As of the Execution Date, the Company shall not be
in default under any order of any court, arbitrator or governmental body; and
the Company shall not be subject to or party to any order of any court or
governmental body arising out of any action, suit or proceeding under any
statute or other law respecting antitrust, monopoly, restraint of trade, unfair
competition or similar matters. As of the Execution Date, neither the Company
nor any of the Shareholders shall be in violation of any statute or other rule
or regulation of any governmental body the violation of which may have a
Material Adverse Effect.
17. Permits; Compliance with Laws. The Company has all necessary Permits
(meaning franchises, authorizations, approvals, orders, consents, licenses,
certificates, permits, registrations, qualifications or other rights and
privileges) necessary to permit it to own its property and to conduct its
business as it is presently conducted and all those Permits are valid and in
full force and effect. No Permit is subject to termination as a result of the
execution of the Agreement or consummation of the contemplated transactions. The
Company is now and has been in compliance with all applicable statutes,
16
ordinances, orders, rules and regulations (including all applicable laws and
regulations relating to drugs and controlled substances) promulgated by any
federal, state, municipal or other governmental authority which apply to the
conduct of its business. The Company has never entered into or been subject to
any judgment, consent decree, compliance order or administrative order with
respect to any environmental or health and safety law or received any notice,
demand letter, formal complaint or claim with respect to any environmental or
health and safety matter or the enforcement of any such law.
18. Licenses; Credentials. Section 8.18 of the Disclosure Schedule contains
a complete and accurate list of all licenses held by the Shareholders and all of
the Health Care Providers. Prior to the Execution Date, the Company has
delivered copies of all licenses and all credentialing documents and
correspondence relating to or about the Company, the Shareholders and all of the
Health Care Providers. Each Health Care Provider is duly licensed under the laws
of the State of Texas or the laws of the states disclosed in Section 8.18 of the
Disclosure Schedule and has complied with all laws, rules and regulations
relating to the rendering of services in their respective specialty areas.
Except as disclosed on Schedule 8.18 (a) of the Disclosure Schedule no
Shareholder or Health Care Provider has: (i) had his or her professional
license, Drug Enforcement Agency number, Medicare provider status or staff
privileges at any hospital or medical facility suspended, relinquished,
terminated or revoked; (ii) been reprimanded, sanctioned or disciplined by any
licensing board or any federal, state or local society or agency, governmental
body, hospital, third party payor or specialty board; or, (iii) had a final
judgment or settlement without judgment entered against him or her in connection
with a malpractice or similar action for an amount in excess of Five Thousand
Dollars ($5,000.00). As of the Execution Date, the Company will possess all
licenses, permits, franchises, authorizations, patents, copyrights, trademarks
and trade names, or rights thereto, required to conduct its business as then
conducted and as then proposed to be conducted, without known conflict with the
rights of others.
19. Labor Laws. The Company employs _______ full-time and _______ part-time
employees and generally enjoys a good employer-employee relationship with those
employees. The Company is not delinquent in payment to any of its employees for
any wages, salaries, commissions, bonuses or other direct compensation for any
services performed for it prior to the Execution Date or amounts required to be
reimbursed to its employees. There are no charges of employment discrimination
or unfair labor practices or strikes, slowdowns, stoppages of work, or any other
concerted interference with normal operations existing, pending or, to each of
the Shareholder's knowledge, threatened against or involving the Company. No
question concerning labor representation exists respecting any group of
employees of the Company. The Company is in compliance with all applicable laws,
including, without limitation, environmental laws, OSHA, ERISA, Americans with
Disabilities Act, the Fair Labor Standards Act and the Immigration Reform and
Control Act of 1986, as amended and supplemented, and Sections 212(n) and 274A
of the Immigration and Nationality Act, as amended and supplemented, and all
implementing regulations relating thereto.
17
20. Information Supplied by the Company.
(a) Neither this Agreement nor any document referenced in this
Agreement, nor any certificate or statement furnished pursuant to the Agreement
by or on behalf of the Company or any Shareholder, when taken together, contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained therein not misleading.
(b) The Company has provided to each Shareholder all information that
Shareholder has requested regarding the properties, assets, business, condition
(financial or otherwise), results of operations or prospects of the Company, has
provided the Shareholders the opportunity to ask questions and has answered any
and all questions from the Shareholders in connection with those matters, and
has delivered to each Shareholder the financial statements and Projections set
forth in Section 8.7 of the Disclosure Schedule. No document referenced in this
Agreement or statement furnished pursuant to this Section 8.20(b) by or on
behalf of the Company, when taken together, to the knowledge of the Company,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein not misleading.
(c) The Company has provided to, or made available for inspection and
copying by, Sheridan and its counsel and the Shareholders and their counsel
true, correct and complete copies of all documents referred to in this Article
III or in the Disclosure Schedules delivered to Sheridan pursuant to this
Agreement.
(d) As of the Execution Date, no representation or warranty by any of
the Shareholders in any written statement or certificate furnished or to be
furnished to SHCR or any Purchaser pursuant to this Agreement or the Related
Documents when taken together, will have contained any untrue statement of a
material fact or will have omitted to state a material fact necessary to make
the statements made not misleading. There will be no fact or condition which at
the time has not been disclosed to SHCR or any Purchaser which could materially
adversely affect the business, prospects, financial condition or results of
operations of the Company.
21. Investment Banking; Brokerage Fees. Neither the Company nor any of the
Shareholders have incurred or become liable for any broker's or finder's fee,
banking fees or similar compensation, relating to or in connection with the
contemplated transactions.
22.Employee Benefit Programs.
(a) Section 8.22 of the Disclosure Schedule sets forth a list of every
Employee Program that has been maintained (as such term is further defined
below) by the Company at any time during the three-year period ending on the
Execution Date.
(b) Each Employee Program which has been maintained by the Company and
which has at any time been intended to qualify under Section 401(a) or 501(c)(9)
of the Code, has received a favorable determination or approval letter from the
18
IRS regarding its qualification under that section and has, in fact, been
qualified under the applicable section of the Code from the effective date of
that Employee Program through and including the Closing (or, if earlier, the
date that all of that Employee Program's assets were distributed). No event or
omission has occurred which would cause that Employee Program to lose its
Qualification under the applicable Code section.
(c) There has not been any failure of any party to comply with any
laws applicable with respect to the Employee Programs that have been maintained
by the Company. With respect to any Employee Program now or heretofore
maintained by the Company, there has occurred no "prohibited transaction," as
defined in Section 406 of ERISA, or Section 4975 of the Code, or breach of any
duty under ERISA or other applicable law (including, without limitation, any
health care continuation requirements or any other tax law requirements, or
conditions to favorable tax treatment, applicable to such plan), which could
result, directly or indirectly (including without limitation, through any
obligation of indemnification or contribution), in any taxes, penalties or other
liability to either of the Company or any Affiliate. No litigation, arbitration,
or governmental administrative proceeding (or investigation) or other proceeding
(other than those relating to routine claims for benefits) is pending or, to the
knowledge of any Shareholder, threatened with respect to any such Employee
Program.
(d) Neither the Company nor any of its Affiliates has incurred any
liability under Title IV of ERISA which will not be paid in full prior to the
Closing. There has been no "accumulated funding deficiency" (whether or not
waived) with respect to any Employee Program ever maintained by the Company or
any of its Affiliates and subject to Code Section 412 or ERISA Section 302. With
respect to any Employee Program maintained by the Company or any of its
Affiliates and subject to Title IV of ERISA, there has been no (nor will be any
as a result of the transaction contemplated by this Agreement): (i) "reportable
event," within the meaning of ERISA Section 4043, or the regulations thereunder
(for which notice the notice requirement is not waived under 29 C.F.R. Part
2615); and, (ii) event or condition which presents a risk of plan termination or
any other event that may cause the Company or any of its Affiliates to incur
liability or have a lien imposed on its assets under Title IV of ERISA. All
payments and/or contributions required to have been made (under the provisions
of any agreements or other governing documents or applicable law) with respect
to all Employee Programs ever maintained by the Company or any Affiliate, for
all periods prior to the Closing, either have been made or have been accrued
(and all such unpaid but accrued amounts are described on Section 8.22 of the
Disclosure Schedule). Except as described in Section 8.22 of the Disclosure
Schedule, no Employee Program maintained by the Company or any Affiliate and
subject to Title IV of ERISA (other than a Multiemployer Plan) has any "unfunded
benefit liabilities" within the meaning of ERISA Section 4001(a)(18), as of the
Closing Date. Neither the Company nor any Affiliate have ever maintained a
Multiemployer Plan. None of the Employee Programs ever maintained by the Company
or any Affiliate have ever provided health care or any other non-pension
benefits to any employees after their employment was terminated (other than as
required by part 6 of subtitle B of title I of ERISA) or has ever promised to
provide those post-termination benefits.
19
(e) With respect to each Employee Program maintained by the Company
within the three years preceding the Execution Date, complete and correct copies
of the following documents (if applicable to that Employee Program) have
previously been delivered to Sheridan: (i) all documents embodying or governing
that Employee Program, and any funding medium for the Employee Program
(including, without limitation, trust agreements) as they may have been amended
to the Execution Date; (ii) the most recent IRS determination or approval letter
with respect to that Employee Program under Code Section 401 or 501(c)(9), and
any applications for determination or approval subsequently filed with the IRS;
(iii) the three most recently filed IRS Forms 5500, with all applicable
schedules and accountants' opinions attached thereto; (iv) the summary plan
description for that Employee Program (or other descriptions of that Employee
Program provided to employees) and all modifications thereto; (v) any insurance
policy (including any fiduciary liability insurance policy) related to that
Employee Program; (vi) any documents evidencing any loan to an Employee Program
that is a leveraged employee stock ownership plan; and (vii) with respect to any
Multiemployer Plan, any participation or adoption agreement relating to the
Company's participation in or contributions under that plan;
(f) Each Employee Program maintained by the Company as of the
Execution Date is subject to termination by the Board of Directors of the
Company without any further liability or obligation on the part of the Company
to make further contributions to any trust maintained under any such Employee
Program following such termination.
(g) For purposes of this Section 8.22:
(i) an entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides (or has promised to provide) benefits
under such Employee Program, or has any obligation (by agreement or under
applicable law) to contribute to or provide benefits under such Employee
Program, or if such Employee Program provides benefits to or otherwise covers
employees of such entity (or their spouses, dependents, or beneficiaries); and
(ii) an entity is an "Affiliate" of the Company for purposes of
this Section 8.22 if it would have ever been considered a single employer with
either of the Company under ERISA Section 4001(b) or part of the same
"controlled group" as the Company for purposes of ERISA Section 302(d)(8)(C).
(iii) an Employee Program means: (i) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA Section
3(40)), plans to which more than one unaffiliated employer contributes and
employee benefit plans (such as foreign or excess benefit plans) which are not
subject to ERISA; and, (ii) all stock option plans, bonus or incentive award
plans, severance pay policies or agreements, deferred compensation agreements,
supplemental income arrangements, vacation plans, and all other employee benefit
plans, agreements, and arrangements not described in (i) above. In the case of
an Employee Program funded through an organization described in Code Section
501(c)(9), each reference to that Employee Program shall include a reference to
such organization.
20
(h) The Shareholders and the Company represent to SHCR that immediately prior to
the Execution Date, the Shareholders and the Company took all necessary and
appropriate action to terminate the Plans (as defined below), and that no
additional contributions are required to be made by the Company to the Plans
after the Execution Date. The Company agrees that as soon as practicable
following the Execution Date, the Company shall apply for determination letters
from the Internal Revenue Service to the effect that the termination of the
Plans does not have any adverse effect upon their qualification. As soon as
practicable after the Company has received such determination letters from the
IRS, the Company shall direct the Plan's trustees to make distributions to
participants and beneficiaries under the Plans in accordance with the terms of
the Plans. Any and all costs associated with the administration or termination
of the Plans, including without limitation, costs relating to the preparation of
Forms 5500, annual valuations, and the Forms 5310, and any costs relating to the
distribution of benefits to participants and beneficiaries under the Plans,
shall promptly be paid in their entirety directly by the Shareholders or borne
by the Plan as the Trustees shall determine. Plans means the [Any Company Profit
Sharing Plan, any Company 401(k) and Profit Sharing Plan and Trust Agreement of
the Company and any other Company ERISA plan].
23. Environmental Matters.
(a) Except as set forth in Section 8.23 of the Disclosure Schedule,
(i) the Company has never generated, transported, used, stored, treated,
disposed of, or managed any Hazardous Waste (as defined below); (ii) no
Hazardous Material (as defined below) has ever been or is threatened to be
spilled, released, or disposed of at any site presently or formerly owned,
leased, or occupied by the Company, or has ever come to be located in the soil
or groundwater at any such site, for which the Company may have any liability;
(iii) no Hazardous Material has ever been transported from any site presently or
formerly owned, leased, or occupied by the Company for treatment, storage, or
disposal at any other place; (iv) the Company does not presently own, operate,
lease, or occupy any site on which underground storage tanks are or were
located, for which the Company may have any liability; and (v) no lien has ever
been imposed by any governmental agency on any property, facility, machinery, or
equipment owned, leased, or occupied by the Company in connection with the
presence of any Hazardous Material.
(b) Except as set forth in Section 8.23 of the Disclosure Schedule,
(i) the Company has no liability under, nor has the Company ever violated in any
material respect, any Environmental Law; (ii) any property owned, leased, or
occupied by the Company, and any facilities and operations thereon are presently
in compliance in all material respects with all applicable Environmental Laws
for which the Company may have liability; (iii) the Company has never entered
into or been subject to any judgment, consent decree, compliance order, or
administrative order with respect to any environmental or health and safety
matter or received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect to
any environmental or health and safety matter or the enforcement of any
Environmental Law; and (iv) neither the Company nor any Shareholder has any
reason to believe that any of the items enumerated in clause (iii) of this
paragraph will be forthcoming.
21
(c) Except as set forth in Section 8.23 of the Disclosure Schedule, no
site owned, leased, or occupied by the Company contain any asbestos or
asbestos-containing material, any polychlorinated biphenyls (PCBs) or equipment
containing PCBs, or any urea formaldehyde foam insulation, for which the Company
may have any liability.
