<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: October 12, 1998
PHYSICIANS' SPECIALTY CORP.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
DELAWARE
- --------------------------------------------------------------------------------
(State of other jurisdiction of incorporation)
1-12759 58-2251438
- ------------------------ ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
1150 Lake Hearn Drive, Suite 640, Atlanta, Georgia 30342
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone no. including area code: (404) 256-7535
--------------
- --------------------------------------------------------------------------------
(Former Address, if changed since Last Report) (Zip Code)
<PAGE> 2
Item 5. Other events.
On October 12, 1998, pursuant to an asset acquisition agreement,
Physicians' Specialty Corp. (the "Company") completed the acquisition of the
assets of Cleveland Ear, Nose and Throat Center, Inc. ("Cleveland ENT"), a ten
physician ENT physician practice with eight allied health care professionals and
eight clinical offices in metropolitan Cleveland, Ohio. Cleveland ENT had
previously been affiliated with MedPartners, Inc. ("MedPartners"). In connection
with the transaction, the Company entered into an amended and restated Clinic
Services Agreement with Cleveland ENT maintaining the percentage of net income
management fee structure which existed in the MedPartners/Cleveland ENT Clinic
Services Agreement. The Company is contemplating modifying the percentage of net
income arrangement consistent with the Company's historical practices. In
connection therewith, the Company has granted Cleveland ENT a one time option,
which expires on December 15, 1998, to unwind the transaction with the Company
as of December 31, 1998 and repurchase all Cleveland ENT non-medical assets
acquired by the Company for a total cash purchase price equal to the price paid
by the Company to MedPartners for such assets, plus amounts invested by the
Company in Cleveland ENT.
In addition, on August 31, 1998, PSC Ambulatory Surgery, Ltd., a
Georgia limited partnership (the "PSC Partnership"), of which the Company is the
sole general partner and Atlanta Ear, Nose & Throat Associates, P.C. ("Atlanta
ENT"), one of the Company's affiliated practices, is the sole limited partner,
acquired in the aggregate a 17.5% limited partnership interest in Atlanta
Surgery Center, Ltd., a Georgia limited partnership ("Atlanta Surgery Center").
The aggregate purchase price was paid by the Company (the "Purchase Price").
Pursuant to the terms of the transaction, the Company and Atlanta ENT own 99%
and 1%, respectively, of the partnership interest in the PSC Partnership;
provided that Atlanta ENT has an option to purchase up to 40% of the partnership
interest from the Company for an amount equal to the percentage of the PSC
Partnership acquired by Atlanta ENT multiplied by the Purchase Price. Atlanta
Surgery Center operates three multi-specialty ambulatory surgery centers,
consisting of 14 operating rooms, in the metropolitan Atlanta area. As a result
of the transaction, effective July 1, 1998, the PSC Partnership will receive
17.5% of the distributions made by Atlanta Surgery Center and the Company and
Atlanta ENT will receive their pro rata share of such distributions based on
their ownership interest in the PSC Partnership.
In connection with the Cleveland ENT and the Atlanta Surgery Center
transactions and two other practice acquisitions completed by the Company in
June and August 1998 (the "Transactions"), the Company paid an aggregate of
$9,880,000 (consisting of cash and borrowings under the Company's credit
facility), issued an aggregate of 35,232 shares of Common Stock of the Company,
agreed to issue an aggregate of 35,232 shares of Common Stock of the Company and
issued a $150,000 non-interest bearing contingent promissory note which is
payable, at the Company's option, in cash or the Company's Common Stock, upon
the holder achieving certain performance targets. As of October 27, 1998, the
Company had approximately $3.7 million of borrowings under the Company's credit
facility. In connection with the Transactions, the Company incurred
approximately $387,374 in fees to Premier HealthCare, an affiliate of the
Company's Vice Chairman and Secretary, for advisory services rendered.
-2-
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PHYSICIANS' SPECIALTY CORP.
By: /s/ Robert A. DiProva
--------------------------------------
Robert A. DiProva
Executive Vice President and
Chief Financial Officer
Dated: October 28, 1998
