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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to ___________________
Commission file Number: 001-12759
Physicians' Specialty Corp.
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(Exact Name of Registrant as Specified in its charter)
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Delaware 58-2251438
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
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1150 Lake Hearn Drive, Suite 640 Atlanta, Georgia 30342
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(Address of principal executive offices)
404-256-7535
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(Registrant's telephone number, including area code)
N/A
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(Former name or former address, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
There were 9,172,025 shares of the Registrants' common stock, par value
$.001 per share, outstanding as of August 13, 1999.
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Physicians' Specialty Corp.
Index
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Part 1 - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at June 30, 1999
and December 31, 1998.............................................. 3
Consolidated Statements of Operations
For the Three Months and Six Months
Ended June 30, 1999 and 1998....................................... 4
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1999 and 1998....................................... 5
Notes to Consolidated Financial Statements......................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................... 12
Part II - Other Information
Item 1. Legal Proceedings.................................................. 18
Item 5. Other Information.................................................. 18
Item 6. Exhibits and Reports on Form 8-K................................... 19
Signatures......................................................... 21
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Part 1: Financial Information
Item 1: Financial Statements
PHYSICIANS' SPECIALTY CORP.
Condensed Consolidated Balance Sheets
(Unaudited)
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<CAPTION>
June 30, December 31,
1999 1998
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,407,338 $ 4,925,501
Accounts receivable, net of allowance for doubtful
Accounts of $1,206,863 and $1,700,016 in
1999 and 1998, respectively 20,080,599 16,166,944
Notes receivable 1,647,662 80,000
Prepayments and other 1,263,960 1,779,070
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Total current assets 24,399,559 22,951,515
PROPERTY AND EQUIPMENT, net 11,300,104 8,861,850
INTANGIBLE ASSETS, net 31,211,198 26,267,950
PROMISSORY NOTE RECEIVABLE - RELATED PARTY 2,152,000 --
INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES 4,803,864 5,396,609
OTHER ASSETS 491,749 207,231
------------ -----------
Total Assets $ 74,358,474 $63,685,155
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 522,000 $ --
Due to physicians 702,539 --
Accounts payable and accrued expenses 6,127,647 4,563,773
Borrowing under credit agreement 861,058 --
Deferred income taxes 385,184 --
------------ -----------
Total current liabilities 8,598,428 4,563,773
SUBORDINATED SELLER NOTES AND
OTHER LONG TERM PAYABLES 8,860,034 7,563,701
BORROWING UNDER CREDIT AGREEMENT 5,750,000 3,750,000
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Total liabilities 23,208,462 15,877,474
SHAREHOLDERS' EQUITY:
Common stock, $.001 par value; 50,000,000 shares authorized
issued: 9,172,025 in 1999 and 9,152,160 in 1998 9,172 9,152
Additional paid-in capital 41,147,398 41,083,033
Treasury stock (184,272) --
Retained earnings 10,177,714 6,715,496
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Total shareholders' equity 51,150,012 47,807,681
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Total liabilities and shareholders' equity $ 74,358,474 $63,685,155
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements
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PHYSICIANS' SPECIALTY CORP.
Consolidated Statement of Operations
(Unaudited)
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<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
REVENUES
Net patient service revenues $ 20,785,144 $12,780,051 $ 40,295,853 $23,580,191
Capitation revenues 1,311,944 1,145,368 2,674,114 2,310,674
Management fees 560,754 288,071 904,054 326,690
Earnings in unconsolidated subsidiaries 473,305 -- 768,305 --
------------ ----------- ------------ -----------
Net revenue 23,131,147 14,213,490 44,642,326 26,217,555
EXPENSES
Provider claims, wages, benefits 15,270,463 9,530,051 29,352,940 17,454,512
General and administrative 4,042,772 2,562,405 8,007,521 4,819,759
Depreciation and amortization 686,104 403,331 1,372,536 686,120
------------ ----------- ------------ -----------
Operating expenses 19,999,339 12,495,787 38,732,997 22,960,391
Operating income 3,131,808 1,717,703 5,909,329 3,257,164
Other income (expense) (219,197) 124,659 (233,964) 153,559
------------ ----------- ------------ -----------
Pretax income 2,912,611 1,842,362 5,675,365 3,410,723
Provision for income taxes 1,135,678 718,411 2,213,155 1,330,031
------------ ----------- ------------ -----------
Net income $ 1,776,933 1,123,951 $ 3,462,210 $ 2,080,692
============ =========== ============ ===========
Earnings per share:
Basic earnings per share $ 0.19 $ 0.15 $ 0.38 $ 0.29
Diluted earnings per share $ 0.19 $ 0.14 $ 0.37 $ 0.27
Weighted average shares
outstanding
Basic 9,172,025 7,695,730 9,168,388 7,106,869
Diluted 9,431,594 8,240,675 9,391,427 7,640,821
</TABLE>
See accompanying notes to consolidated financial statements
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PHYSICIAN'S SPECIALTY CORP.
Consolidated Statements of Cash Flows
(Unaudited)
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<CAPTION>
Six Months Ended
June 30,
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1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,462,210 $ 2,080,692
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,372,536 686,120
Compensation expense -- 32,987
Earnings in unconsolidated subsidiaries (775,697) --
Increase in accounts receivable (3,188,709) (3,197,606)
Change in prepayments and other 282,597 (686,091)
Change in accounts payable and accrued liabilities 179,070 972,442
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Total adjustments (2,130,203) (2,192,148)
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Net cash provided by (used in) operating activities 1,332,007 (111,456)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for acquisitions, net of cash acquired (6,431,100) (10,310,258)
Distributions from unconsolidated subsidiaries 574,171 --
Purchase of property and equipment (1,684,412) (917,354)
----------- ------------
Net cash used in investing activities (7,541,341) (11,227,612)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock, net of offering costs 14,385 16,520,043
Common stock repurchased (184,272) --
Borrowing under credit agreement 2,861,058 75,185
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Net cash provided by financing activities 2,691,171 16,595,228
----------- ------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (3,518,163) 5,256,159
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,925,501 5,351,639
----------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,407,338 $ 10,607,798
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements
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Physicians' Specialty Corp.
Notes to the Consolidated Financial Statements (Unaudited)
June 30, 1999
NOTE 1. ORGANIZATION
Physicians' Specialty Corp. (the "Company") was organized in July 1996
to provide comprehensive physician practice management services to physician
practices and health care providers specializing in the treatment and management
of diseases and disorders of the ear, nose, throat, head and neck ("ENT") and
related specialties. The Company commenced its business activities upon
consummation of the reorganization, as described in Note 3, and its initial
public offering ("IPO") on March 26, 1997. The Company provides financial and
administrative management, enhancement of clinical operations, network
development and payor contracting services, including the negotiation and
administration of capitated arrangements. The Company has operations in greater
Atlanta, Georgia; Chicago, Illinois; Birmingham, Alabama; the South Florida
area; Southern New York and Northern New Jersey and in metropolitan Cleveland,
Ohio.
NOTE 2. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries and its investment in an
unconsolidated subsidiary and have been prepared in accordance with generally
accepted accounting principles for interim financial reporting and in accordance
with Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, the accompanying
unaudited consolidated financial statements contain all adjustments (consisting
of normal recurring items) necessary for a fair presentation of the results for
the interim periods presented. These financial statements and footnote
disclosures should be read in conjunction with the audited financial statements
and the notes thereto included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998.