(d) The Company has provided to Sheridan copies of all documents,
records, and information available to the Company concerning any environmental
matter relevant to the Company, whether generated by the Company or others,
including, without limitation, environmental audits, environmental risk
assessments, site assessments, documentation regarding off-site disposal of
Hazardous Materials, spill control plans, and reports, correspondence, permits,
licenses, approvals, consents, and other authorizations related to environmental
or health and safety matters issued by any governmental agency.
(e) For purposes of this Section 8.23: (i) Hazardous Material means
any hazardous or bio-hazardous waste, hazardous or bio-hazardous material,
hazardous or bio-hazardous substance, petroleum product, oil, toxic substance,
pollutant, or contaminant, as defined or regulated under any Environmental Law,
or any other substance which may pose a threat to the environment or to human
health or safety; (ii) Hazardous Waste means any hazardous or bio-hazardous
waste as defined or regulated under any Environmental Law. Environmental Law
means any environmental or health and safety-related law, regulation, rule,
ordinance, or by-law at the foreign, federal, state, or local level, whether
existing as of the Execution Date or previously enforced.
24. Insurance. The physical properties, assets, business, operations,
employees, officers and directors of the Company are insured to the extent
disclosed in Section 8.24 of the Disclosure Schedule. Except as set forth in
Section 8.24 of the Disclosure Schedule, there is no claim by the Company
pending under any of those policies. Those insurance policies and arrangements
are in full force and effect, all premiums with respect thereto are currently
paid, and the Company is in compliance with the terms thereof. That insurance is
sufficient for compliance by the Company with all requirements of applicable law
and all agreements and leases to which it is a party. Those insurance policies
shall continue to be in full force and effect following consummation of the
transactions contemplated by the Agreement. Neither the Company nor any
Shareholder knows, after due inquiry, of any threatened termination of any of
those policies or arrangements.
25. Relationship with Customers. The relationships of the Company with its
customers and Medical Customers are good commercial working relationships. No
customer or Medical Customer, which accounted for more than 1% of the revenues
of the Company for the twelve (12) months ended February 28, 1998 or which is
otherwise significant to the Company, has canceled or otherwise terminated or to
the knowledge of the Company and each of the Shareholders, threatened to cancel
or otherwise terminate its relationship with the Company, or has during that
period decreased materially its usage or purchase of the services or products of
the Company. No such customer or Medical Customer has, to the knowledge of any
Shareholder, any plan or intention to terminate, to cancel or otherwise
materially and adversely modifying its relationship with the Company or to
decrease materially or limit its usage, purchase or distribution of the services
or products of the Company.
22
26. Powers of Attorney. Neither the Company nor any Shareholder have any
outstanding power of attorney relating to their status as Shareholders,
officers, agents or employees of the Company, or relating to the Company, except
as otherwise contemplated by this Agreement.
27. Health Care Facilities. Each of the Shareholders and Health Care
Providers maintains in good standing staff memberships or similar affiliations
with the health care facilities as set forth on Section 8.27 of the Disclosure
Schedule.
28. Good Health. The Shareholders and, to the Shareholders' knowledge, all
of the Health Care Providers are in good physical and mental health and do not
suffer from any illnesses or disabilities which could prevent any of them from
fulfilling their responsibilities under the respective contracts, agreements or
understandings with the Company or prevent them from fulfilling their
responsibilities with the Company as they currently exist. None of the
Shareholders, and to the Shareholders' knowledge, none of the Health Care
Providers use or abuse drugs or any controlled substances, or have used or
abused any controlled substances at any time (other than those medications
lawfully prescribed by a medical doctor in a reasonable diagnosis and which do
not interfere with that person's capacity to perform his or her obligations to
the Company), or are under the influence of alcohol or are affected by the use
of alcohol during the time period required to perform their duties and
obligations under any contracts, agreements or understandings with the Company.
29. Employees; Independent Contractors. The Company has made available to
Sheridan the names and annual salary rates and other incentive, bonus or other
compensation, if applicable, for all present full-time and part-time employees
of the Company and a complete and correct copy of the permanent payroll of the
Company as of February 28, 1998. To the best knowledge of the Company and the
Shareholders, no former or current employee of the Company is a party to, or is
otherwise bound by, any agreement or arrangement, including, without limitation,
any confidentiality, non-competition or proprietary rights agreement, between
that individual and any other person that in any way adversely affects the
performance of his duties or the ability of the Company to conduct its business.
30. No Default. As of the Execution Date, the Company will not be in
default under, and no condition will exist that with notice or lapse of time or
both would constitute a default by the Company under, (i) any mortgage, loan
agreement, indenture, evidence of indebtedness for borrowed money or other
agreement or instrument by the Company, or to which the Company is a party at
the time, or pursuant to which any material portion of its assets is bound at
the time, or (ii) any judgment, order or injunction of any court, arbitrator or
governmental agency, except for non-payment defaults which in the aggregate
could not materially and adversely affect the business, financial condition or
results of operations of the Company.
23
SECTION 9. SHCR's Representations and Warranties
1. Making of Representations and Warranties. As a material inducement to
the Shareholders and the Company to enter into this Agreement and consummate the
contemplated transactions, SHCR makes to the Shareholders the representations
and warranties contained in this Section.
2. Organization and Corporate Power. SHCR is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
and has the full corporate power and authority to own or lease its properties
and to conduct its business in the manner and in the places where those
properties are owned or leased or their business is conducted and to enter into
this Agreement and each agreement, document and instrument to be executed and
delivered by it pursuant to or as contemplated by this Agreement and to carry
out the contemplated transactions.
3. Authority. The execution, delivery and performance of this Agreement and
each agreement, document and instrument to be executed and delivered by SHCR
pursuant to this Agreement have been duly authorized by all necessary corporate
action of SHCR, and no other corporate action on the part of SHCR or its
stockholders is required in connection therewith. This Agreement and each such
agreement, document and instrument constitutes, or when executed and delivered
by SHCR will constitute, valid and binding obligations of SHCR enforceable in
accordance with their respective terms. The execution, delivery and performance
by SHCR of this Agreement and each such agreement, document and instrument:
(a) do not and will not violate any provisions of the
Certificate of Incorporation or By-Laws of SHCR;
(b) do not and will not result in any violation by SHCR of any laws,
rules or regulations of the United States or any state or other jurisdiction
applicable to SHCR, or require SHCR to obtain any approval, consent or waiver
of, or to make any filing with, any Person (governmental or otherwise) that has
not been obtained or made; and
(c) do not and will not result in a breach of, constitute a default
under, accelerate any obligation under or give rise to a right of termination of
any indenture or loan or credit agreement or any other agreement, contract,
instrument, mortgage, lien, order, writ, judgment, injunction, decree,
determination or arbitration award to which SHCR is a party or by which the
property of SHCR is bound or affected.
24
4. Investment Banking; Brokerage Fees. Neither SHCR nor any affiliate of
SHCR has incurred or become liable for any broker's or finder's fee, banking
fees or similar compensation relating to or in connection with the contemplated
transactions.
5. Litigation. Except as otherwise provided in Section 9.5 of the
Disclosure Schedule, there is no litigation or governmental or administrative
proceeding ("Litigation") or to SHCR's knowledge any investigation (including
without limitation, any malpractice claims, Department of Professional
Regulation or Board of Medicine (or equivalent) investigation, suit, notice of
intent to institute, arbitration or other proceeding) ("Investigation") pending
or, to the knowledge of SHCR, threatened against the SHCR or affecting any of
their respective properties or assets, or against any officer, director or
stockholder or employee of SHCR or which would prevent or hinder the
consummation of the contemplated transactions, nor, to the knowledge of SHCR,
has there occurred any event nor does there exist any condition on the basis of
which any such claim may be asserted, except for Litigation and Investigations
which will not have a Material Adverse Effect or for which adequate insurance is
in effect.
6. SHCR Stock. Upon delivery to each of the Shareholders of SHCR Common
Stock and upon their surrender of Common Stock at the Closing in accordance with
the terms of this Agreement, those Shareholders shall receive SHCR Common Stock
which is fully paid, non-assessable, with good and marketable title, free and
clear of all claims, except for restrictions provided for in the Investment and
Shareholders Agreement and applicable laws and regulations.
7. Financial Statements. SHCR has delivered to the Shareholders and the
Company the following consolidated financial statements which are complete and
correct in all material respects and fairly present the financial position of
SHCR and its subsidiaries on the dates of those statements and the results of
their respective operations for the periods covered thereby: (a) unaudited
consolidated balance sheet as at December 31, 1997 and the related statement of
operations, shareholders' equity and cash flows for the fiscal year then ended.
The audited December 31, 1997 statements (including the footnotes and schedules
thereto) were prepared in accordance with generally accepted accounting
principles consistently applied during the period covered thereby (the "SHCR
Base balance Sheet").
8. Absence of Undisclosed Liabilities.
(a) As of the date of the SHCR Base Balance Sheet, neither SHCR nor
its subsidiaries had any material liability of any nature, whether accrued,
absolute, contingent or otherwise asserted or unasserted, known or unknown
(including without limitation, liabilities as guarantor or otherwise with
respect to obligations of others, or liabilities for taxes due or then accrued
or to become due or contingent or potential liabilities relating to activities
of SHCR or any of its subsidiaries or the conduct of their business prior to the
date of the SHCR Base Balance Sheet regardless of whether claims in respect
thereof had been asserted as of that date), except liabilities stated or
adequately reserved against on the SHCR Base Balance Sheet.
25
(b) As of the Execution Date and as of the Closing Date, SHCR does not
have and will not have and none of its subsidiaries have and or will have any
material liabilities of any nature, whether accrued, absolute, contingent or
otherwise, asserted or unasserted, known or unknown (including without
limitation, liabilities as guarantor or otherwise with respect to obligations of
others, or liabilities for taxes due or then accrued or to become due or
contingent or potential liabilities relating to activities of SHCR or the
conduct of its business prior to the Execution Date or the Closing Date, as the
case may be, regardless of whether claims in respect thereof had been asserted
as of that date), except liabilities: (i) stated or adequately reserved against
on the SHCR Base Balance Sheet or the notes thereto; (ii) reflected in Section
9.8 of the Disclosure Schedule; or, (iii) incurred in the ordinary course of
business of SHCR or its subsidiaries since the date of the SHCR Base Balance
Sheet.
9. Absence of Certain Developments. Since the date of the SHCR Base Balance
Sheet, except as set forth in Section 9.9 of the Disclosure Schedule, SHCR and
its subsidiaries have conducted their business only in the ordinary course
consistent with past practice and there has not been:
(a) any change in the financial condition, properties, assets,
liabilities, business or operations of SHCR and its subsidiaries , which change
by itself or in conjunction with all other changes, whether or not arising in
the ordinary course of business, would not have a Material Adverse Effect;
(b) any obligation or liability of any nature, whether accrued,
absolute, contingent or otherwise, asserted or unasserted, known or unknown
(including without limitation, liabilities for taxes due or to become due or
contingent or potential liabilities), incurred by SHCR or its subsidiaries other
than obligations and liabilities incurred in the ordinary course of business;
(c) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
of SHCR or its subsidiaries;
(d) any other transaction entered into by SHCR or any of its
subsidiaries other than transactions in the ordinary course of business;
(e) any declaration, setting aside or payment of any dividend by SHCR,
or the making of any other distribution in respect of the capital stock of SHCR,
or any direct or indirect redemption, purchase or other acquisition by SHCR of
its own capital stock; or
(f) any agreement or understanding whether in writing or otherwise,
for SHCR to take any of the actions specified in paragraphs (a) through (e)
above.
10. Compliance with Laws. SHCR and its subsidiaries are now and have been
in compliance with all applicable statutes, ordinances, orders, rules and
regulations promulgated by any federal, state, municipal or other governmental
authority which apply to the conduct of their respective businesses, except for
any non-compliance or violation that, individually or in the aggregate, would
not have a Material Adverse Effect.
26
11. SEC Documents. SHCR has filed with the United States of America
Securities and Exchange Commission all reports, notices and other documents
required to be filed by it under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and the applicable regulations
thereunder. SHCR has furnished to the Shareholders and the Company a true and
complete copy of its Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 and, upon request, shall promptly furnish to the Shareholders
and the Company any other filing made with the United States of America
Securities and Exchange Commission. As of the date of its filing and as of the
Closing Date, SHCR's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 and all other required filings with the SEC complied in all
material respects with the requirements of the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, and the applicable
regulations thereunder.
12. Information Supplied by SHCR. Neither this Agreement nor any document
referenced in this Agreement, nor any certificate or statement furnished
pursuant to the Agreement by or on behalf of Sheridan SHCR, when taken together,
to the knowledge of Sheridan SHCR, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained therein not misleading.
13. Capitalization. The total authorized capital stock of SHCR consists of
20,000,000 shares of common stock (the "Common Stock"), par value $.01 per
share, 1,000,000 shares of Class A common stock, par value $.01 per share and
5,000,000 shares of preferred stock, par value $.01 per share. As of February
15, 1998, 6,972,605 shares of Common Stock were issued and outstanding, all of
which are duly and validly issued, fully paid and nonassessable, were issued in
compliance with all applicable state and federal securities laws.
14. Permits; Compliance with Laws. SHCR has all necessary Permits necessary
to permit it to own its property and to conduct its business as it is presently
conducted and all those Permits are valid and in full force and effect, except
to the extent that any failure to possess a Permit would not have a Material
Adverse Effect. No Permit is subject to termination as a result of the execution
of the Agreement or consummation of the contemplated transactions. SHCR is now
and has been in compliance with all applicable statutes, ordinances, orders,
rules and regulations (including all applicable laws and regulations relating to
drugs and controlled substances) promulgated by any federal, state, municipal or
other governmental authority which apply to the conduct of its business, except
for any non-compliance or violation that, individually or in the aggregate,
would not have a Material Adverse Effect. SHCR has never entered into or been
subject to any judgment, consent decree, compliance order or administrative
order with respect to any environmental or health and safety law or received any
request for information, notice, demand letter, administrative inquiry or formal
or informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any such law.
27
SECTION 10. Option Agreement; Restrictions on Transfer of Shares.
1. As of the date of the exercise of the Option, SHCR, the Company and the
Purchaser of the Shares of the Company shall enter into an option agreement
containing substantially the same terms and conditions as this Agreement (the
"Option Agreement").
2. The Company shall not transfer any Shares on its books unless the
Shareholder selling those Shares, and the Purchaser of those Shares shall have
first complied with the provisions of this Agreement and the Purchaser shall
agree in writing to be bound by the terms of the applicable Option Agreement.
3. Promptly after the Execution Date, each Shareholder shall deliver his or
her certificates for all of the Shares owned by him or her to SHCR for the
purpose of imprinting in bold the following legend on the Certificates
representing the Shares:
"The sale, pledge, assignment, encumbrance or other disposition, and the
registration or transfer of the shares represented by this Certificate are
restricted by the terms of a Purchase Option Agreement, dated as of March 4,
1998, by and among KENNETH TRIMMER, M.D., P.A. (the "Company"), Sheridan
Healthcare, Inc. ("SHCR") and each of the shareholders of the Company including
[insert name of Shareholder], a copy of which is on file in the principal office
of Sheridan."
SHCR shall cause this legend to be affixed to the Shares and shall not permit
any transfer of the Shares in violation of this Agreement. The Shareholder or
any subsequent Purchaser or Purchasers of Shares shall deliver his or her Shares
to the Trustee (as defined in the VTA), and the Trustee shall hold all Shares in
escrow on behalf of the Shareholder or the subsequent Purchaser or Purchasers of
the Shares.
4. None of the Shareholders shall, at any time sell, assign, transfer,
donate, or otherwise dispose of any Shares of the Company now, or at any time
hereafter owned by him or her, except in the case of a sale in accordance with
the provisions of this Agreement. Any attempted sale, assignment, transfer,
donation or other encumbrance in violation of this Section shall be null and
void and of no force or effect whatsoever.
SECTION 11. Indemnification.
1. Survival of Representations, Warranties, Etc. All representations,
warranties, agreements, covenants and obligations in this Agreement, MSA,
Employment Agreements, Restrictive Covenant Agreements, VTA (as defined below)
or in the Disclosure Schedule or in any certificate, exhibit, schedule or
agreement delivered by any party pursuant to the contemplated transactions are
material and may be relied upon by the party receiving the same and shall
survive the Closing regardless of any investigation by or knowledge of that
party and shall not merge into the performance of any obligation by any party to
this Agreement, all as subject to the provisions of this Section 11.
28
2. Indemnification by Shareholders. Except as otherwise provided in this
Section, each of the Shareholders and the Partner PA Shareholders on behalf of
himself and his successors, executors, administrators, estates, heirs and
permitted assigns, agree subsequent to the Closing to indemnify and hold
harmless SHCR, its subsidiaries, affiliates and each of their respective
officers, directors, employees and agents (individually a "Company Indemnified
Party" and collectively, the "Company Indemnified Parties") from and against and
in respect of all losses, liabilities, obligations, damages, deficiencies,
actions, suits, proceedings, demands, assessments, orders, judgments, fines,
penalties, costs and expenses (including the reasonable fees, disbursements and
expenses of attorneys, accountants and consultants) of any kind or nature
whatsoever (whether or not arising out of third-party claims and including all
amounts paid in investigation, defense or settlement of the foregoing)
sustained, suffered or incurred by or made against any Company Indemnified Party
(individually, a "Loss", collectively, "Losses") arising out of, based upon or
in connection with:
(a) fraud, intentional misrepresentation or a deliberate or willful
breach by the Company, the Partner PA, a Partner PA Shareholder or any
Shareholder of any of their representations, warranties or covenants under this
Agreement, in any Partner PA Related Document or in any of the Related
Documents.
(b) conditions, circumstances or occurrences which constitute or
result in any other breach of any representation or warranty made by the
Company, the Partner PA, a Partner PA Shareholder or any Shareholder in this
Agreement or in any schedule, exhibit, certificate, financial statement,
agreement or other instrument delivered under this Agreement, the Partner PA
Documents or any of the Related Documents, or by reason of any claim, action or
proceeding asserted or instituted arising out of any matter or thing covered by
any such representations or warranties;
(c) any breach of any other covenant or agreement made by the Company,
the Partner PA, a Partner PA Shareholder or any Shareholder in this Agreement or
in any schedule, exhibit, certificate, financial statement, agreement or other
instrument delivered under this Agreement, the Partner PA Related Documents or
any of the Related Documents, or by reason of any claim, action or proceeding
asserted or instituted arising out of any matter or thing covered by any such
covenant or agreement; and
(d) (i) any and all claims for injury (including death), claims for
damage, direct or consequential, or liability claims resulting from or connected
with products sold or services provided by the Company, the Partner PA, a
Partner PA Shareholder or any Shareholder or any of their agents or employees
prior to the Execution Date, including without limitation, any malpractice
claims; (ii) other personal injury or property damage claims relating to events
occurring on or prior to the Execution Date; (iii) amounts due in connection
with any Employee Program maintained or contributed to by the Company or the
Partner PA on or prior to the Execution Date; (iv) amounts paid or payable
relating to environmental matters including Losses resulting from or in
connection with the use, storage, or discharge into or presence in the ground,
water or atmosphere of any Hazardous Waste or Hazardous Material relating to the
Company, the Partner PA, a Partner PA Shareholder or any Shareholder or any
29
violation of an Environmental Law which occurred on or prior to the Execution
Date relating to Company, the Partner PA, a Partner PA Shareholder or any
Shareholder; (v) Losses relating to the failure of the Company or the Partner PA
to comply with applicable laws or regulations on or prior to the Execution Date;
and, (vi) Losses with respect to Taxes of the Company or the Partner PA
(including their respective predecessors) which relate to a time period prior to
the Execution Date.
Claims under clauses 11.2 (a) through (d) of this Section are collectively
referred to as "Company Indemnifiable Claims".
The rights of Company Indemnified Parties to recover indemnification in
respect of any occurrence referred to in clauses (a) and (c) through (e) of this
Section 11.2 shall not be limited by the fact that such occurrence may not
constitute an inaccuracy in or breach of any representation or warranty referred
to in clause (b) of this Section 11.2.
3. Limitations on Indemnification by Shareholders and the Partner PA
Shareholders.
(a) Threshold. Subject to the exceptions set forth in Section 11.3(c),
the Shareholders shall not be obligated to indemnify Company Indemnified Parties
in respect of any occurrence referred to in clauses (b) or (c) of Section 11.2
except to the extent the cumulative amount of Company Indemnifiable Losses under
those clauses (b) and (c) of Section 11.2 exceeds Fifty Thousand Dollars
($50,000.00) (the "Company Threshold"), whereupon the full amount of those
Losses in excess of the Company Threshold shall be recoverable in accordance
with the terms of this Agreement. In no event shall the Shareholder's Company
Threshold ,between this Agreement and the AOA exceed Fifty Thousand Dollars
($50,000.00).
Subject to the exceptions set forth in Section 11.3(c), the Partner PA
Shareholders shall not be obligated to indemnify Company Indemnified Parties in
respect of any occurrence referred to in clauses (b) or (c) of Section 11.2
except to the extent the cumulative amount of Company Indemnifiable Losses under
those clauses (b) and (c) of Section 11.2 exceeds Fifty Thousand Dollars
($50,000.00) (the "Partner PA Threshold"), whereupon the full amount of those
Losses in excess of the Partner PA Threshold shall be recoverable in accordance
with the terms of this Agreement. In no event shall the Partner PA Shareholders'
Company Threshold and Partner PA Threshold between this Agreement and the AOA
exceed Fifty Thousand Dollars ($50,000.00). Any Threshold limitation on
indemnity shall not apply to any monies due under any of the Related Documents
and this Agreement.
(b) Time Limits for Claims. Subject to the exceptions set forth in
11.3(c), indemnification with respect to Company Indemnifiable Losses in respect
of any occurrence referred to in clauses (b) or (c) of 11.2 shall expire on the
second anniversary of the Execution Date; provided, however, that in each case
if prior to the applicable date of expiration a specific state of facts shall
have become known which may constitute or give rise to any Company Indemnifiable
Loss as to which indemnity may be payable and a Company Indemnified Party shall
have given notice of such facts to Shareholder, then the right to
indemnification with respect thereto shall remain in effect until such matter
shall have been finally determined and disposed of, and any indemnification due
in respect thereof shall have been paid, according to the date on which notice
of the applicable claim is given.
30
(c) Aggregate Limitation of Losses Notwithstanding anything
in this Agreement, in no event shall the Shareholders and the Partner PA
shareholders be obligated to pay SHCR collectively more than Twenty Million
Dollars for any Losses under this Agreement and the AOA and the Related
Documents. For several obligations an individual Shareholder or Partner PA
Shareholder shall be liable for no more than Ten Million Dollars, provided,
however, for joint and several obligations, the preceding sentence shall apply.
(d) Joint and Several Liability Limitation. Except as otherwise
provided in this subsection, all obligations for indemnity under this Agreement,
the Related Documents and the Partner PA Related Documents are the joint and
several obligations of the Shareholders and the Partner PA Shareholders. Except
after a Departure (as defined below), if a Loss is readily and reasonably
identifiable as being derived from the Company, Partner PA, Partner PA
Shareholder or a Shareholder and the derivation of that Loss is not at all
reasonably attributable to the Partner PA or a Partner PA Shareholder, then the
Shareholders shall be severally responsible for that Loss. Except after a
Departure (as defined below) if a Loss is readily and reasonably identifiable as
being derived from the Partner PA or Partner PA Shareholder and the derivation
of that Loss is not at all reasonably attributable to the Company or a
Shareholder, then the Partner PA Shareholders shall be severally responsible for
that Loss. Notwithstanding the immediately preceding two sentences (the
"Severability Instances"), if a Shareholder or a PA Partner Shareholder ceases
his employment with the Partner PA or the Company (for any reason whatsoever) or
if the MSA or this Agreement or the AOA is terminated or materially altered
(collectively, a "Departure") other than by expiration, then the Severability
Instance as to those Partner PA Shareholders or Shareholders, as the case may
be, shall not apply and the affected persons shall in all events be jointly and
severally liable.
4. Indemnification by SHCR. SHCR agrees subsequent to the Execution Date to
indemnify and hold harmless the Shareholder Indemnified Parties from and against
and in respect of all Shareholder Losses sustained, suffered or incurred by or
made against any Shareholder arising out of, based upon or in connection with:
(a) fraud, intentional misrepresentation or a deliberate or willful
breach of SHCR or Acquisition of any of its representations, warranties or
covenants under this Agreement or in any certificate, schedule or exhibit
delivered pursuant to this Agreement or any of the Related Documents;
(b) conditions, circumstances or occurrences which constitute or
result in any breach of any representation or warranty made by SHCR in this
Agreement or the Related Documents or in any schedule, exhibit, certificate,
agreement or other instrument delivered under or in connection with this
Agreement or the Related Documents, or by reason of any claim, action or
proceeding asserted or instituted arising out of any matter or thing covered by
any such representations or warranties (collectively, "Shareholder
Representation and Warranty Claims");
(c) any breach of any covenant or agreement made by SHCR in this
Agreement or in any Related Documents delivered under this Agreement or the
Related Documents, or by reason of any claim, action or proceeding asserted or
instituted arising out of any matter or thing covered by any such covenant or
agreement; and
(d) a determination by the Internal Revenue Service that (i) the
Shareholder did not sell his Shares for federal income tax purposes as a result
of this Agreement and the Related Documents, or (ii) any portion of the Option
Consideration (other than any portion determined by the Internal Revenue Service
for federal income tax purposes to be allocable to the RCAs) does not constitute
an amount realized within the meaning of Section 1001 of the Code from the sale
of a capital asset as defined in Section 1222. The amount of any indemnity under
this Section 11.4(d) shall include, but not be limited to, any Taxes, penalties,
and interest resulting from any such determinations and shall be grossed-up for
the federal income tax thereon by dividing such amount by the difference between
one and the then highest individual marginal federal income tax rate.
Claims under clauses (a) through (d) are hereinafter collectively referred
to as "Shareholder Indemnifiable Claims".
31
5. Limitations on Indemnification by SHCR.
(a) The right of all Shareholders to indemnification under 11.4 shall
be subject to the following provisions:
(i) Subject to the exceptions set forth in Section 11.5(a)(iii),
SHCR shall not be obligated to indemnify Shareholder Indemnified Parties in
respect of any occurrence referred to in clauses Section 11.4 (b) or (c) except
to the extent the cumulative amount of Shareholder Indemnifiable Losses under
those clauses exceeds Fifty Thousand Dollars ($50,000.00) (the "Shareholder
Threshold"), whereupon the full amount of such Losses in excess of the
Shareholder Threshold shall be recoverable in accordance with the terms hereof.
Any threshold limitation on indemnity shall not apply to any monies due under
any of the Related Documents and this Agreement;
(ii) Subject to the exceptions set forth in 11.5(a)(iii),
indemnification with respect to Shareholder Indemnifiable Claims in respect of
any occurrence referred to in clauses (b) or (c) of Section 11.4 shall expire on
the second anniversary of the Execution Date; provided, however, that in each
case if prior to the applicable date of expiration a specific state of facts
shall have become known which may constitute or give rise to any Shareholder
Indemnifiable Claim as to which indemnity may be payable and a Shareholder
Indemnified Party shall have given notice of such facts to Shareholder, then the
right to indemnification with respect thereto shall remain in effect until such
matter shall have been finally determined and disposed of, and any
indemnification due in respect thereof shall have been paid, according to the
date on which notice of the applicable claim is given; and
(iii) Aggregate Limitation of Losses Notwithstanding anything in
this Agreement, in no event shall SHCR be obligated to pay the Shareholders
collectively more than Twenty Million Dollars for any Losses, under this
Agreement and the AOA and any of the Related Documents.