NOTE 3. REORGANIZATION
The Company acquired substantially all of the assets (other than
certain excluded assets such as employment agreements and patient charts,
records, and files) and certain liabilities of (i) Atlanta Ear, Nose & Throat
Associates, P.C. ("Atlanta ENT"), (ii) ENT & Allergy Associates, Inc., (iii)
Metropolitan Ear, Nose & Throat, P.C., (iv) Atlanta Head and Neck Surgery, P.C.,
and (v) Ear, Nose & Throat Associates, P.C. (collectively, the "Initial
Practices"), and all of the outstanding shares of common stock of three
corporations holding managed care contracts (the "ENT Networks") in March 1997
(the "Reorganization"). In connection with the acquisition of assets of the
Initial Practices and the common stock of the ENT Networks, the Company issued
an aggregate of 3,104,755 shares of its common stock. The Reorganization was
accounted for as a promoter transaction under Staff Accounting Bulletin No. 48
at historical cost.
NOTE 4. ACQUISITIONS
1998 ACQUISITIONS
During 1998, the Company acquired substantially all of the assets
(other than certain excluded assets such as employment agreements and patient
charts, records, and files) and assumed certain contractual liabilities of five
ENT physician practices.
In connection with these acquisitions, the Company (i) paid an
aggregate of approximately $1.4 million in cash, (ii) issued an aggregate of
65,273 shares of common stock (valued at approximately $495,000), (iii) agreed
to issue an aggregate of 78,038 additional shares of common stock (valued at
approximately $615,000) to four of the affiliated practices beginning in
February 1999, of which 12,765 shares of common stock have been issued, (iv)
issued a subordinated convertible promissory note in the principal amount of
$250,000 that is convertible into shares of common stock, at the Company's
option, valued at the average closing price of such common stock for the ten
trading days preceding the date of delivery of such shares, and (v) issued a
$150,000 noninterest 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.
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In addition, in May 1998, the Company acquired (i) substantially all of
the tangible assets and assumed certain contractual liabilities of Physicians'
Domain, Inc., a White Plains, New York-based ENT physician practice management
company ("Physicians' Domain") and (ii) the stock of three corporations that are
successors to three ENT physician practices affiliated with Physicians' Domain
(collectively "PDI"). In connection with the PDI transaction, the Company (i)
paid approximately $5.4 million in cash, (ii) discharged approximately $3.8
million of liabilities of PDI, and (iii) issued a subordinated long-term
promissory note in the principal amount of approximately $6.4 million. If the
PDI practices achieve stipulated performance targets, the Company will pay an
additional $500,000, in cash or shares of common stock, at the Company's option.
The Company also entered into a management services agreement in
connection with the PDI transaction. The management services agreement provides
for a fixed annual management fee of approximately $2.1 million, plus
reimbursement of practice operating expenses. Pursuant to the management
services agreement, the fixed management fee is subject to annual increases
after May 27, 2003 consistent with the annual percentage increase in the
consumer price index for the prior year. The management services agreement also
provides for mutually agreed-on increases in the fixed management fee upon (i)
the management by the Company of ancillary business developed or acquired or
(ii) the acquisition of additional physician practices which are merged into the
existing PDI practices.
The Company used a portion of the net proceeds received from the
Company's public offering in May 1998 to pay the cash component of and to
discharge the indebtedness of PDI assumed by the Company in connection with the
PDI transaction.
In addition, PSC Ambulatory Surgery, Ltd., a Georgia limited
partnership (the "PSC Partnership"), of which a subsidiary of the Company is the
sole general partner, and 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 of
approximately $4.8 million was paid in cash by the Company. 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 had an option to purchase up to 40% of the partnership interest from
the Company based upon the Company's cost. Atlanta Surgery Center operates three
multispecialty ambulatory surgery centers in the metropolitan Atlanta area. In
January 1999, Atlanta ENT issued a secured promissory note in the amount of
$2,152,000 as consideration for an additional 39% equity interest in the PSC
Partnership.
Also during 1998, the Company acquired the assets of Cleveland Ear,
Nose, and Throat Center, Inc. ("Cleveland ENT") which had previously been
affiliated with MedPartners, Inc. ("MedPartners"). In connection with the
transaction, the Company entered into a clinic services agreement with Cleveland
ENT maintaining the percentage of net income management fee structure which
existed in the original agreement with MedPartners. Under the terms of the
transaction, the Company granted Cleveland ENT a one-time option to unwind the
transaction with the Company and repurchase all Cleveland ENT nonmedical assets
acquired by the Company. Cleveland ENT's option to unwind the transaction
expired on December 15, 1998. In connection with the acquisition of the assets
of this practice, the Company (i) paid approximately $4.2 million in cash and
(ii) issued a $150,000 noninterest bearing contingent promissory note which is
payable at the Company's option in cash or the Company's common stock upon
Cleveland ENT achieving certain performance targets.
In January 1999, the Company amended the Clinic Services Agreement with
Cleveland ENT. Under the Agreement, as amended, the Company receives a
management fee equal to 12.5% of all net clinic revenue (after adjustment for
contractual allowances) generated by Cleveland ENT. Cleveland ENT also agreed to
pay the Company an additional $300,000 for management services provided during
the period from October 1, 1998 through December 31, 1998.
In connection with these acquisitions, the Company paid approximately
$1.0 million to Premier HealthCare, an affiliate of the Company's Vice Chairman
and Secretary for advisory services rendered.
ACQUISITIONS FROM JANUARY 1, 1999 THROUGH JUNE 30, 1999
During the three month period ended March 31, 1999, the Company
acquired substantially all of the assets (other than certain excluded assets
such as employment agreements and patient charts, records and files) and assumed
certain contractual liabilities of (i) E.N.T. Medical Associates, Inc., P.C.
("ENT Medical"), and (ii) Advanced Surgical Arts, Inc. ("ASA"). In addition the
Company acquired substantially all of the business assets and assumed certain
contractual liabilities of Preferred Diagnostic Services,
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Inc. ("PDS"). In connection with the ENT Medical, ASA, and PDS transactions
completed by the Company during the three month period ended March 31, 1999 the
Company, (i) paid an aggregate of $1,910,000 in cash, (ii) issued an aggregate
of 4,600 shares of common stock (valued at the time of issuance at an aggregate
of approximately $37,000, (iii) agreed to issue an aggregate of 1,637 shares of
common stock (valued at an aggregate of approximately $13,000 and (iv) issued
subordinated promissory notes in the aggregate principal amounts of $1,360,000
which accrue interest at a rate of 6% per annum payable quarterly beginning in
May 1999 with principal payments beginning in February 2000. In connection with
these acquisitions, the Company paid approximately $207,000 to Premier
HealthCare, an affiliate of the Company's Vice Chairman and Secretary for
advisory services rendered.
During the three month period ended June 30, 1999, PSC Marietta
Ambulatory Surgery, Ltd., a Georgia limited partnership ("PSC Marietta
Partnership"), of which the Company is the sole general partner, and Atlanta
ENT, one of the Company's affiliated practices, is the sole limited partner,
acquired in the aggregate a 12.5% limited partnership interest in Marietta
Outpatient Surgery, Ltd., a Georgia limited partnership ("Marietta Surgery
Center"). The aggregate purchase price was paid by the Company. Pursuant to the
terms of the transaction, the Company and Atlanta ENT own 99% and 1%
respectively, of the partnership interest in PSC Marietta Partnership provided
that Atlanta ENT has an option to purchase up to 40% of the partnership interest
from the Company based upon the Company's cost. Marietta Surgery Center operates
a multi-specialty ambulatory surgery center consisting of 8 operating rooms, in
the Marietta suburb of metropolitan Atlanta. As a result of the transaction,
effective April 1, 1999, the PSC Marietta Partnership will receive 12.5% of the
distributions made by Marietta 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 Marietta Partnership.