6. Notice; Defense of Claims.
Promptly after receipt by an indemnified party of notice of any claim,
liability or expense to which the indemnification obligations in this Agreement
would apply, the indemnified party shall give notice thereof in writing to the
indemnifying party, but the omission to so notify the indemnifying party
promptly will not relieve the indemnifying party from any liability except to
the extent that the indemnifying party shall have been prejudiced as a result of
the failure or delay in giving such notice. Such notice shall state the
information then available regarding the amount and nature of such claim,
liability or expense and shall specify the provision or provisions of this
Agreement under which the liability or obligation is asserted. If within twenty
(20) days after receiving such notice the indemnifying party gives written
notice to the indemnified party stating that: (a) it would be liable under the
provisions hereof for indemnity in the amount of such claim if such claim were
successful; and, (b) that it disputes and intends to defend against such claim,
liability or expense at its own cost and expense, then counsel for the defense
shall be selected by the indemnifying party (subject to the consent of the
indemnified party which consent shall not be unreasonably withheld) and the
indemnified party shall not be required to make any payment with respect to such
claim, liability or expense as long as the indemnifying party is conducting a
good faith and diligent defense at its own expense; provided, however, that the
32
assumption of defense of any such matters by the indemnifying party shall relate
solely to the claim, liability or expense that is subject or potentially subject
to indemnification. The indemnifying party shall have the right, with the
consent of the indemnified party, which consent shall not be unreasonably
withheld, to settle all Indemnifiable matters related to claims by third parties
which are susceptible to being settled provided its obligation to indemnify the
indemnifying party therefor will be fully satisfied. As reasonably requested by
the indemnified party, the indemnifying party shall keep the indemnified party
apprized of the status of the claim, liability or expense and any resulting
suit, proceeding or enforcement action, shall furnish the indemnified party with
all documents and information that the indemnified party shall reasonably
request and shall consult with the indemnified party prior to acting on major
matters, including settlement discussions. Notwithstanding anything herein
stated to the contrary, the indemnified party shall at all times have the right
to fully participate in such defense at its own expense directly or through
counsel; provided, however, if the named parties to the action or proceeding
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate under applicable
standards of professional conduct, the expense of separate counsel for the
indemnified party shall be paid by the indemnifying party, provided, however,
that the separate counsel selected by the indemnified party shall be approved by
the indemnifying party, which approval shall not be unreasonably withheld. If no
such notice of intent to dispute and defend is given by the indemnifying party,
or if such diligent good faith defense is not being or ceases to be conducted,
the indemnified party shall, at the expense of the indemnifying party, undertake
the defense of (with counsel selected by the indemnified party), and shall have
the right to compromise or settle (exercising reasonable business judgment),
such claim, liability or expense. Provided however, before settling the
indemnified party shall first use reasonable efforts to obtain the consent to
that settlement from the indemnifying party, which consent shall not be
unreasonably withheld. After using reasonable efforts without success the
indemnified party may settle without the consent of the indemnifying party
without any prejudice to its claim for indemnity. If such claim, liability or
expense is one that by its nature cannot be defended solely by the indemnifying
party, then the indemnified party shall make available all information and
assistance that the indemnifying party may reasonably request and shall
cooperate with the indemnifying party in such defense.
7. Use of SHCR Common Stock to Pay Indemnification. In the event that the
Company or the Shareholders or the Partner PA Shareholders are liable for
indemnification under this Agreement they may satisfy their obligations, in
whole or in part by tendering shares of SHCR Common Stock, with a value
determined in accordance with the next succeeding sentence. The value of the
SHCR Common Stock tendered for payment in satisfaction of an indemnification
obligation shall be determined based upon the average of the last sale price per
share of Common Stock on the NASDAQ National Market for the last fifteen (15)
trading days immediately prior to date the SHCR Common Stock is tendered to the
indemnified party.
SECTION 12. Term of Option.
The Option may be exercised at any time after the execution and delivery of
this Agreement up to the Option Expiration Date (as defined below). The Option
Expiration Date shall be March 4, 2097, or if a court of competent jurisdiction
determines that the Option Expiration Date renders this Agreement unenforceable
or invalid, then the Option Expiration Date shall be reduced to a date which
would cure the invalidity or unenforceability. In the event that a regulatory
authority or court of competent jurisdiction shall determine that this Option
Agreement or the option contemplated by this Agreement, violates any statutes,
rules or regulations (and that determination is not stayed or appealed within
ninety (90) days of that determination), or is unenforceable or invalid, the
parties will negotiate in good faith to enter into an alternative legally valid
arrangement between SHCR or Sheridan and the then current Shareholders which
substantially preserves for the parties the relative economic benefits of this
Agreement.
SECTION 13. Miscellaneous.
1. Expenses and Taxes. Except as otherwise provided in this Agreement, all
accounting, legal and other costs and expenses incurred in connection with the
negotiation of this Agreement and the exercise of the Option granted by this
Agreement shall be paid by the party incurring those fees, costs and expenses.
Shareholder shall be solely responsible for all (i) taxes imposed upon the
conveyance of the Shares, and (ii) sales, use or excise taxes payable in
connection with the contemplated exercise of the Option. In no event shall SHCR
be liable for Taxes imposed upon the Company or any of the Shareholders for
periods or transactions prior to the Execution Date.
33
The parties agree to allocate the Option Consideration set forth in
Schedule 1.1 to the Option for all purposes (including financial accounting and
Tax purposes). The parties acknowledge that the Company has filed a consent with
the Internal Revenue Service pursuant to Section 341(f) of the Code. SHCR shall
prepare or cause to be prepared and file or cause to be filed all Tax returns of
the Company with respect to taxable periods ending after the Execution Date and
shall pay or cause to be paid all Taxes of the Company with respect to periods
or transactions after the Execution Date. The parties shall cooperate fully, as
and to the extent reasonably requested by the other party, in connection with
the filing of any Tax returns pursuant to this Section and any audit, litigation
or other proceeding with respect to such Taxes. The Company and the Shareholders
are solely responsible for filing any tax returns for the time period starting
from the date of their last filings and ending on the day immediately preceding
the Execution Date and pay all taxes relating thereto.
2. Survival. All of the respective representations and warranties of the
parties to this Agreement or in any certificate delivered by any party incident
to the contemplated Option are material and may be relied upon by the party
receiving the same and shall survive beyond the date of exercise of the Option
for a time period equal to the applicable statutes of limitations. All
statements in this Agreement shall be deemed representations and warranties. The
due diligence investigations conducted by the parties to this Agreement and the
results thereof shall not diminish or otherwise affect any of the
representations and warranties set forth in this Agreement.
3. Notices. Whenever any notice, request, information or other document is
required or permitted to be given under this Agreement, that notice, demand or
request shall be in writing and shall be either hand delivered, sent by United
States certified mail, postage prepaid or delivered via overnight courier to the
addresses below or to any other address that any party may specify by notice to
the other parties. No party shall be obligated to send more than one notice to
each of the other parties and no notice of a change of address shall be
effective until received by the other parties. A notice shall be deemed received
upon hand delivery, two days after posting in the United States mail or one day
after dispatch by overnight courier.
If to SHCR
and any of the Purchasers: Sheridan Healthcare, Inc.
4651 Sheridan Street, Suite 400
Hollywood, Florida 33021
ATTN: Jay A. Martus, Esq.
Vice President and General Counsel
If to the Shareholders: Kenneth J. Trimmer, M.D.
5128 Corinthian Bay
Plano, Texas 75093
If to the Company: Kenneth J. Trimmer, M.D., P.A.
8160 Walnut Hill Lane, Suite 001
Dallas, Texas 75231
With a copy to:Jenkens & Gilchrist, a Professional
Corporation 1445 Ross Avenue, Suite 3200
Dallas, Texas 75202 ATTN: Kenneth Gordon,
Esq.
34
Any party to this Agreement may change the address to which any
communications are to be directed to that party by giving notice of the change
to the other parties in the manner provided in this Section.
4. Entire Agreement. This Agreement, including the schedules attached to
this Agreement set forth the entire agreement and understanding of the parties
in respect of the subject matter of this Agreement and merges and supersedes all
prior agreements, arrangements and understandings related to the subject matter
hereof or thereof.
5. Successors and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors, assigns,
heirs, estates, beneficiaries, executors and legal and personal representatives.
6. Amendment and Waiver. Failure of any party to enforce one or more of the
provisions of this Agreement or to require at any time performance of any of the
obligations under this Agreement shall not be construed to be a waiver of any
provisions by any party nor to in any way affect the validity of this Agreement
or any party's right to enforce any provision of this Agreement nor to preclude
any party from taking all other action at any time which it would legally be
entitled to take. All waivers to be effective shall be in writing signed by the
waiving party. This Agreement may not be modified or terminated orally, and no
modification or termination shall be binding unless in writing and signed by the
parties to this Agreement. Each party agrees to be bound by any telecopied
signature to this Agreement or any agreement executed in connection herewith as
if a manually executed signature page had been executed and delivered.
7. Further Assurances. The parties shall execute all other documents or
instruments and shall take all other actions as may reasonably be requested by
the other to effect the purposes of this Agreement.
8. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
9. Governing Law. This Agreement shall be governed by and construed
in accordance with State Law, without regard to its conflicts of laws
principles.
10. Severability. The invalidity or unenforceability of any one or more of
the words, phrases, sentences, clauses, or sections contained in this Agreement
shall not affect the validity or enforceability of the remaining provisions of
this Agreement or any part of any provision, all of which are inserted
conditionally on their being valid in law, and in the event that any one or more
of the words, phrases, sentences, clauses or sections contained in this
Agreement shall be declared invalid or unenforceable, this Agreement shall be
construed as if such invalid or unenforceable word or words, phrase or phrases,
sentence or sentences, clause or clauses, or section or sections had not been
inserted or shall be enforced as nearly as possible according to their original
terms and intent to eliminate any invalidity or unenforceability. If any
invalidity or unenforceability is caused by the length of any period of time set
forth in any part of this Agreement, the period of time shall be considered to
be reduced to a period which would cure the invalidity or unenforceability.
35
11. Litigation; Prevailing Party. Except as otherwise required by
applicable law or as expressly provided in this Agreement, in the event of any
litigation, including appeals, with regard to this Agreement, the prevailing
party shall be entitled to recover from the non-prevailing party all reasonable
fees, costs, and expenses of counsel (at pre-trial, trial and appellate levels).
12. Construction. This Agreement shall be construed without regard to any
presumption or other rule requiring construction against the party causing this
Agreement to be drafted, including any presumption of superior knowledge or
responsibility based upon a party's business or profession or any professional
training, experience, education or degrees of any member, agent, officer of
employee of any party. If any words in this Agreement have been stricken out or
otherwise eliminated (whether or not any other words or phrases have been added)
and the stricken words initialed by the party against whom the words are
construed, then this Agreement shall be construed as if the words so stricken
out or otherwise eliminated were never included in this Agreement and no
implication or inference shall be drawn from the fact that those words were
stricken out or otherwise eliminated.
13. Word Usage. Words used in the masculine shall apply to the feminine
where applicable, and wherever the context of this Agreement directs, the plural
shall be read as the singular and the singular as the plural.
14. Mergers and Consolidation; Successors and Assigns. Neither the Company
nor any of the Shareholders shall have the right to assign their rights or
delegate their duties and obligations under this Agreement. SHCR may freely
assign and delegate all of its rights and duties under this Agreement.
Additionally, the parties each agree that upon the sale of all or substantially
all of the assets, business and goodwill of SHCR or all or substantially all of
the stock of SHCR to another company or any other entity, or upon the merger or
consolidation of SHCR with another company or any other entity (each a "Change
in Control Event"), this Agreement shall inure to the benefit of, and be binding
upon, the Shareholders, the Company and SHCR and any entity purchasing the
assets, business and goodwill or stock, or surviving merger or consolidation (a
"Successor").
15. Reformation Upon Change in or Violation of Health Laws.
(a) Reformation. In the event that subsequent to the Execution
Date (i) the contents or validity of this Agreement or any of the Related
Documents are successfully challenged by any Governmental Authority under the
Health Laws or (ii) any party determines, based upon advice received from legal
counsel, that a violation of a Health Law has occurred as a result of this
Agreement or the documents or contemplated transactions, or that there is a
substantial risk that a violation of a Health Law will occur as a result of this
Agreement or the Related Documents, that is reasonably expected to have a
material adverse affect on any of the parties, that party shall notify the other
parties with respect thereto. If the parties are unable to agree in good faith
on the need for reformation as contemplated in the foregoing sentence, then any
party may request and initiate a binding arbitration in Dallas, Texas, to be
conducted pursuant to the provisions of this Agreement. In the event the
arbitrator shall determine that reformation is necessary, the parties shall act
in good faith and use their reasonable efforts to analyze, revise, reform and,
to the extent necessary, restructure this Agreement and the Related Documents
and the contemplated transactions to fully comply with all applicable Health
Laws in a manner that is equitable to all parties in light of the intent of the
parties regarding the contemplated transactions by this Agreement and the
Related Documents as evidenced by this Agreement and the Related Documents. If
SHCR, Purchaser, the Company and the Shareholders cannot reach agreement on any
term of such revision, reformation or restructuring contemplated in this section
within a reasonable time, any of those parties may request and initiate a
binding arbitration in Dallas, Texas to be conducted pursuant to the provisions
of this Agreement to determine the extent and nature of any reformation or, if
reformation is not possible, recission.
36
(b) Failure to Reform; Recission of Agreement. If an event causing the
application of this section occurs within six (6) months of the Execution Date
and the parties in good faith are unable to modify the terms of this Agreement
in accordance with this section, the Parties shall rescind this Agreement, and
to the fullest extent possible, the Seller Shares shall be released to the
Shareholders, the Option Consideration and the Purchase Price, if any, shall be
returned to SHCR and Purchaser, and the parties shall take such other reasonable
actions as are necessary to place the parties as near as reasonably possible to
the positions of the parties prior to entering into this Agreement. If an event
causing the application of this section occurs after six (6) months of the
Execution Date and before the fifth anniversary of the Execution Date, and the
parties in good faith are unable to modify the terms of this Agreement in
accordance with this section the Parties shall rescind this Agreement, and to
the fullest extent possible, the Seller Shares shall be released to the
Shareholders, and the Unrealized Percentage of the Option Consideration and the
Purchase Price, if any, shall be returned to SHCR and Purchaser, and the parties
shall take all other reasonable actions as are necessary to place the parties as
near as reasonably possible to the positions of the parties prior to entering
into this Agreement.
(c) Defined Terms. As used in this Agreement, the following terms
shall have the meanings provided below unless the context otherwise requires:
(1) "Governmental Authority" shall mean any and all federal,
Texas or local governments, governmental institutions, public authorities and
other governmental entities of any nature whatsoever, and any subdivisions or
instrumentalities thereof, including, but not limited to, departments, boards,
bureaus, commissions, agencies, courts, administrations and panels, and any
divisions or instrumentalities thereof, whether permanent or ad hoc and whether
now or hereafter constituted and/or existing.
(2) "Health Laws" shall mean applicable provisions of the federal
Social Security Act (including the federal Medicare and Medicaid Anti-Fraud and
Abuse Amendments (42 U.S.C. §1320a-7, -7a and -7b) and the federal
physician anti-self referral law (42 U.S.C. §1395nn, the "Stark Bill")),
the Texas Medical Practice Act (Article 4495b of the Texas Revised Civil
Statutes, the "TMPA"), and the Texas Illegal Remuneration Law (Texas Health &
Safety Code §161.091), as such laws may now exist or be amended hereafter.
(3) "Unrealized Percentage" shall mean the percentage which is
equal to 100 minus 4 for each 12 month calendar year (or the pro rata portion
thereof for periods less than a full calendar year) which has passed since the
sixth (6th) month anniversary of the date of this Agreement.
16. Corporate Practice of Medicine. Nothing contained herein is intended to
(a) constitute the use of a medical license for the practice of medicine by
anyone other than a licensed physician; (b) aid Purchaser or any other
corporation to practice medicine when in fact such corporation is not authorized
to practice medicine; or (c) do any other act or create any other arrangements
in violation of the TMPA. Any other provision of this Agreement to the contrary
notwithstanding, SHCR shall not exercise any of its rights under this Agreement
to direct the medical, professional or ethical aspects of the practice of
medicine by the Company or its physician employees or to make credentialing,
quality assurance, utilization review or peer review policies for the Company,
all of which shall be left to the sole direction of the physicians on the
Company's board of directors and the physician or physicians having the right to
vote the shares of the Company.
37
17. Compliance with Health Laws. The parties enter into this Agreement with
the intent of conducting their relationship in full compliance with applicable
state, local and federal law, including, but not limited to, the Health Laws.
Notwithstanding any unanticipated effect of any of the provisions herein, no
party to this Agreement will intentionally conduct itself under the terms of
this Agreement in a manner to constitute a violation of the Health Laws.
18. Referral Policy. Nothing contained in this Agreement shall require
(directly or indirectly, explicitly or implicitly) any of the Parties to refer
or direct any patients to any other party or to use another party's facilities
as a precondition to receiving the benefits set forth herein or in establishing
the valuation of the Option or the Sale Shares.
19. Arbitration; Jury Trial. THE PARTIES SHALL USE GOOD FAITH NEGOTIATION
TO RESOLVE ANY CONTROVERSY, DISPUTE OR DISAGREEMENT ARISING OUT OF, RELATING TO
OR IN CONNECTION WITH THIS AGREEMENT OR THE BREACH OF THIS AGREEMENT. IN THE
EVENT THE PARTIES ARE UNABLE TO RESOLVE ANY DISPUTE OR CONTROVERSY BY
NEGOTIATION, EITHER PARTY MAY SUBMIT SUCH DISPUTE TO BINDING ARBITRATION WHICH
SHALL BE CONDUCTED IN DALLAS, TEXAS. THE BINDING ARBITRATION SHALL BE CONDUCTED
IN ACCORDANCE WITH THE RULES OF PROCEDURE FOR ARBITRATION OF THE NATIONAL HEALTH
LAWYERS ASSOCIATION ALTERNATIVE DISPUTE RESOLUTION SERVICE. JUDGMENT ON THE
AWARD OR DECISION RENDERED BY THE ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION. NOTWITHSTANDING THE TERMS OF THIS SECTION, IN THE EVENT OF ANY
BREACH OR DISPUTE OF THIS AGREEMENT OR ANY OF THE RELATED AGREEMENTS FOR WHICH
AN EQUITABLE REMEDY IS APPROPRIATE THE AGGRIEVED PARTY MAY SEEK AND OBTAIN
RELIEF IN A COURT OF COMPETENT JURISDICTION TO AVAIL ITSELF OF THE EQUITABLE
REMEDIES. IN THAT CASE SHOULD ANY PENDENT LEGAL CLAIMS ARISE, THOSE CLAIMS SHALL
BE SUBMITTED TO BINDING ARBITRATION, HOWEVER IF THE COURT FAILS TO REMAND THOSE
LEGAL CLAIMS TO ARBITRATION, THEN FOR THOSE CLAIMS, THE PARTIES WAIVE ALL RIGHTS
TO ANY TRIAL BY JURY IN ALL LITIGATION RELATING TO OR ARISING OUT OF THIS
AGREEMENT.
38
Each of the parties to this Agreement have caused this Agreement to be
duly executed as of the date first written above.
SHAREHOLDERS:
Kenneth J. Trimmer, M.D.
COMPANY:
KENNETH TRIMMER, M.D., P.A.,
a Texas professional association
By:
Kenneth J. Trimmer, M.D.
President
PARTNER PA SHAREHOLDERS:
Kenneth J. Trimmer, M.D.
SHCR:
SHERIDAN HEALTHCARE, INC.,
a Delaware corporation
By:
Jay A. Martus
Vice President and General Counsel
39
Exhibit A to Purchase Option Agreement
Shareholders of the Company
Name of Shareholder Number of Shares Owned
Kenneth J. Trimmer, M.D. 1,000
40
Exhibit B to Purchase Option Agreement
PHYSICIAN EMPLOYMENT AGREEMENT
THIS PHYSICIAN EMPLOYMENT AGREEMENT (the "Agreement") dated as of March 4,
1998 (the "Execution Date"), is entered into by and between KENNETH TRIMMER,
M.D., P.A., a Texas professional association and its successors and assigns
("KTPA"), and KENNETH J. TRIMMER, M.D., (the "Physician" or "Dr.
Trimmer").
PRELIMINARY STATEMENTS
One day after the execution and delivery of this Agreement, KTPA, Michael
Cavenee, M.D., P.A., also a Texas professional association ("MCPA", collectively
with KTPA, the "Company"); each of the shareholders of the Company, and Sheridan
Healthcorp, Inc., a Florida corporation ("Sheridan") have executed and delivered
a Management Services Agreement (the "MSA") pursuant to which Sheridan will
manage all of the business of the Company except the provision of medical
services. Capitalized terms not defined in this Agreement have the meaning given
to them in the MSA.
KTPA desires to employ the Physician and the Physician desires to be
employed with KTPA, on the terms and subject to the conditions contained in this
Agreement.
In consideration of the parties' promises and mutual covenants in this
Agreement, KTPA and the Physician agree as follows:
AGREEMENT
1. Employment. As of the Commencement Date, KTPA employs the
Physician and the Physician accepts the employment upon this Agreement's terms
and conditions.
2. Term of Employment. Unless terminated earlier under the provisions of
this Agreement, the initial term of employment of the Physician shall be for a
period of five (5) years (the "Initial Term"), commencing on March 5, 1998, (the
"Commencement Date") and expiring on March 4, 2003 (the "Expiration Date").
Unless terminated earlier under the provisions of this Agreement, and provided
that both (i) the Physician shall be less than sixty five (65) years of age on
the Expiration Date of the Initial Term, or a Renewal Term (as defined below);
and, (ii) the Company has met the Earnings Threshold (as defined below), then
the Physician may elect, in his or her sole discretion, to extend the Initial
Term or a Renewal Term for an additional period of three (3) years (a "Renewal
Term") by sending a written notice (a "Renewal Notice") to KTPA at least One
Hundred Eighty (180) days prior to the expiration of the Initial Term or Renewal
Term then in effect, as the case may be. Any Renewal Terms shall be upon the
same terms and conditions as contained in this Agreement, except where otherwise
specified in this Agreement or by the parties in writing. Unless terminated
earlier under the provisions of this Agreement, this Agreement shall terminate
upon the Expiration Date of the Initial Term or Renewal Term then in effect (i)
if the Physician elects not to extend the term of the Agreement by timely
sending KTPA a Renewal Notice; (ii) if the Physician is older than sixty five
(65) years of age on the Expiration Date of the Initial Term or a Renewal Term,
as the case may be; or (iii) in KTPA's sole discretion, if the Company has not
met the Earnings Threshold as of the date the Renewal Notice is received. For
purposes of this Agreement, any references to the "Term" of the Agreement shall
be to the Initial Term and any Renewal Terms then in effect.
41
For purposes of this Agreement, a Contract Year shall be defined as the
twelve (12) month period commencing on the Commencement Date of this Agreement
(or on its anniversary in subsequent years) and ending on the day before the
anniversary of the Commencement Date. During the term of the MSA, the Earnings
Threshold shall be met when the aggregate amount of all monthly Management Fees
paid to Sheridan pursuant to Article IV of the MSA during each Contract Year of
the Initial Term or Renewal Term then in effect is equal to at least Two Million
Five Hundred Twenty Five Thousand Dollars ($2,525,000.00) (the "Base Amount").
In the event that the MSA is terminated for any reason, the Earnings Threshold
shall be met if the net earnings of the Company for the most recent four (4)
quarters for which financial information is available on the expiration date of
the Initial Term or Renewal Term then in effect (after payment of any physician
base compensation pursuant to Section 3(a)(i) of this Agreement or pursuant to
any other written arrangement with any other physician employee of the Company,
but before payment of any Incentive Compensation pursuant to Section 3(a)(iii)
of this Agreement or pursuant to any other written arrangement with any other
physician employee of the Company) is at least equal to the Base Amount.
3. Compensation. During the Term, the Physician shall be compensated as
follows:
(a) Monetary Compensation.
(i) Base Compensation. Provided that this Agreement has not been
terminated, KTPA shall pay to the Physician as compensation for the performance
of his or her duties under this Agreement, base compensation (the "Base
Compensation") at an annual rate of Two Hundred Thousand Dollars ($200,000.00)
during the Initial Term and any Renewal Terms (or the pro rata portion thereof
for periods less than a full Contract Year).
The Physician shall be paid Base Compensation bi-weekly in
substantially equal installments, or at more frequent intervals as KTPA may
determine, subject to all applicable withholdings, set offs, and taxes.
(ii) Incentive Compensation during the Term of the MSA. Provided
that this Agreement has not been terminated, during each Contract Year of the
Term, and provided the MSA has not been terminated, to the extent permitted by
law, KTPA shall pay to the Physician incentive compensation (the "Incentive
Compensation") in an amount equal to the Physician's Share (as defined below) of
any amounts paid to the Company pursuant to Sections 4.1(d) and 4.1(e) of the
MSA. The Physician's Share shall be equal to the percentage set forth opposite
the Physician's name on Schedule 3(a)(ii) attached to this Agreement, as amended
by written agreement of the parties from time to time.
(iii) Incentive Compensation upon termination of the MSA.
Provided that this Agreement has not been terminated, upon termination of the
MSA and to the extent permitted by law, at the end of each Contract Year, KTPA
shall pay to the Physician as Incentive Compensation an amount equal to the
Physician's Share of the Additional Compensation Amount (as defined below), if
any, and Physician's Share of the Excess Net Earnings (as defined below), if
any. For purposes of this Agreement, the Additional Compensation Amount shall be
equal to the Net Earnings (as defined below) which are above the Base Amount, up
to a maximum of Two Hundred Thirty Thousand Dollars ($230,000.00) For purposes
of this Agreement, Excess Net Earnings for any Contract Year shall be equal to
Forty percent (40%) of the Net Earnings (as defined below) which are above the
Base Amount after payment of any Additional Compensation Amount. Net Earnings
means the net earnings of the Company for the most recent four (4) quarters for
which financial information is available at the expiration date of a Contract
Year as calculated by Sheridan according to generally accepted accounting
principles applied on a consistent basis as provided by the FASB, after payment
of any base compensation, but before payment of any incentive compensation to
the Physician or any shareholders or physician employees of the Company.
42
Any Incentive Compensation payable pursuant to this Agreement
shall be paid to the Physician within ninety (90) days of the end of each
Contract Year, or as soon as reasonable practicable thereafter, subject to all
applicable withholds, set offs and taxes. In the event this Agreement is
terminated during a Contract Year, the Physician shall receive the pro rata
portion of his or her Incentive Compensation attributable to the portion of the
Contract Year during which the Physician provided services to KTPA.
(b) Physician Benefit Plans. During the Term, the Physician shall be
entitled to participate in or benefit from the benefit plans and policies that
are afforded to other similarly situated KTPA or physician employees. KTPA
retains the right to terminate or alter in its sole and absolute discretion, any
benefit plans or policies from time to time subject to the terms of the MSA.
(c) Vacation and Sick Days. The Physician shall accrue five (5) weeks
paid vacation time during each twelve (12) month calendar year or a pro rata
amount for periods less than a full calendar year. The Physician shall also
accrue six (6) paid sick days during each calendar year or a pro rata amount for
periods less than a full calendar year. Vacation and sick days shall be used
within the calendar year, and vacation days shall only be used at the times and
intervals mutually agreed upon between Physician and KTPA. The Physician shall
not be entitled to any additional compensation for unused vacation and sick
days. Additionally, any time spent by Physician on (i) religious holidays; or
(ii) education, through the attendance of lectures, seminars or other
educational activities, at a time when Physician would otherwise be required to
provide services to KTPA shall be considered vacation time. Physician is
expected to use his or her vacation time for fulfillment of all of his or her
CME requirements.
(d) Licenses, Staff, Association and Society Fees. During the Term,
KTPA shall pay Physician's applicable hospital medical staff fees and
professional license fees which enable Physician to fulfill his or her
obligations under this Agreement. During the Term, KTPA shall pay up to One
Thousand Five Hundred Dollars ($1,500.00) per calendar year of professional
association and societies dues and membership fees selected by the Physician.