Also, during the three months period ended June 30, 1999, the Company
acquired the assets of Computerized Tomography Center, Inc. ("CTC"), a
diagnostic imaging center located in the northern suburbs of metropolitan
Atlanta. CTC was previously an indirect wholly-owned subsidiary of PhyMatrix
Corp.
In connection with the PSC Marietta Partnership and CTC transactions
completed by the Company during the three month period ended June 30,1999, the
Company (i) paid an aggregate of $3,047,000 in cash (ii) issued a subordinated
promissory note in the principal amount of $125,000 with principal payments
beginning in June 2000, and bearing interest at a rate of 6% per annum, (iii)
agreed to pay in cash $192,900 upon the satisfactory completion of a computer
upgrade installation and (iv) entered into a Non Compete/Non Solicitation
Agreement with PhyMatrix providing for additional cash consideration in the
amount of $500,000 payable in equal monthly installments of $10,000 (without
interest) for 35 consecutive months, with a final payment of $150,000 on the
36th month. In connection with these acquisitions, the Company paid
approximately $240,000 to Premier HealthCare, an affiliate of the Company's Vice
Chairman and Secretary for advisory services rendered.
NOTE 5. PUBLIC OFFERINGS
On March 26, 1997, the Company completed its IPO of 2,200,000 shares of
its common stock. The net proceeds of the IPO were approximately $14,275,000, a
portion of which was used for repayment of indebtedness of the acquired
practices, repayment of indebtedness of the Company, payment of a consulting
fee, and for general corporate purposes and working capital requirements.
In May 1998, the Company registered under the Securities Act of 1933,
as amended, an aggregate of 3,146,514 shares of common stock of which (i)
2,750,000 shares may be issued from time to time by the Company in connection
with potential future affiliation transactions with ENT physicians or related
specialty practices or the merger with or acquisition by the Company of other
related businesses or assets, (ii) 220,000 shares are issuable upon exercise of
warrants issued to the representatives of the underwriters in the IPO which may
be sold from time to time by the holders of the warrants after issuance, and
(iii) 176,514 shares which were issued in December 1998 in connection with a
practice asset acquisition completed in December 1997, may be sold from time to
time by the physician stockholders.
In May 1998, the Company completed a public offering of 2,050,263
shares of its common stock (i) of which 2,000,000 shares were sold by the
Company and (ii) 50,263 shares were sold by certain stockholders of the Company.
In May 1998, the Company's underwriters exercised their option to purchase
307,540 additional shares of common stock from the Company to cover
over-allotments. The net proceeds to the Company from this offering and the
exercise of the over-allotment shares were approximately $16,520,000, with
approximately $5,400,000 and $3,800,000, respectively, used to pay the cash
portion of the purchase price of the PDI transaction and to repay outstanding
indebtedness of PDI.
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NOTE 6. INTANGIBLE ASSETS
The Company's physician practice acquisitions involve the purchase of
tangible and intangible assets and the assumption of certain liabilities of the
acquired practices. As part of the purchase price allocation, the Company
allocates the purchase price to the tangible and identifiable intangible assets
acquired and liabilities assumed based on estimated fair market values. Costs of
acquisitions in excess of the net estimated fair value of tangible and
identifiable intangible assets acquired and liabilities assumed are amortized
using the straight line method over a period of 25 years. At June 30, 1999, the
amount of such intangible assets was approximately $31,211,000 with accumulated
amortization totaling approximately $1,454,000.
NOTE 7. NOTES RECEIVABLE
In January 1999, the Company loaned $1,475,000 to the Cleveland ENT
physicians. This loan bears interest at a rate of 6% per annum and matures on
the earlier of January 14, 2000, the termination of the management services
agreement, or the termination of the employment of three or more of the
physicians. In addition, the Company granted the physicians the right and option
(the "Put Option") to require the Company to purchase from the physicians all of
the outstanding shares of common stock of Ohio Nasal Sinus Center, Inc.
("ONSC"), the sole asset of which is a corporate domain name. The Put Option may
be exercised by the physicians commencing January 10, 2000 and expiring on March
1, 2000. In the event the physicians exercise the Put Option, the Company would
be required to purchase the ONSC common stock for approximately $2 million in
cash and the issuance of a subordinated promissory note in the principal amount
of $520,000 (collectively, the "Put Purchase Price"). The subordinated
promissory note would bear interest at a rate of 6% per annum and would be
payable in four equal annual installments commencing on the first anniversary of
the date of issuance of the note. In the event the Put Option is exercised by
the physicians, the cash portion of the Put Purchase Price would be reduced by
any amounts owed under the loan or any other monetary obligations owed by the
physicians to the Company. Pursuant to the terms of the transaction, the Company
has agreed to indemnify the physicians for certain matters arising out of the
transaction.
In January 1999, Atlanta ENT issued a secured promissory note in the
amount of $2,152,000 to PSC Georgia Corp., a wholly owned subsidiary of the
Company and the general partner of PSC Ambulatory Surgery, Ltd., as
consideration for an additional 39% equity interest in PSC Ambulatory Surgery
Ltd. This note bears a fluctuating rate of interest equal to the prime rate (as
defined in the note), and is payable on a monthly basis commencing February 1999
and continues for 119 consecutive months at which time all accrued interest and
principal is due and payable. The note is secured by Atlanta ENT's acquired
interest in PSC Ambulatory Surgery, Ltd.
NOTE 8. NET PATIENT SERVICE REVENUE
Net patient service revenue is based on established billing rates, less
estimated allowances for patients covered by Medicare and other contractual
reimbursement programs, and discounts from established billing rates. Amounts
received by the Company for treatment of patients covered by Medicare and other
contractual reimbursement programs, which may be based on cost of services
provided or predetermined rates, are generally less than the established billing
rates of the Company's practices.
In March 1998, the Emerging Issues Task Force of the Financial
Accounting Standards Board (the "FASB") issued its Consensus on Issue 97-2
("EITF 97-2"). EITF 97-2 addresses certain specific matters pertaining to the
physician practice management industry. EITF 97-2 was effective for the Company
for the year ended December 31, 1998. EITF 97-2 addresses the ability of
physician practice management companies to consolidate the results of physician
practices with which it has an existing contractual relationship. The Company
has determined that its contracts met the criteria of EITF 97-2 for
consolidating the results of operations of the related physician practices, and
the Company has adopted EITF 97-2 in its consolidated statement of operations
effective for the year ended December 31, 1998. The Company has adjusted the
statement of operations for the three and six months ended June 30, 1998 to
conform with such consolidation. EITF 97-2 also has addressed the accounting
method for future combinations with individual physician practices. The Company
believes that, based on the criteria set forth in EITF 97-2, any future
acquisitions of individual physician practices will be accounted for under the
purchase method of accounting.
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NOTE 9. NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, FASB issued Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income," which establishes standards
for the reporting of comprehensive income in a company's financial statements.
Comprehensive income includes all changes in a company's equity during the
period that result from transactions and other economic events other than
transactions with its stockholders. SFAS No. 130 was effective for the year
beginning January 1, 1998. For the three month period ended March 31, 1999,
comprehensive income equals net income.
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information," which requires that an enterprise
disclose certain information about operating segments. SFAS No. 131 was
effective for the Company's financial statements for the year ended December 31,
1998. The Company considers its entire business as one reporting segment:
providing comprehensive physician practice management services to physician
practices and health care providers specializing in the treatment and management
of diseases and disorders of the ear, nose, throat, head, and neck and related
specialties.
In February 1998, the FASB issued SFAS No. 132, "Employer's Disclosures
About Pensions and Other Postretirement Benefits," which requires disclosure of
additional information about the cost and financial status of pension and
postretirement plans. SFAS No. 132 was effective for financial statements for
the year ended December 31, 1997. SFAS No. 132 did not require any significant
disclosures or revision of prior disclosures.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes standards for reporting
and disclosing information about derivative instruments. SFAS No. 133 is
effective for financial statements for the Company's fiscal quarter beginning
July 1, 1999. The Company does not expect SFAS No. 133 will have a significant
effect on its current financial reporting.
NOTE 10. EARNINGS PER SHARE
The Company has calculated its basic and diluted earnings per share in
accordance with SFAS No. 128, "Earnings Per Share". Basic earnings per share are
calculated by dividing net income available to common stockholders by the
weighted average number of common shares outstanding for the periods presented.
Diluted earnings per share reflects the potential dilution that could occur if
securities and other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Interest expense, net of tax, of approximately
$8,000 and $15,000 and $10,000 and $19,000 related to the subordinated seller
notes was added to net income in computing diluted earnings per share for the
three and six month periods ending June 30, 1999 and 1998, respectively.
A reconciliation of the number of weighted average shares used in
calculating basic and diluted earnings per share is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Weighted average number of common
shares outstanding - basic 9,172,025 7,695,730 9,168,388 7,106,869
Effect of potentially dilutive shares outstanding 142,247 431,490 105,717 431,577
Effect of convertible debt 117,322 113,455 117,322 102,375
--------- --------- --------- ---------
Weighted average number of common shares
outstanding - diluted 9,431,594 8,240,675 9,391,427 7,640,821
========= ========= ========= =========
</TABLE>
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NOTE 11. CREDIT AGREEMENT
Effective July 31, 1998, the Company closed on a four year $45 million
amended and restated senior credit facility syndicated by Nationsbanc Montgomery
Securities LLC. Syndicate lenders include NationsBank, N.A., PNC Bank and
Rabobank Nederland (the "Credit Facility"). The Credit Facility replaced the
Company's $20 million senior credit facility. Borrowings under the Credit
Facility (i) are secured by the assignment to the banks of the Company's stock
in all of its material subsidiaries and the Company's accounts receivable,
including the accounts receivable assigned to the Company by affiliated
practices pursuant to management services agreements, (ii) are guaranteed by all
material subsidiaries (including future subsidiaries) and (iii) restrict the
Company from pledging its assets to any other party. Advances under the Credit
Facility are used to fund acquisitions and working capital, are governed by a
borrowing base related primarily to the Company's earnings before interest,
taxes, depreciation and amortization ("EBITDA") and bears interest, at the
Company's option, based upon either a prime-based or LIBOR-based rate. EBITDA is
used by the Company as an indicator of a company's ability to incur and service
debt. EBITDA should not be considered an alternative to operating income, net
income, cash flows or any other measure of performance as determined in
accordance with generally accepted accounting principles, as an indicator of
operating performance, or as a measure of liquidity. The Credit Facility
contains affirmative and negative covenants which, among other things, require
the company to maintain certain financial ratios (including maximum indebtedness
to pro forma EBITDA, maximum indebtedness to capital, minimum net worth, minimum
current ratio and minimum fixed charges coverage), limit the amounts of
additional indebtedness, dividends, advances to officers, shareholders and
physicians, acquisitions, investments and advances to subsidiaries, and restrict
changes in management and the Company's business. As of August 13, 1999, the
Company had approximately $5.8 million of borrowings outstanding under the
Credit Facility with approximately $34.6 million available under the Credit
Facility.
NOTE 12: DEFINITIVE MERGER AGREEMENT
On June 14, 1999, the Company announced the signing of a definitive
merger agreement between the Company and a new company organized at the
direction of TA Associates ("MergerCo"). Under the terms of the merger
agreement, each outstanding share of Physicians' Specialty Corp. common stock,
other than shares as to which appraisal rights are properly perfected and not
withdrawn, shares held by the Company or any of its subsidiaries or by MergerCo,
certain shares held by management and their affiliates, certain affiliated
physicians and certain shares held by employee option holders, will be converted
into the right to receive $10.50 per share and certain indebtedness of the
Company will be refinanced. In addition, certain shares held by the Company's
Chairman and President, other member of Company management and their affiliates,
and certain affiliated physicians will be converted into shares of the surviving
corporation and management will retain an equity interest in the surviving
corporation. Company management and affiliated physicians holding approximately
3.6 million shares of Company common stock (representing 40% of the outstanding
shares) have entered into a Voting Agreement, under which they agreed to vote
their shares in favor of the proposed merger. TA Associates, Inc. and a
syndicate of five commercial banks including and led by First Union National
Bank have agreed, subject to the satisfaction of certain terms and conditions,
to provide financing in connection with the merger.
On June 29, 1999, the Company announced that the Company, certain of
its directors and TA Associates have been named as defendants in a lawsuit filed
as a purported class action in the Chancery Court for New Castle County,
Delaware. This suit alleges, that members of the Board of Directors suffer from
conflicts of interest that made in impracticable for the Board to conduct a
"bona fide" market check or auction of the Company prior to approval of the
Merger. The lawsuit also alleges that the announcement of the Merger was timed
to place an artificial lid on the market price of Physicians' Specialty Common
Stock. The suit seeks, among other things, injunctive relief prohibiting
consummation of the merger or, in the event that the transaction is consummated,
rescission, compensatory damages and costs and disbursements.
The Company believes the suit has no merit and intends to vigorously
defend the lawsuit.
NOTE 13: SUBSEQUENT EVENT
On July 1, 1999, the Company acquired substantially all of the assets
and assumed certain contractual obligations of Robert A. Mayers M.D., P.C., a
solo allergy practice located in Rye Brook, New York. In connection with the
acquisition of the assets of this practice, the Company paid $125,000 in cash.
In addition the Company paid approximately $5,000 to Premier HealthCare an
affiliate of the Company's Vice Chairman and Secretary for advisory services
rendered.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
All references to "we" or "us" refers to Physicians' Specialty Corp., a
Delaware corporation, and its wholly-owned subsidiaries. This Form 10-Q contains
forward-looking statements within the meaning of the "safe harbor" provisions
under Section 21E of the Securities and Exchange Act of 1934 and the Private
Securities Litigation Reform Act of 1995. We use forward-looking statements in
our description of our plans and objectives for future operations and
assumptions underlying these plans and objectives. Forward-looking terminology
includes the words "may," "expects," "believes," "anticipates," "intends,"
"forecasts," "projects," or similar terms, variations of such terms or the
negative of such terms. These forward-looking statements are based on
management's current expectations and are subject to factors and uncertainties
which could cause actual results to differ materially from those described in
such forward-looking statements. We expressly disclaim any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained in this Form 10-Q to reflect any change in our expectations
or any changes in events, conditions or circumstances on which any
forward-looking statement is based. Factors which could cause such results to
differ materially from those described in the forward-looking statements include
those set forth under "Risk Factors" and elsewhere in, or incorporated by
reference from time to time into, our filings with the Securities and Exchange
Commission. These factors include the following: we are unable to predict the
outcome of pending litigation or its impact on our proposed merger, we have a
limited operating history and a limited history of combined operations; our
results may be adversely affected by our acquisition strategy; we depend on
affiliated physicians; our substantial debt reduces cash available for our
business, may adversely affect our ability to obtain additional funds and
increases our vulnerability to economic or business downturns; our operating
results may be adversely affected by reductions in reimbursement by third party
payors; we face intense competition in the physician practice management
industry; we are subject to various government regulation; and other risks.