(e) Professional Liability Insurance. During the Term, the
following will apply:
(i) KTPA shall insure, at its cost, the Physician under KTPA's
current professional liability policy ("Physicians' Insurance") in the amount of
$1,000,000.00 for each claim and $3,000,000.00 annual aggregate limit and the
costs for such insurance shall be borne by KTPA;
(ii) in the event KTPA determines to provide professional
liability insurance for the Physician from other than Physicians' Insurance, at
its costs, KTPA agrees to provide coverage limits no less than as specified in
subsection (i) above;
(iii) subject to Section 3(e)(i) and 3(e)(vi), KTPA may, in its
absolute sole discretion, at any time during the Term, cancel, continue, modify,
change or substitute the malpractice insurance policy coverage for Physician
and/or KTPA for Physician's provision of medical services while acting in the
scope of his or her employment pursuant to the terms and conditions of this
Agreement which was obtained pursuant to KTPA's obligations under this
Agreement;
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(iv) Physician shall immediately execute and deliver, in strict
accordance with KTPA's written instructions, all documents and instruments
necessary to effectuate the provisions of this Section;
(v) Physician agrees to act in full accordance with the terms and
conditions of any and all malpractice insurance policies, copies of which shall
be provided to the Physician; and,
(vi) subject to Section 3(e)(i) and 3(e)(iii), KTPA will obtain a
continuous claims made professional liability insurance policy to cover
Physician pursuant to the terms of this Agreement. In the event Physician is no
longer employed by KTPA, KTPA shall, at KTPA's expense, continue to cover
Physician for medical malpractice claims arising out of his or her employment
under this Agreement through the applicable statute of limitations by: (i)
continuing the continuous claims made professional liability insurance policy;
(ii) purchasing a replacement continuous claims made professional liability
insurance policy with retroactive coverage which does not create any lapse in
coverage; or, (iii) purchasing appropriate tail coverage to meet its obligation
under this subparagraph.
(f) Withholdings. KTPA shall withhold from any compensation or other
benefits payable under this Agreement, or arrange for the payment of, any
federal, state, city or other taxes as shall be required pursuant to any law or
governmental regulation or ruling.
(g) Patient Referrals. The parties agree that the benefits and
compensation paid to Physician under this Agreement are fair market value for
services rendered and do not require, are not payment to induce nor are in an
any way contingent upon, the referral of patients or any other arrangement for
the provision of any item or service offered by KTPA. The parties to this
Agreement agree that no payments made under this Agreement are made in return
for or to induce any person to: (i) refer an individual to anyone for the
furnishing or arranging for the furnishing of items or services for which
payment may be made in whole or in part under Medicare or Medicaid; or, (ii)
purchase, lease, order or arrange for or recommend purchasing, leasing or
ordering any good, facility, service or item for which payment may be made in
whole or in part under Medicare or Medicaid.
4. Employment Duties.
(a) The Physician agrees during his or her employment under this
Agreement to: (i) provide medical services on behalf of KTPA as a duly licensed
physician under the laws of the State of Texas; (ii) keep all records as are
necessary and reasonably required by KTPA to assist KTPA in the proper
administration and management of its business; and, (iii) perform any other
duties and assignments relating to the business of KTPA, its Affiliates (as
defined below) and subsidiaries, as KTPA's Board of Directors or its delegatees
reasonably directs, provided further that those duties or assignments shall be
reasonably related to the Physician's expertise and experience ((i), (ii) and
(iii) shall be collectively, the "Physician Duties"). In all events the
Physician's duties shall be reasonable and Physician shall not be required to
breach any of his ethical responsibilities as defined in the American Medical
Association's Code of Conduct. During the Term, the Physician shall, except
during vacation periods, approved leaves and periods of illness, devote
sufficient business time and attention to the performance of the Physician
Duties under this Agreement and shall use his or her best efforts, skills and
abilities to perform his or her duties in accordance with applicable laws which
are brought to his or her attention by KTPA and to promote KTPA's best
interests.
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(b) Call. The Physician agrees and acknowledges that his or her
services may be necessary on evenings and weekends, and shall be available for
weekday and weekend call in accordance with call policies and schedules as
established by KTPA. Any call coverage involving physicians not employed by KTPA
may only be arranged with the prior written consent of KTPA, after verification
of the credentials, malpractice history and insurance coverages of the
non-employee physicians who are proposed to be providing call coverage.
(c) Access to Records. Upon written request, and to the extent
required by Title 42 of the United States Code, Section 1395(x)(v)(1)(I), as
amended, Physician agrees to make available to the Secretary of the United
States Department of Health and Human Services or the Comptroller General of the
United States, or any of their duly authorized representatives, this Agreement,
all documents and records necessary to certify the nature and extent of services
provided by Physician under this Agreement.
(d) Licensure and Certification. The Physician agrees as a condition
of his or her employment under this Agreement to maintain all required state and
governmental licenses, certifications and authorizations necessary to perform
his or her obligations under this Agreement.
(e) Activities. KTPA shall reimburse Physician for any expenses
incurred by the Physician, which were reasonable business expenses, incurred in
conformity with written KTPA policies and after submission of documentation
regarding those expense as required by KTPA policies.
(f) Medical Records. With respect to all services performed by
Physician under this Agreement, the Physician agrees to complete all medical
records with respect to patient care in accordance with the policies and
procedures of KTPA and further agrees to complete in a timely manner, all forms
and ancillary records which may be required by KTPA policy, third-party payors
or others in connection with patient care.
(g) Medical Staff Privileges. During the Term as requested by KTPA,
Physician shall become a member of the medical staff and maintain other
privileges (the "Privileges") at any hospital, ambulatory surgical center or
other facility where KTPA provides medical services in the Dallas Metropolitan
Area at the locations listed on Schedule 4 (g).
(h) Non-Discrimination. The Physician agrees not to discriminate
against patients because of race, color, sex, age, religion, payor or health
status.
(i) HMOs, IPAs, PPOs, and Employer Groups, Etc. For and on behalf of
Physician, KTPA shall have the sole and exclusive right and authority to enter
into contractual relationships with HMOs, IPAs, PPOs, and employer groups
(collectively "Third Party Payor(s)"), or other managed care arrangements.
Physician shall provide the same quality of care to all patients from these
sources as is provided to other patients of KTPA. Upon request from KTPA,
Physician shall execute all Third Party Payor documents as "provider" if deemed
necessary or advisable by KTPA. Physician shall not contract with any Third
Party Payors without KTPA's prior written consent in each instance.
(j) Miscellaneous.
(i) The Physician further agrees and acknowledges that he or she
shall comply with and follow all reasonable written policies, standards, rules
45
and regulations established by KTPA from time to time in performing the
Physician Duties under this Agreement which are provided to the Physician, and
agrees to be bound by and comply with the terms and conditions of other
agreements to which KTPA is a party to, or to which it may become a party to,
with hospitals, ambulatory surgical centers, insurance companies, third party
payors and other providers of medical services in connection with the provision
of medical services.
(ii) Except as provided in Schedule 4(j)(ii), the Physician shall
not, during his or her employment under this Agreement, render medical services
(except for non-compensated good samaritan emergencies), or expert witness
testimony or legal medical consulting services or any other related services,
for any other person or entity as an employee, agent, independent contractor or
otherwise .
(iii) Without KTPA's prior written consent exercisable in its
reasonable discretion, the Physician shall not, during his or her employment
under this Agreement, devote any time to or engage in any self-employment or
employment activities . Notwithstanding the preceding sentence, as long as the
foregoing does not interfere with Physician's provision of services under this
Agreement, Physician may lecture, teach and publish without obtaining KTPA's
consent, which shall not be unreasonably withheld.
(iv) The Physician shall immediately notify KTPA of any and all
incidents, unfavorable occurrences, notices or claims made arising out of his or
her services under this Agreement as soon as he or she becomes aware of this
information and shall cooperate in any investigation and in the defense of any
incidents, unfavorable occurrences, notices and claims.
(v) The Physician agrees to be bound by and comply with the terms
and conditions of the MSA, applicable to Physician.
5. Duty to Account.
(a) Except as otherwise permitted by the terms of this Agreement,
Physician shall assign, account, and pay to KTPA all accounts receivable,
compensation and any other form of remuneration due from or paid by any source
other than KTPA attributable to (i) services he or she has rendered on behalf of
KTPA under this Agreement; (ii) services he or she has rendered during the Term
in violation of the terms of this Agreement including without limitation, a
violation of Sections 4 and 8; or (iii) sums which come into his or her
possession which are attributable to the services of other employees of KTPA,
including, but not limited to, fees for medical services, teaching, lecturing,
consulting, research, court testimony and publication of articles of a
professional nature (the accounts receivable, compensation and other
remuneration attributable to services described in (i), (ii) and (iii) are
collectively the "KTPA Receivables"). Physician appoints KTPA as his or her
attorney in fact to execute, deliver and/or endorse checks, applications for
payments, insurance claim forms or other instruments or documents, convenient or
required in the exclusive discretion of KTPA to fully collect, secure and
realize all KTPA Receivables and other sums due with respect to services
provided under this Agreement. This power of attorney is coupled with an
interest, is irrevocable and shall survive the expiration or termination of this
Agreement for a time period without limitation for all services rendered during
the Term. Disability insurance benefits and medical expense reimbursements
received by Physician pursuant to any formal plan of KTPA shall not be
considered a KTPA Receivable for purposes of this Section.
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(b) All KTPA Receivables shall be the sole property of KTPA. In no
event shall Physician be entitled to any portion of KTPA Receivables, or the
proceeds from KTPA Receivables, during the Term or after the termination of this
Agreement, whether or not KTPA Receivables may have been derived in any way from
the performance of Physician pursuant to the terms of this Agreement.
6. Representations and Warranties of Physician. The Physician represents
and warrants to KTPA as follows:
(a) Physician is a physician duly licensed to practice medicine
under the laws of the State of Texas;
(b) Physician has to the best of his knowledge complied with all laws,
rules and regulations relating to the practice of medicine and is able to enter
into and perform all duties under this Agreement;
(c) except for the Related Documents, Physician is not a party to or
bound by any other agreement or commitment, or subject to any restriction or
agreement related to previous employment or consultation containing
confidentiality or non-compete covenants or other relevant restrictions which
may have a possible present or future adverse affect on KTPA or the Physician in
the performance of his or her duties under this Agreement;
(d) except as disclosed on Schedule 6(d), Physician has never: (i) had
his or her professional license, Drug Enforcement Agency number, Medicare or
Medicaid provider status or staff privileges at any hospital or medical facility
suspended, relinquished, terminated or revoked; (ii) been reprimanded,
sanctioned or disciplined by any licensing board or any federal, state or local
society or agency, governmental body, hospital, third party payor or specialty
board; or, (iii) had a final judgment or settlement without judgment entered
against him or her in connection with a malpractice or similar action;
(e) to the best of his or her knowledge, Physician is in good physical
and mental health and does not suffer from any illness or disability which could
prevent him or her from fulfilling his or her responsibilities under this
Agreement; and
(f) none of the representations or warranties made by Physician in
this Agreement or in any resumes or curricula vitae submitted to KTPA or any
Affiliate of KTPA, or in any insurance applications or any staff membership
applications submitted to any third party in connection with this Agreement,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary in order to make the statements or
provisions in this Agreement not misleading or incomplete.
During the Term, the Physician agrees to immediately notify KTPA of
any fact or circumstance which occurs or is discovered during the Term, which in
itself or with the passage of time and/or the combination with other reasonably
anticipated factors does render or will render any of these representations and
warranties to be untrue.
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7. Confidentiality.
(a) Confidential Information. The Physician acknowledges that as a
result of the Physician's employment with KTPA, the Physician has and will
necessarily become informed of, and have access to, certain valuable and
confidential information of KTPA, including, without limitation, trade secrets,
technical information, plans, lists of patients, data, records, fee schedules,
computer programs, manuals, processes, methods, scheduling, financial data, file
schedules, intangible rights, contracts, agreements, licenses, personnel
information and the identity of health care providers (collectively, the
"Confidential Information"), and that the Confidential Information, even though
it may be contributed, developed or acquired in whole or in part by the
Physician, is KTPA's exclusive property to be held by the Physician in trust and
solely for KTPA's benefit. Accordingly, except as required by law or for the
performance of Physician's duties under this Agreement, the Physician shall not,
at any time, either during or subsequent to the Term, use, reveal, report,
publish, copy, transcribe, transfer or otherwise disclose to any person,
corporation or other entity, any of the Confidential Information without the
prior written consent of KTPA exercisable in its sole and absolute discretion,
except to officers and employees of KTPA and except for information which
legally and legitimately is or becomes of general public knowledge from
authorized sources other than the Physician.
(b) Return of Confidential Information. Upon the termination of
Physician's employment under this Agreement, the Physician shall promptly
deliver to KTPA all KTPA property and possessions including, without limitation,
all drawings, manuals, letters, notes, notebooks, reports, copies, deliverable
Confidential Information and all other materials relating to KTPA's business
which are in the Physician's possession or control.
8. Non-Competition and Nonsolicitation. Physician acknowledges that as a
result of Physician's employment with KTPA, Physician will become informed of
and have access to the Confidential Information, the unauthorized use or
disclosure of which would cause irreparable injury to KTPA. In consideration for
access to the Confidential Information, the substantial compensation paid to
Physician by KTPA, and the other benefits received by Physician hereunder,
Physician agrees with KTPA as follows:
(a) Definitions. As used in this Section 8, the following terms have
the specified meanings:
(i) "Competing Business" means any business that provides
management services that are the same as or similar to those provided by the
Management Company during the Initial Term and any Renewal Term.
(ii) "Contracting Parties" means any and all facilities,
including but not limited to hospitals, clinics, PHOs, PPOs, HMOs, integrated
delivery systems, ambulatory centers, third party payors, managed care
companies, and other parties or facilities that have contracted with or are
serviced by KTPA or any of its Affiliates.