GENERAL
We are a physician practice management company which provides
comprehensive management services to physician practices specializing in the
treatment and management of ENT diseases and disorders, including specialists
practicing in the related fields of allergy, audiology, oral surgery, plastic
surgery, sleep medicine and ancillary services. We are currently affiliated with
92 physicians, one dentist and 84 allied health care professionals operating 67
clinical locations in Alabama, Florida, Georgia, Illinois, New Jersey, New York
and Ohio. We are also affiliated with a sleep diagnostic laboratory company
operating 12 sleep diagnostic laboratories and we own minority equity interests
in Atlanta Surgery Center and Marietta Surgery Center, which in the aggregate
own four ambulatory surgery centers containing 22 operating rooms.
Our revenue is derived:
- - from patient service revenue generated by physicians who are affiliated
or employed by us;
- - from our capitated managed care contracts;
- - from earnings related to ambulatory surgery centers in which we own
minority interests; and
- - from transitional management fees earned in conjunction with
integration of our acquired affiliated practices.
Patient service revenue consists of gross charges, less allowances for
bad debts and contractual adjustments, generated by or on behalf of physicians
affiliated with us or practicing at our wholly-owned subsidiary, ENT & Allergy
Associates. Capitation revenue consists of fixed monthly payments received by us
directly from HMOs or payors subcontracting with HMOs. Additionally, we record
our allocable share of earnings for our minority interests in Atlanta Surgery
Center and Marietta Surgery Center on the equity basis of accounting.
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MANAGEMENT SERVICES AGREEMENTS
The management services agreements delineate the responsibilities and
obligations of us and our affiliated practices. Under the management services
agreements, the affiliated practice assigns to us all of its non-governmental
accounts receivable and all of its right and interest in the proceeds of its
governmental accounts receivable and grants to us the right to collect and
retain the proceeds of the accounts receivable for our account to be applied
under the terms of the agreement. We are responsible for the payment for and
incur practice expenses which include:
- - operating expenses of the affiliated practice, including salaries and
benefits of non-medical employees of the practice, lease obligations of
office space and equipment, medical and office supplies; and
- - the non-operating expenses of the affiliated practice.
We pay for all such expenses directly out of the proceeds of the accounts
receivable assigned to us by the affiliated practice. In addition, under our
management services agreements, we retain, as a part of our management fee, a
stipulated percentage (generally between 12.5% and 15%) of all revenue (after
adjustment for contractual allowances) generated by or on behalf of physicians
practicing at such practice. Contractual allowances are the differences between
the amounts customarily charged by physicians practicing at such practice and
the amounts received pursuant to negotiated fee schedules from payors under
managed care, governmental and indemnity arrangements. We believe that such
contractual allowances are not currently expected to materially adversely affect
our revenue. In New York, in order to comply with state law, we are reimbursed
for practice expenses and are paid a fixed management fee of approximately $2.5
million per year subject to annual increases after the fifth anniversary of the
date of the management services agreement, consistent with the annual percentage
increase in the consumer price index. Our management fees under future
management services agreements will be determined based upon negotiations
between us and future affiliating practices and may vary significantly in the
future.
CAPITATED MANAGED CARE CONTRACTS
Our managed care contracts require us to contract for the provision of
substantially all of the ENT medical and surgical professional services required
by the enrollees under the managed care contracts. We have contracted with
physicians, including those at our affiliated practices in Atlanta, North
Georgia and Birmingham, Alabama, to provide a substantial portion of the medical
professional services in exchange for compensation on a discounted
fee-for-service or contract capitation basis.
We incur direct costs or provider claims based on medical services
provided by the participating physicians to the managed care company's
enrollees. As a result, if capitation amounts received by us are reduced by the
managed care companies or if enrollees covered by capitated contracts require
more frequent or more extensive care than is anticipated, operating margins may
be reduced or the revenue derived from such contracts may be insufficient to
cover the direct costs of the professional services provided by associated
physicians to enrollees under the contracts. Because of this we may be required
to adjust our rates paid to participating physicians. As a result, our business,
financial condition and results of operations may be adversely affected,
particularly if we are unable to renegotiate compensation levels paid to
participating physicians under the participation agreements on a timely or
favorable basis or negotiate capitated managed care contracts on terms favorable
to us.
Prior to entering into a capitated managed care contract, we analyze
the costs of managing such contracts including a study of the number of lives to
be covered, the geographic region to be covered and the historical utilization
patterns and the associated costs of enrollees. We then determine the capitation
fee necessary to generate acceptable returns under the contract and will
negotiate the capitation rate with the managed care company. Capitalization fees
are generally a fixed amount per enrollee per month. Capitated managed care
contracts frequently provide for periodic renegotiation of capitation fees and
adjustments based upon changes in the number of enrollees under the contracts,
changes in the types of professional services to be provided under the
contracts, and changes in the geographic areas to be covered under the
contracts.
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To assist in monitoring and controlling direct costs or provider claims
under capitated managed care contracts held by us, we utilize our management
information system, a comprehensive capitation administration and utilization
management system. We believe the system enables us to effectively analyze
clinical and cost data necessary to monitor and control expenses and manage
profitability under capitated arrangements and to anticipate accurately the
costs participating physicians will incur in providing services under such
contracts so that we undertake contracts which we can expect to realize adequate
profit margins or otherwise meet our objectives.
RESULTS OF OPERATIONS
Revenue. Net patient service revenue increased to $20,785,000 and
$40,296,000 for the three and six months ended June 30, 1999 as compared with
$12,780,000 and $23,580,000 for the same periods in 1998, representing increases
of $8,005,000 and $16,716,000 or 63% and 71%, respectively. The increase in
patient service revenue is primarily attributable to an increase in the number
of physicians affiliated with us to 92 physicians at June 30, 1999 as compared
with 68 physicians at June 30, 1998, an increase of 24 physicians or 35%.
Patient service revenue generated by physicians who were affiliated with us for
both six month periods ended June 30, 1998 and 1999 increased on average
approximately 10% per physician. Capitation revenues increased to $1,312,000 and
$2,674,000 for the three and six months ended June 30, 1999 as compared with
$1,145,000 and $2,311,000 for the same periods in 1998 representing increases of
$167,000 and $363,000 or 15% and 16%, respectively. The increase in capitation
revenues was primarily attributable to an increase in the aggregate number of
enrollees to approximately 358,000 at June 30, 1999 as compared to approximately
320,000 at June 30, 1998, an increase of approximately 38,000 enrollees or 12%.
Management fees increased to $561,000 and $904,000 for the three and six months
ended June 30, 1999 as compared with $288,000 and $327,000 for the same periods
in 1998 primarily as a result of transitional management fees earned in
conjunction with integration of our acquired affiliated practices. For the three
and six months ended June 30, 1999, we recorded as revenue earnings from our
equity interests in Atlanta Surgery Center and Marietta Surgery Center in the
amount of $473,000 and $768,000. This revenue is not included in the three and
six months ended June 30, 1998. As a result of the foregoing factors, our net
revenue increased to $23,131,000 and $44,642,000 for the three and six months
ended June 30, 1999 as compared with $14,213,000 and $26,218,000 for the same
periods in 1998, representing increases of $8,918,000 and $18,424,000 or 63% and
70% respectively.