(iii) "Management Company" means Sheridan Healthcorp, Inc.,
Sheridan Healthcare, Inc., and their respective Affiliates.
48
(iv) "Restricted Area" means the area within twenty-five (25)
miles of any location where Physician provided medical services during the
twenty four (24) months immediately prior to the date of termination of
Physician's employment with KTPA.
(b) Noncompetition During Employment. Physician agrees that during
Physician's employment with KTPA or any of its Affiliates, Physician shall not,
either directly or indirectly, on Physician's own behalf or as an employee,
employer, consultant, contractor, agent, principal, partner, stockholder,
corporate officer, director, or in any other individual or representative
capacity, (i) provide medical services to or for any person or entity except in
Physician's capacity as an employee of KTPA or an Affiliate of KTPA, or (ii)
engage in a Competing Business.
(c) Noncompetition After Employment. Physician agrees that for a
period of two (2) years commencing on the date of the termination of Physician's
employment with KTPA (whether by resignation, discharge, or otherwise),
Physician shall not, either directly or indirectly, on Physician's own behalf or
as an employee, employer, consultant, contractor, agent, principal, partner,
stockholder, corporate officer, director, or in any other individual or
representative capacity, (i) provide medical services within the Restricted
Area, or (ii) engage in a Competing Business within the State of Texas.
(d) Termination of Medical Staff Privileges. Physician acknowledges
that Privileges at the hospital or any other health care facilities to which he
or she is assigned are predicated and contingent upon Physician's contractual
relationship with the KTPA. If Physician's employment relationship with the KTPA
is terminated for any reason whatsoever, the Privileges of Physician at the
hospital or any other health care facilities to which he or she is assigned will
terminate automatically and Physician shall immediately resign from, and
surrender, all Privileges at the hospital or any other health care facilities to
which he or she is assigned and Physician expressly waives any right to any
challenge or review (under any fair hearing plan or otherwise) of the
termination of his or her Privileges at the hospital or at those health care
facilities and all claims of any kind whatsoever, including due process claims,
he or she or his or her estate may have against the KTPA or any of its
Affiliates and all other parties with respect to the termination of his or her
Privileges; provided, however, that if concurrent with the termination of such
membership or privileges under this Section, a hospital or medical staff takes
action that is based on the quality of services rendered by Physician or that is
reportable to the Texas State Board of Medical Examiners or the National
Practitioner Data Bank, then nothing in this Section shall affect or limit any
applicable hearing rights Physician may have regarding such action by the
hospital or medical staff under the then current medical staff bylaws at the
hospital or health care facility. The terms of this Agreement will take
precedence over any inconsistent terms which may be found in the bylaws of the
medical staff or of the hospital or any other health care facilities to which
Physician is assigned, or in the KTPA's contract with any employees. Termination
or resignation by Physician shall not, in and of itself, constitute a negative
action reportable as staff membership revocation in future applications by
Physician. Physician agrees that for a period of two (2) years commencing on the
date of termination of Physician's employment with the KTPA, Physician shall not
apply for or obtain Privileges at the hospital or any other health care facility
to which he or she was assigned during the twenty four (24) months immediately
prior to the date of termination of Physician's employment with the KTPA.
(e) Nonsolicitation and Related Activities. Physician agrees that
during Physician's employment with KTPA and for a period of two (2) years
commencing on the date of the termination of Physician's employment with KTPA
(whether by resignation, discharge, or otherwise), Physician shall not, either
directly or indirectly:
49
(i) induce or solicit, or attempt to induce or solicit, any of
KTPA's patients to terminate, curtail or restrict their relationship with KTPA
or any of its Affiliates;
(ii) induce or solicit, or attempt to induce or solicit, any of
KTPA's Contracting Parties to terminate, curtail or restrict their relationship
with KTPA or any of its Affiliates;
(iii) induce or solicit, or attempt to induce or solicit, any
person employed or contracted by KTPA or any of its Affiliates to leave
Physician's employment or not fulfill Physician's contractual responsibility,
whether or not the employment or contracting is full-time or temporary, pursuant
to a written or oral agreement, or for a determined period of time or at will;
or
(iv) assist others in taking any action described in clauses (i)
through (iii) above.
(f) Reasonableness of Restrictions. Physician acknowledges that the
time, geographical scope, and scope of activity restrictions set forth in this
Agreement are reasonable in scope and are necessary for the protection of the
business and goodwill of KTPA. Physician expressly acknowledges and agrees that
Physician's experience and abilities are such that Physician's compliance with
the covenants and restrictive covenants contained herein will not cause
Physician any undue hardship or unreasonably interfere with Physician's ability
to earn a livelihood. Physician agrees that should any portion of the covenants
in this Section 8 be unenforceable because of the scope thereof or the period
covered thereby or otherwise, the covenants shall be deemed to be reduced and
limited to enable them to be enforced to the extent permissible under the laws
and public policies applied in the jurisdiction in which enforcement is sought.
(g) Independent Agreement. All of the covenants and provisions of this
Section 8 on the part of the Physician shall be construed as an agreement
independent of any other agreement between KTPA and the Physician, and the
existence of any claim or cause of action of the Physician against KTPA, whether
predicated on any such other agreement or otherwise, shall not constitute a
defense to the enforcement by KTPA of the covenants and provisions of this
Section 8; provided that notwithstanding anything contained in this Agreement,
in the event that this Agreement is properly terminated for cause by the
Physician pursuant to Section 10(c), then Sections 8(c) and (d) shall not apply
and clause (iii) of Section 8(e) shall not apply except to the extent it applies
to clauses (i), (ii) and (iv) of Section 8(e).
Notwithstanding anything contained in this Agreement, in the event
that KTPA materially breaches or materially fails to meet any material
obligation under this Agreement (after KTPA has received at least thirty (30)
days written notice of that material breach pursuant to Section 11(f) of this
Agreement and KTPA has failed to remedy that breach within the thirty (30) day
period), then Sections 8(b), (c) and (d) (except to the extent it applies to
Sections 8(a), (e), (f) and (g)) shall not apply.
9. Remedies. The Physician and KTPA each acknowledge that: (i) the services
Physician will render under this Agreement are special and unique and cannot be
replaced by KTPA; (ii) the event of a breach by the Physician of the provisions
of Sections 4(c), 5, 7, 8, 10(d) or 11(a) will cause KTPA irreparable harm; and,
(iii) monetary damages in an action at law would not provide an adequate remedy
in the event of a breach. Accordingly, the Physician agrees that, in addition to
any other remedies (legal, equitable or otherwise) available to KTPA, KTPA may
seek and obtain injunctive relief against the breach or threatened breach of the
provisions of Sections 4(c), 5, 7, 8, 10(d) or 11(a) as well as all other rights
and remedies available at law and equity. The existence of any claim or cause of
50
action of Physician against KTPA or any of its Affiliates, whether arising out
of this Agreement or otherwise, shall not constitute a defense to the
enforcement by KTPA or any of its Affiliates of the provisions of these
Sections. Nothing contained in this Section 9 shall be construed as prohibiting
KTPA and all other injured parties from pursuing all other remedies available
(if available) to them for a breach or threatened breach of the provisions of
Sections 4(c), 5, 7, 8, 10(d) or 11(a), including the recovery of compensatory
and punitive damages from Physician. Physician further acknowledges and agrees
that the covenants contained in Sections 4(c), 5, 7, 8, 10(d) or 11(a) are
necessary for the protection of KTPA's legitimate business and professional
duties, ethical obligations and interests, and are reasonable in scope and
content. These legitimate business interests include, without limitation, trade
secrets (as defined under applicable Texas law); other valuable confidential
business information that may not qualify as trade secrets, but as to which KTPA
or any of its Affiliates has expended time and money in developing and as to
which any of them holds confidential and proprietary, substantial business
relationships with existing and prospective customers, clients and patients;
customer, client and patient goodwill associated with its ongoing business and
evidenced by the various trademarks, trade names, service marks and trade dress
used by KTPA or any of its Affiliates in connection with its business, and an
expectation of continuing patronage from its existing customers, clients and
patients; and the extraordinary and specialized training in managed care
medicine which will be provided by KTPA to Physician during the Term. In the
event of any breach or violation by Physician of any of the provisions of
Section 8, the running of the two-year period (but not KTPA's and any of the
Physician's obligations thereunder) shall be tolled during the continuation of
any breach or violation.
10. Termination. Physician's employment under this Agreement may be
terminated prior to the expiration of the Term described in Section 2, upon
the occurrence of any of the following events:
(a) Death. This Agreement will automatically terminate upon the death
of the Physician. KTPA shall have no further obligation under this Agreement to
make any payments to, or bestow any benefits on, the Physician's beneficiary or
beneficiaries from and after the date of the Physician's death, other than as
provided in Section 10(d).
(b) Disability. To the extent permitted by law, this Agreement may be
terminated at KTPA's option, exercisable in its absolute sole discretion, if the
Physician shall suffer a permanent disability. For the purposes of this
Agreement, the term "permanent disability" means the Physician's inability to
perform his or her material duties under this Agreement, with or without a
reasonable accommodation, for a period of any three (3) consecutive months due
to illness, accident or any other physical or mental incapacity. Physician shall
not be entitled to receive any compensation during any periods of absence caused
by a permanent or temporary disability. KTPA shall have no further obligation
under this Agreement to make any payments to, or bestow any benefits on, the
Physician from and after the date of termination under this provision, other
than as provided in Section 10(d).
(c) Cause. This Agreement may be terminated for cause at KTPA's
option, at any time upon delivery of written notice to the Physician. Cause
shall mean, for purposes of this Agreement, the Physician's: (i) material breach
of any material provision of this Agreement; (ii) willful refusal to perform an
ethical (as defined by the AMA Code of Conduct) duty directed by KTPA's Board of
Directors or a supervising officer, an executive of KTPA or any authorized
delegatee, which is reasonably within the scope of the Physician's duties; (iii)
misappropriation of assets or business opportunities of KTPA or any of its
Affiliates for personal or non-KTPA use; (iv) commission of any misdemeanor
involving moral turpitude and any felony; (v) commission of fraud, embezzlement,
or breach of trust; (vi) revocation or suspension of Physician's license to
practice medicine under the laws of the State of Texas for a time period greater
51
than thirty days; (vii) failure or inability to competently and adequately
perform his or her duties under this Agreement, as determined by KTPA's Board of
Directors, exercisable in its sole discretion; (viii) breach of his or her
obligations contained in Section 11(a) of this Agreement; (ix) loss, suspension,
revocation or substantial curtailment of Physician's appointment to and/or
privileges on the medical staff at any health care facility where Physician
provides services under this Agreement (a "Health Care Facility"); (x)
commission of a material act of professional misconduct; (xi) commission of acts
that in any way materially jeopardize or damage the professional integrity,
reputation or relationships of KTPA or any of its Affiliates; (xii) this section
not used; (xiii) negligence, misfeasance or malfeasance in connection with
performing or discharging Physician's obligations under this Agreement; or (xiv)
being a primary basis for KTPA's or an Affiliate's inability to obtain adequate
professional liability coverage in accordance with Section 3(e) of this
Agreement. Prior to KTPA's termination of this Agreement for cause under
Sections 10(c)(i) (except as provided below), 10(c)(vi) or 10(c)(vii), KTPA
shall first have provided Physician with at least thirty (30) days prior written
notice and Physician shall have not, within that thirty (30) days, remedied the
basis of that termination to KTPA's reasonable satisfaction. No right of cure
shall exist for KTPA's termination of this Agreement for cause under Sections
10(c)(ii), (iii), (iv), (v), (viii), (ix), (x), (xi), or (xiii).
This Agreement may be terminated for cause at the Physician's
option, for KTPA's failure to substantially perform its obligations to the
Physician under this Agreement after KTPA has received at least thirty (30) days
prior written notice of that substantial failure and KTPA has failed within that
thirty (30) day period to remedy the substantial failure to the Physician's
reasonable satisfaction.
Neither KTPA nor its Affiliates shall have any further obligation
under this Agreement to make any payments to, or bestow any benefits on, the
Physician from and after the date of termination of the Agreement under this
provision, other than as provided in Section 10(d).
(d) Obligations. In the event of a termination under Sections 10(a),
(b) or (c), KTPA shall have no further obligation under this Agreement to make
any payments to, or bestow any benefits on, the Physician from and after the
date of termination, other than payments or benefits accrued and due and payable
to Physician prior to the date of the termination. Physician shall, upon KTPA's
request and promptly upon notice, vacate all premises, including all facilities
serviced by KTPA. Physician shall return all of the property of KTPA and its
Affiliates that is in his or her possession or control.
(e) Medical Staff Privileges. Physician acknowledges and agrees that
Physician's employment is expressly contingent upon Physician being granted
appropriate continuous clinical privileges to provide services at the hospital
or any other health care facilities to which he or she is assigned. If Physician
is unable to receive or maintain those clinical privileges necessary to perform
all material services of Physician under this Agreement at the hospital or other
health care facilities for any reason whatsoever, whether or not those
privileges are granted to other employees or contractors of the KTPA,
Physician's employment under this Agreement shall be terminated.
11. Miscellaneous.
(a) Substance Abuse Policy. It is KTPA's policy (the "Policy") that
none of its employees shall use or abuse any controlled substances at any time
or be under the influence of alcohol or be affected by the use of alcohol during
the time period required to perform their duties and obligations under any
employment agreements. Physician agrees to abide by the Policy described in
Schedule A to this Agreement.
52
(b) Survival. The provisions of Sections 4(c), 6, 7, 8, 9, 10(d) and
11 shall survive the expiration or termination of this Agreement for a time
period without limitation.
(c) Entire Agreement; Waiver. This Agreement contains the entire
understanding of the parties and merges and supersedes any prior or
contemporaneous agreements between the parties relating to this Agreement's
subject matter. This Agreement may not be modified or terminated orally, and no
modification, termination or attempted waiver of any of the provisions shall be
binding unless in writing and signed by the party against whom it is sought to
be enforced; provided however, that Physician's compensation may be increased at
any time by KTPA without in any way affecting any of the other terms and
conditions of this Agreement, which in all other respects shall remain in full
force and effect. Failure of a party to enforce one or more of the provisions of
this Agreement or to require at any time performance of any of the obligations
under this Agreement shall not be construed to be a waiver of any provisions by
a party nor to in any way affect the validity of this Agreement or a party's
right to enforce any provision of this Agreement, nor to preclude a party from
taking any other action at any time which it would legally be entitled to take.
(d) Mergers and Consolidation; Successors and Assigns. Physician shall
not have the right to assign or delegate this personal service Agreement, or any
of his or her rights or obligations under this Agreement, without KTPA's consent
exercisable in its sole discretion. The preceding sentence shall not hinder the
Physician's estate from being entitled to receive all accrued and unpaid
compensation and benefits due to Physician at the time of his or her death. KTPA
may freely assign and delegate all of its rights and duties under this
Agreement. Additionally, the parties each agree that upon the sale of all or
substantially all of the assets, business and goodwill of KTPA or all or
substantially all of the stock of KTPA to another company or any other entity,
or upon the merger or consolidation of KTPA with another company or any other
entity, this Agreement shall inure to the benefit of, and be binding upon, both
Physician and KTPA and any entity purchasing the assets, business, goodwill or
stock, or surviving merger or consolidation.
(e) Additional Acts. The Physician and KTPA each agrees to execute,
acknowledge and deliver all further instruments, agreements or documents and do
all further acts that are necessary or expedient to carry out this Agreement's
intended purposes. Each party recognizes that time is of the essence with
respect to each of their obligations in this Agreement. Each party agrees to act
as soon as practicable in light of the particular circumstances and use their
best efforts in as timely a fashion as possible to maximize the intended
benefits of this Agreement.
(f) Notices. Whenever any notice, demand or request is required or
permitted under this Agreement, that notice, demand or request shall be either
hand-delivered in person or sent by United States Mail, registered or certified,
postage prepaid, or delivered via overnight courier to the addresses below or to
any other address that either party may specify by notice to the other party.
Neither party shall be obligated to send more than one notice to the other party
and no notice of a change of address shall be effective until received by the
other party. A notice shall be deemed received upon hand delivery, two business
days after posting in United States Mail or one business day after dispatch by
overnight courier.
53
To KTPA:Kenneth J. Trimmer, M.D., P.A.
4651 Sheridan Street, Suite 400
Hollywood, Florida 33021
(954) 987-5822
ATTN: Jay A. Martus, Esq., General Counsel
To the Physician: Kenneth J. Trimmer, M.D.
6628 Castle Pines Drive
Plano, Texas 75093
With a copy to: Jenkens & Gilchrist, a Professional
Corporation
1445 Ross Avenue, Suite 3200
Dallas, Texas 75202
Attn: Kenneth Gordon, Esq.
(214) 855-4500
(g) Headings. The headings of the paragraphs of this Agreement have
been inserted for convenience of reference only and shall in no way restrict or
otherwise affect the construction of the terms or provisions of this Agreement.
References in this Agreement to Sections are to the sections of this Agreement.
(h) Construction. This Agreement shall be construed without regard to
any presumption or other rule requiring construction against the party causing
this Agreement to be drafted, including any presumption of superior knowledge or
responsibility based upon a party's business or profession or any professional
training, experience, education or degrees of any member, agent, officer or
employee of any party. If any words in this Agreement have been stricken out or
otherwise eliminated (whether or not any other words or phrases have been added)
and the stricken words initialed by the party against whom the words are
construed, this Agreement shall be construed as if the words so stricken out or
otherwise eliminated were never included in this Agreement and no implication or
inference shall be drawn from the fact that those words were stricken out or
otherwise eliminated.
(i) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
(j) Severability. The invalidity or unenforceability of any one or
more of the words, phrases, sentences, clauses, or sections contained in this
Agreement shall not affect the validity or enforceability of the remaining
provisions of this Agreement or any part of any provision, all of which are
inserted conditionally on their being valid in law, and in the event that any
one or more of the words, phrases, sentences, clauses or sections contained in
this Agreement shall be declared invalid or unenforceable, this Agreement shall
be construed as if such invalid or unenforceable word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted or shall be enforced as nearly as possible according to their
original terms and intent to eliminate any invalidity or unenforceability. If
any invalidity or unenforceability is caused by the length of any period of time
or the size of any area set forth in any part of this Agreement, the period of
time or area, or both, shall be considered to be reduced to a period or area
which would cure the invalidity or unenforceability.
54
(k) Governing Law. This Agreement is made and executed and shall be
governed by and construed in accordance with the laws of the State of Texas
applicable to contracts wholly negotiated, executed and performable in that
state, without regard to its conflicts of laws principles.
(l) No Third Party Beneficiaries. All obligations of KTPA under this
Agreement are imposed solely and exclusively for the benefit of Physician, and
no other person will have standing to enforce, be entitled to or be deemed to be
the beneficiary of any of these obligations.
(m) Litigation; Prevailing Party. In the event of any arbitration or
litigation, including appeals, with regard to this Agreement, the prevailing
party, as defined by the trier of fact, shall be entitled to recover from the
non-prevailing party all reasonable fees, costs, and expenses of counsel (at
pre-trial, trial and appellate levels).
(n) Definition of Affiliates. The term "Affiliates" for purposes of
this Agreement means an individual or entity (whether now existing or hereafter
created) that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, another person or
entity, and includes: (1) a spouse, parent, brother, sister, child, aunt, uncle,
grandparent, niece, nephew, first cousin of an individual or an individual's
spouse (a "Relative"); (2) an officer, director, trustee, employee, shareholder
or partner of a person which is not a Relative of any such person; (3) a spouse
of any Relative; and (4) any individual or entity controlled by, controlling or
under common control with any individual or entity designated above. For
purposes of the foregoing, "control" means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
an entity or individual, whether through the ownership of voting securities, by
contract, or otherwise.
(o) Arbitration; Jury Trial. THE PARTIES SHALL USE GOOD FAITH
NEGOTIATION TO RESOLVE ANY CONTROVERSY, DISPUTE OR DISAGREEMENT ARISING OUT OF,
RELATING TO OR IN CONNECTION WITH THIS AGREEMENT OR THE BREACH OF THIS
AGREEMENT. IN THE EVENT THE PARTIES ARE UNABLE TO RESOLVE ANY DISPUTE OR
CONTROVERSY BY NEGOTIATION, EITHER PARTY MAY SUBMIT SUCH DISPUTE TO BINDING
ARBITRATION WHICH SHALL BE CONDUCTED IN DALLAS, TEXAS. THE BINDING ARBITRATION
SHALL BE CONDUCTED IN ACCORDANCE WITH THE RULES OF PROCEDURE FOR ARBITRATION OF
THE NATIONAL HEALTH LAWYERS ASSOCIATION ALTERNATIVE DISPUTE RESOLUTION SERVICE.
JUDGMENT ON THE AWARD OR DECISION RENDERED BY THE ARBITRATOR MAY BE ENTERED IN
ANY COURT HAVING JURISDICTION. NOTWITHSTANDING THE TERMS OF THIS SECTION, IN THE
EVENT OF ANY BREACH OR DISPUTE OF THIS AGREEMENT OR ANY OF THE RELATED
AGREEMENTS FOR WHICH AN EQUITABLE REMEDY IS APPROPRIATE THE AGGRIEVED PARTY MAY
SEEK AND OBTAIN RELIEF IN A COURT OF COMPETENT JURISDICTION TO AVAIL ITSELF OF
THE EQUITABLE REMEDIES. IN THAT CASE SHOULD ANY PENDENT LEGAL CLAIMS ARISE,
THOSE CLAIMS SHALL BE SUBMITTED TO BINDING ARBITRATION, HOWEVER IF THE COURT
FAILS TO REMAND THOSE LEGAL CLAIMS TO ARBITRATION, THEN FOR THOSE LEGAL CLAIMS,
THE PARTIES WAIVE ALL RIGHTS TO ANY TRIAL BY JURY IN ALL LITIGATION RELATING TO
OR ARISING OUT OF THIS AGREEMENT.
55
Each of the parties have duly executed this Agreement as of the Execution Date.
KTPA:
KENNETH TRIMMER, M.D., P.A.,
a Texas professional association
Date:
By:
Kenneth J. Trimmer, M.D.
President
PHYSICIAN:
KENNETH J. TRIMMER, M.D.
Date:
Kenneth J. Trimmer, M.D.
56
Exhibit C to Purchase Option Agreement
Allocation of Option Consideration Among Shareholders
Name of Shareholder Option Consideration
Kenneth J. Trimmer, M.D. 446,040 shares of
SHCR Common Stock
$2,003,345.00 aggregate cash
consideration
Schedule 1.1 to Purchase Option Agreement
Consideration
The aggregate option consideration (the "Option Consideration") payable to
the Shareholders for their grant of the Option is as follows:
1. Common Stock. Within fifteen days of the Execution Date, SHCR shall deliver
to each Shareholder, that number of shares (the "SHCR Shares") of the common
stock of SHCR, par value $.01 per share (the "Common Stock") specified next to
each Shareholder's name in Exhibit C. Stock being rendered pursuant to this
provision is subject to the terms and conditions of an Investment and
Shareholders' Agreement dated as of March 4, 1998 by and between SHCR and each
of the Shareholders of the Company (the "ISA"). The aggregate number of shares
of Common Stock to be issued to all Shareholders as Option Consideration shall
be equal to Four Hundred Forty Six Thousand Forty Shares (446,040) shares of
Common Stock for Dr. Trimmer.
2 Cash Consideration. Upon the execution and delivery of this Agreement, SHCR
shall deliver cashier's checks to the Shareholders in the amounts specified next
to each Shareholder's name in Exhibit C. The aggregate cash consideration
portion of the Option Consideration shall be equal to Two Million Three Thousand
Three Hundred Forty Five Dollars ($2,003,345.00) for
Dr. Trimmer.
3. Guarantee. Except as provided below, SHCR guarantees the Shareholders that on
or before the first anniversary (the "First Anniversary") of the Execution Date,
the Shareholders shall have received an amount of cash in at least the minimum
aggregate amount of Five Million One Hundred Twenty Two Thousand Eight Hundred
Fifty Dollars ($5,122,850.00) from the proceeds of the sale of their SHCR
Shares. SHCR may issue more shares (the "Other Shares") of Common Stock to the
Shareholders at any time during the first year prior to the First Anniversary
and SHCR may require the Shareholders to sell the Other Shares during that year.
The proceeds of the sale of the Other Shares shall be accounted in calculating
the existence of a Deficit (as hereinafter defined). If the total amount of cash
received by the Shareholders pursuant to the two preceding sentences is less
than Five Million One Hundred Twenty Two Thousand Eight Hundred Fifty Dollars
($5,122,850.00)(the "Deficit"), SHCR shall pay to the Shareholders by the First
Anniversary the amount of the Deficit in immediately available funds in Dallas,
Texas. SHCR further guarantees that the sum of the amount of such cash received
by the Shareholders pursuant to the preceding sentences plus the fair market
value of the SHCR Shares (the "Retained Shares") (the sum of which is the
"Anniversary Value") retained by the Shareholders as of the First Anniversary
shall equal or exceed Ten Million One Hundred Eighty One Thousand Seven Hundred
Forty Five Dollars ($10,181,745.00), and if such sum is less than amount, SHCR
shall issue within fifteen days following the First Anniversary such number of
additional shares (the "Additional Shares") of Common Stock such that the
Anniversary Value and the fair market value of the Additional Shares shall equal
or exceed Ten Million One Hundred Eighty One Thousand Seven Hundred Forty Five
Dollars ($10,181,745.00). The Shareholder shall have the registration rights
with respect to the Additional Shares as set forth in the Investment and
Shareholder Agreement.
In connection with these provisions, Shareholders agree to promptly sell the
SHCR Shares pursuant to the written directions of SHCR, provided such directions
are in accordance with applicable laws. Notwithstanding the foregoing, the
Shareholders may refuse to sell any of their SHCR Shares under this provision on
the terms directed by SHCR; however, the proceeds that would have been realized
from any refused sales shall be deemed as cash received for purposes of
calculating the Deficit and the value of the SHCR Shares not sold shall be the
refused proceeds.
The Shareholders agree not to sell any of their shares of SHCR shares during the
first year after the Execution Date except as permitted in the Investment and
Stockholders Agreement..
For this purpose, the proceeds of the sale of SHCR Shares shall mean the
proceeds of such sales net of all expenses, including underwriter fees and
discounts and broker's commissions.
Fair market value of the Retained Shares and the Additional Shares for this
purpose shall mean the average of the last sale price per share of Common Stock
on NASDAQ National Market for the last fifteen (15) trading days immediately
prior to the Anniversary Date.
DISCLOSURE SCHEDULE TO PURCHASE OPTION AGREEMENT
Schedule 8.2(a)
and 8.2(b)Materials and Financial Statements and Projections Schedule 8.3
Organization, Existence and Authority; Corporate Records Schedule
8.4Capitalization Schedule 8.5 Subsidiaries; Investments Schedule 8.6 Prior
Transactions Schedule 8.7 Financial Statements Schedule 8.7(b) Projections
Schedule 8.8 Absence of Undisclosed Liabilities Schedule 8.9 Absence of Certain
Developments for Company Schedule 8.10(a)Exceptions to Accounts Receivable
Schedule 8.10(b)Accounts Receivable Schedule 8.10(c)Affiliated Accounts
Receivables Schedule 8.11 Transactions with Affiliates Schedule 8.12 Title to
Properties Schedule 8.13 Tax Matters Schedule 8.14 Contracts and Commitments
Schedule 8.15 Intellectual Property Rights; Employee Restrictions Schedule 8.16
Actions, Suits, Claims, Proceedings, Arbitrations or Investigations Schedule
8.18 Licenses of Shareholders and Health Care Providers Schedule
8.18(a)Exceptions to Licensing and Credential Information of Shareholders or
Health Care Provider Schedule 8.22Employee Benefit Programs Schedule 8.23
Environmental Matters Schedule 8.24 Insurance Schedule 8.27 Health Care
Facilities Schedule 9.5Litigation Schedule 9.8Material Liabilities Schedule
9.9Absence of Certain Developments for SHCR