Provider Claims, Wages and Benefits. Provider claims, wages and
benefits, which includes physician compensation, increased to $15,270,000 and
$29,353,000 for the three and six months ended June 30, 1999, as compared with
$9,530,000 and $17,455,000 for the same periods in 1998 representing increases
of $5,740,000 and $11,898,000 or 60% and 68%, respectively. The dollar increase
in provider claims, wages and benefits is primarily attributable to the increase
in the number of affiliated physicians managed by us and the addition of
non-medical personnel at our affiliated practices required to support the
increase in the number of affiliated physicians. As a percent of net revenue,
provider claims, wages and benefits decreased slightly to 66% for both the three
and six month periods ended June 30, 1999 as compared to 67% for the same
periods in 1998.
General and Administrative. General and administrative expenses
increased to $4,043,000 and $8,008,000 for the three and six months ended June
30, 1999 as compared with $2,562,000 and $4,820,000 for the same periods in
1998, representing increases of $1,481,000 and $3,188,000 or 58% and 66%,
respectively. These increases are primarily attributable to the addition of
personnel and greater support costs associated with our expansion during 1998.
As a percent of net revenue, general and administrative expenses were 18% for
both the three and six months ended June 30, 1999 as compared to 18% for the
same periods in 1998.
Depreciation and Amortization. Depreciation and amortization expenses
increased to $686,000 and $1,373,000 for the three and six months ended June 30,
1999 as compared with $403,000 and $686,000 for the same periods in 1998,
representing increases of $283,000 and $687,000 or 70% and 100%, respectively.
These increases were primarily the result of the increases in intangible assets,
or goodwill, resulting from additional acquisitions and resulting increases in
amortization of intangible assets associated with these acquisitions, as well as
investments in equipment, leasehold improvements and management information
systems and resulting increases in depreciation of these assets. As a percent of
net revenue, depreciation and amortization expense remained at 3% for both the
three and six month periods ended June 30, 1999 as compared to 3% for the same
periods in 1998.
Other Income (Expense). Other expense for the three and six months
ended June 30, 1999 was $219,000 and $234,000, respectively representing
interest expense related primarily to the subordinated seller notes and
borrowings in conjunction with our $45,000,000 senior credit facility which was
offset by interest income earned on interest bearing promissory notes and the
short term investment of excess cash and cash equivalents. Other income for the
three and six months ended June 30, 1998 was $125,000 and
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$154,000, respectively and was derived from interest income earned on the short
term investment of cash and cash equivalents net of amounts of interest paid
primarily on the subordinated seller notes.
Income Taxes. Income taxes were provided for at 39% effective tax rates
for the three and six month periods ended June 30, 1999 and 1998 respectively.
Net Income. As a result of the foregoing factors, net income increased
to $1,777,000 and $3,462,000 for the three and six months ended June 30, 1999 as
compared to $1,124,000 and $2,081,000 for the same periods in 1998, representing
increases of $653,000 and $1,381,000 or 58% and 66%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
We utilize capital primarily:
- - to acquire assets or equity of physician practices and related
ancillary businesses;
- - to acquire equipment utilized by our affiliated practices;
- - to fund corporate capital expenditures including management information
systems; and
- - to fund ongoing corporate working capital requirements.
At June 30, 1999, we had working capital of $15,801,000 compared to
$18,388,000 at December 31, 1998, a decrease of $2,587,000. The decrease in
working capital was due primarily to the decrease in cash and cash equivalents
at June 30, 1999 relating to the cash consideration paid for acquisitions
completed by us during the six month period ended June 30, 1999.
For the six month period ended June 30, 1999 net cash provided by
operating activities was $1,332,000 compared to net cash used in operating
activities of $111,000 for the same period in 1998. Net cash provided by
operating activities for the period ended June 30, 1999 consists of our net
income, increased by non-cash expenses such as depreciation and amortization and
decreased by non-cash earnings from our equity interests in Atlanta Surgery
Center and Marietta Surgery Center, and adjusted by changes in the components of
working capital primarily accounts receivable, prepayments and accounts payable.
Net cash used in investing activities was $7,541,000 for the six month
period ended June 30, 1999 compared to $11,228,000 for the same period in 1998.
Our uses of cash in investing activities related primarily to acquisitions and
capital expenditures in both the 1999 and 1998 periods. For the six month period
ended June 30, 1999 we received a distribution from our equity interest in
Atlanta Surgery Center of approximately $574,000.
Net cash provided by financing activities was $2.7 million for the six
month period ended June 30, 1999 primarily due to borrowings of approximately
$2.9 million under our $45 million credit facility. For the same period in 1998
we realized net proceeds of $16.5 million in connection with a public offering
of approximately 2.3 million shares of our common stock.
On July 31, 1998, we closed on a four year $45 million amended and
restated senior credit facility syndicated by Nationsbanc Montgomery Securities
LLC. Syndicate lenders include NationsBank, N.A., PNC Bank and Rabobank
Nederland (the "Credit Facility"). The Credit Facility replaced our $20 million
senior credit facility. Borrowings under the Credit Facility (i) are secured by
the assignment to the banks of our stock in all of our material subsidiaries and
our accounts receivable, including the accounts receivable assigned to us by
affiliated practices pursuant to management services agreements, (ii) are
guaranteed by all material subsidiaries (including future subsidiaries) and
(iii) restrict us from pledging our assets to any other party. Advances under
the Credit Facility will be used to fund acquisitions and working capital, will
be governed by a borrowing base related primarily to our earnings before
interest, taxes, depreciation and amortization ("EBITDA") and will bear
interest, at our option, based upon either a prime-based or LIBOR-based rate.
EBITDA is used by us as an indicator of our ability to incur and service debt.
EBITDA should not be considered an alternative to operating income, net income,
cash flows or any other measure of performance as determined in accordance with
generally accepted accounting principles, as an indicator of operating
performance, or as a measure of liquidity. The Credit Facility contains
affirmative and negative covenants which, among other things, require us to
maintain certain financial ratios
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(including maximum indebtedness to pro forma EBITDA, maximum indebtedness to
capital, minimum net worth, minimum current ratio and minimum fixed charges
coverage), limit the amounts of additional indebtedness, dividends, advances to
our officers, shareholders and physicians, acquisitions, investments and
advances to subsidiaries, and restrict changes in management and our business.
As of August 13, 1999, we had approximately $5.8 million of borrowings
outstanding under the Credit Facility with approximately $34.6 million available
under the Credit Facility.
During the three month period ended June 30, 1999, PSC Marietta
Ambulatory Surgery, Ltd., a Georgia limited partnership ("PSC Marietta
Partnership"), of which our subsidiary PSC Georgia Corp. is the sole general
partner, and Atlanta ENT is the sole limited partner, acquired in the aggregate
a 12.5% limited partnership interest in Marietta Outpatient Surgery, Ltd., a
Georgia limited partnership ("Marietta Surgery Center"). The aggregate purchase
price was paid by us. Pursuant to the terms of the transaction, we and Atlanta
ENT own 99% and 1% respectively, of the partnership interest in PSC Marietta
Partnership provided that Atlanta ENT has an option to purchase up to 40% of the
partnership interest from us based upon our cost of such interest. Marietta
Surgery Center operates a multi-specialty ambulatory surgery center consisting
of 8 operating rooms, in the Marietta suburb of metropolitan Atlanta. As a
result of the transaction, effective April 1, 1999, the PSC Marietta Partnership
will receive 12.5% of the distributions made by Marietta Surgery Center, and we
and Atlanta ENT will receive our pro rata share of such distributions based on
each of our respective ownership interests in the PSC Marietta Partnership.
Also, during the three months period ended June 30, 1999, we acquired
the assets of Computerized Tomography Center, Inc. ("CTC"), a diagnostic imaging
center located in the northern suburbs of metropolitan Atlanta. CTC was
previously an indirect wholly-owned subsidiary of PhyMatrix Corp.
In connection with the PSC Marietta Partnership and CTC transactions
completed by us during the three month period ended June 30,1999, we (i) paid an
aggregate of $3,047,000 in cash, (ii) issued a subordinated promissory note in
the principal amount of $125,000 with principal payments beginning in June 2000,
and bearing interest at a rate of 6% per annum, (iii) agreed to pay in cash
$192,900 upon the satisfactory completion of a computer upgrade installation and
(iv) entered into a Non Compete/Non Solicitation Agreement providing for
additional cash consideration in the amount of $500,000 payable in equal monthly
installments of $10,000 (without interest) for 35 consecutive months, with a
final payment of $150,000 on the 36th month. In connection with these
acquisitions, we paid approximately $240,000 to Premier HealthCare, an affiliate
of the Company's Vice Chairman and Secretary for advisory services rendered.
Several multi-specialty companies in the physician practice management
industry have discontinued physician practice management activities or divested
assets related to physician practice management or announced plans to do so.
Other physician practice management companies have completed or announced
transactions, including mergers, recapitalizations or other corporate
transactions, as a result of which they are no longer public companies. As a
result of these trends and the depressed stock prices of physician practice
management companies, we believe that physician practice management companies
may generally experience a decrease in practice acquisition activity and an
associated slow down in revenue growth attributable to practice acquisitions.
Consistent with our market driven strategy, we focus primarily on practice and
ancillary services acquisitions in markets in which we already manage ENT
practices and to a lesser extent, in new markets.
On June 14, 1999, our Board of Directors approved the terms of a
definitive merger agreement with a new company formed by TA Associates, Inc.
which will effect a recapitalization of Physicians' Specialty. Under the Merger
Agreement, we will be recapitalized and each outstanding share of our common
stock, other than certain of our shares held by management and certain
affiliated physicians, will be converted into the right to receive $10.50 in
cash, and certain of our indebtedness will be refinanced. Certain shares of our
common stock held by Ramie A. Tritt, M.D., our Chairman of the Board and
President, our other executive officers and certain affiliated physicians will
be converted into shares of the surviving corporation and management will
maintain an equity interest in the surviving corporation. If the proposed merger
is consummated, we will become a private company.
The proposed transaction is subject to certain conditions, including
approval by our stockholders holding a majority of the outstanding shares,
financing and other customary closing conditions. Our management and affiliated
physicians holding approximately 3.6 million shares of our common stock
(representing approximately 40% of the outstanding shares) have entered into a
Voting Agreement, under which they have agreed to vote their shares in favor of
the proposed merger. TA Associates and a syndicate of five commercial banks
including and led by First Union National Bank have agreed, subject to certain
terms and conditions to provide the necessary financing for the transaction.
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YEAR 2000
The Year 2000 issue is the result of using only the last two digits to
indicate the year in computer hardware and software programs and embedded
technology such as micro-controllers. As a result, these programs do not
properly recognize a year that begins with "20" instead of the familiar "19." If
uncorrected, such programs will be unable to interpret dates beyond the year
1999, which could cause computer system failure or miscalculations which could
disrupt our operations and adversely affect our cash flows and results of
operations.
We recognize the importance of the Year 2000 issue and have given it
high priority. Our objective is to ensure an uninterrupted transition to the
year 2000 by assessing, testing and modifying products and information
technology ("IT") systems and non-IT systems so that such systems and software
will perform as intended and information and dates can be processed with
expected results. The scope of our compliance efforts include (i) identification
and assessment of risks, including the risks of non-compliance by third parties,
(ii) development of remediation and contingency plans, (iii) implementation and
(iv) testing.
There are three major IT system applications that we rely upon to
process transactions and provide information for managing our operations. These
applications have been identified as follows:
- - accounting and financial reporting system;
- - practice management billing and accounts receivable systems; and
- - capitated claims processing and reporting system.
Accounting and financial reporting system. During 1998 we fully
implemented the Great Plains accounting and financial reporting software
applications at all of our affiliated practices, our subsidiaries and our
corporate locations. The Great Plains accounting package has been modified and
tested and we believe it is Year 2000 compliant.
Practice management billing and accounts receivable systems. Our
affiliated practices currently utilize software packages which were developed by
large third party software development companies such as Medic, Medical Manager,
Verysis and Reynolds & Reynolds. We have been in contact with all of these
companies and believe that all Year 2000 compliant modified programs will be
fully tested and implemented by us and our affiliates during the third quarter
of 1999.
Capitated claims processing and reporting system. We have internally
developed a proprietary capitated claims processing and reporting system which
we believe is Year 2000 compliant.
We are also highly dependent on receiving payments from third party
payors for capitated fees and for insurance reimbursement for claims submitted
by our affiliated practices, and as such, the ability of such payors to process
claims submitted by affiliated practices accurately and timely, constitutes a
significant risk to our cash flow and could materially adversely affect our
operations. We and our affiliated practices have been or will be in
communication with these payors to ensure that these payors will be Year 2000
compliant and will be able to process claims uninterrupted. However, there can
be no assurance that such third party payors will be Year 2000 compliant.
Like virtually every company, we are at risk for the failure of major
infrastructure providers to adequately address potential Year 2000 problems. We
are highly dependent on a variety of public and private infrastructure providers
to conduct our business. Failures of banking systems, basic utility providers,
telecommunication providers and other services to achieve Year 2000 compliance,
could have a material adverse effect on our and our affiliated practices'
ability to conduct business. While we are aware of these risks, a complete
assessment of all such risks is beyond the scope of our Year 2000 project.
Through June 30, 1999, we have incurred costs of approximately $125,000
related to the Year 2000 issue. We do not anticipate that we will incur any
additional material costs associated with addressing Year 2000 issues.
Our current estimates of the amount of time and costs necessary to
remediate and test our computer systems are based on the facts and circumstances
existing at this time. The estimates were made using assumptions of future
events including the continued availability of certain resources, Year 2000
modification plans, implementation success by key third-parties, and other
factors. New developments may occur that could affect our estimates of the
amount of time and costs needed to modify and test our IT and non-IT systems for
Year 2000 compliance. These developments include, but are not limited to:
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- - the availability and cost of personnel trained in this area;
- - the ability to locate and correct all relevant date-sensitive codes in
both IT and non-IT systems;
- - unanticipated failures in our IT and non-IT systems; and
- - the planning and Year 2000 compliance success that third-parties
attain.
We cannot determine the impact of these potential developments on the
current estimate of probable costs of making our IT and non-IT systems Year 2000
compliant. Accordingly, we are not able to estimate our possible future costs
beyond the current estimate of costs. As new developments occur, these cost
estimates may be revised to reflect the impact of these developments on the
costs to us of making our IT and non-IT systems Year 2000 compliant. Such
revisions in costs could have a material adverse impact on our results of
operations in the quarterly period in which they are recorded. Although we
consider it unlikely, such revisions could also have a material adverse effect
on the business, financial condition or results of our operations. If Year 2000
compliance is not achieved, we have developed a contingency plan which includes:
- - increasing normal inventories of critical supplies for our affiliated
practices prior to December 31, 1999;
- - ensuring an adequate line of bank credit if third party payor payments
are disrupted; and
- - ensuring that all critical staff are available or scheduled to work
prior to, during and immediately after December 31, 1999.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On June 18, 1999, a lawsuit was filed as a purported class action in
the Chancery Court for New Castle County, Delaware on behalf of all holders of
Physicians' Specialty Common Stock excluding the defendants and their related or
affiliated entities. The lawsuit names a defendants Physicians' Specialty, six
of the Company's seven directors (including the three members of the Special
Committee) and TA Associates, Inc.
The lawsuit alleges, among other things, that the directors of
Physician's Specialty have breached their fiduciary duties to the Company's
stockholders by approving the Merger. In particular, the lawsuit alleges that
members of the Board of Directors suffer from conflicts of interest that made it
impracticable for the Board of Directors to conduct a "bona fide" market check
or auction of the Company prior to approval of the Merger. The lawsuit also
alleges that the announcement of the Merger was timed to place an artificial lid
on the market price of Physicians' Specialty Common Stock. The lawsuit seeks
among other things, preliminary and permanent injunctive relief prohibiting
consummation of the Merger, unspecified damages, attorneys' fees and other
relief. Physicians' Specialty believes the lawsuit has no merit and intends to
contest this lawsuit vigorously.
ITEM 5. OTHER INFORMATION
During the three month period ended June 30, 1999, PSC Marietta
Ambulatory Surgery, Ltd., a Georgia limited partnership ("PSC Marietta
Partnership"), of which our subsidiary is the sole general partner, and Atlanta
ENT is the sole limited partner, acquired in the aggregate a 12.5% limited
partnership interest in Marietta Outpatient Surgery, Ltd., a Georgia limited
partnership. The aggregate purchase price was paid by us. Pursuant to the terms
of the transaction, we and Atlanta ENT own 99% and 1% respectively, of the
partnership interest in PSC Marietta Partnership. Atlanta ENT has an option to
purchase up to 40% of the partnership interest from us based upon our cost of
such interest. Marietta Surgery Center operates a multi-specialty ambulatory
surgery center consisting of 8 operating rooms, in the Marietta suburb of
metropolitan Atlanta. As a result of the transaction, effective April 1, 1999,
the PSC Marietta Partnership will receive 12.5% of the distributions made by
Marietta Surgery Center and we and Atlanta ENT will receive our pro rata share
of such distributions based on our ownership interest in the PSC Marietta
Partnership.
Also, during the three months period ended June 30, 1999, we acquired
the assets of CTC, a diagnostic imaging center located in the northern suburbs
of metropolitan Atlanta. CTC was previously an indirect wholly-owned subsidiary
of PhyMatrix Corp.
- 18 -
<PAGE> 19
In connection with the PSC Marietta Partnership and CTC transactions
completed by us during the three month period ended June 30,1999, we (i) paid an
aggregate of $3,047,000 in cash, (ii) issued a subordinated promissory note in
the principal amount of $125,000 with principal payments beginning in June 2000,
and bearing interest at a rate of 6% per annum, (iii) agreed to pay in cash
$192,900 upon the satisfactory completion of a computer upgrade installation and
(iv) entered into a Non Compete/Non Solicitation Agreement providing for
additional cash consideration in the amount of $500,000 payable in equal monthly
installments of $10,000 (without interest) for 35 consecutive months, with a
final payment of $150,000 on the 36th month. In connection with these
acquisitions, we paid approximately $240,000 to Premier HealthCare, an affiliate
of the Company's Vice Chairman and Secretary for advisory services rendered.
On June 14, 1999, our Board of Directors approved the terms of a
definitive merger agreement with a new company formed by TA Associates, Inc.
which will effect a recapitalization of Physicians' Specialty. Under the Merger
Agreement, we will be recapitalized and each outstanding share of our common
stock, other than certain shares held by management and certain affiliated
physicians, will be converted into the right to receive $10.50 in cash, and
certain of our indebtedness will be refinanced. Certain shares of our common
stock held by Ramie A. Tritt, M.D., our Chairman of the Board and President, our
other executive officers and certain affiliated physicians will be converted
into shares of the surviving corporation and management will maintain an equity
interest in the surviving corporation. If the proposed merger is consummated, we
will become a private company.
The proposed transaction is subject to certain conditions, including
approval by our stockholders holding a majority of the outstanding shares,
financing and other customary closing conditions. Our management and affiliated
physicians holding approximately 3.6 million shares of our common stock
(representing approximately 40% of the outstanding shares) have entered into a
Voting Agreement, under which they have agreed to vote their shares in favor of
the proposed merger. TA Associates and a syndicate of five commercial banks
including and led by First Union National Bank have agreed, subject to certain
terms and conditions, to provide the necessary financing for the transaction.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 Agreement and Plan of Merger dated as of June 14, 1999 by and among
Physicians' Specialty Corp., TA MergerCo., Inc., TA/Advent VIII, L.P.,
TA/Atlantic and Pacific IV, L.P., TA Investors LLC and TA Executives
Fund LLC (1)
10.60 Stock Option Exercise and Termination Agreement dated as of June 14,
1999 by and among Physicians' Specialty Corp. and each of the
individuals listed on Exhibit A thereto.
10.61 Voting Agreement dated as of June 14, 1999 among TA MergerCo, Inc., the
persons listed on Exhibit A thereto, and Physicians' Specialty Corp.
10.62 Rollover Agreement dated as of June 14, 1999 by and among TA MergerCo.,
Inc. and each of the entities listed on the signature pages attached
thereto.
10.63 Stock Purchase Agreement dated as of June 14, 1999 by and among
TA/Advent VIII, L.P., TA/Atlantic and Pacific IV, L.P., TA Executives
Fund LLC, TA Investors LLC and the holders of the capital stock of
Physicians' Specialty Corp. listed on Exhibit A thereto.
10.64 Registration Rights Agreement dated as of June 14, 1999 by and among TA
MergerCo, Inc. and each of the persons listed on the signature pages
attached thereto.
10.65 Stockholders Agreement dated as of June 14, 1999 by and among TA
MergerCo, Inc. and each of the persons listed on the signature pages
attached thereto.
10.66 Amendment to Executive Employment Agreement dated as of June 14, 1999
between Physicians' Specialty Corp. and Richard D. Ballard.
10.67 Amendment to Executive Employment Agreement dated as of June 14, 1999
between Physicians' Specialty Corp. and Gerald R. Benjamin.
- 19 -
<PAGE> 20
10.68 Amendment to Executive Employment Agreement dated as of June 14, 1999
between Physicians' Specialty Corp. and Lawrence P. Kraska.
10.69 Amendment to Executive Employment Agreement dated as of June 14, 1999
between Physicians' Specialty Corp. and Ramie A. Tritt, M.D.
27.1 Financial Data Schedule (for SEC use only)
- ---------------
(1) Incorporated by reference to our Current Report on Form 8-K
filed on June 18, 1999.
(b) Reports on Form 8-K
During the three months ended June 30, 1999, we filed a current report
on Form 8-K on June 14, 1999 reporting information under Item 5.
- 20 -
<PAGE> 21
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 thereunto duly authorized.
PHYSICIANS' SPECIALTY CORP.
DATE August 16, 1999 /s/ Robert A. DiProva
-------------------- ----------------------------------------
Robert A. DiProva Executive Vice
President and Chief Financial Officer
- 21 -
<PAGE> 1
EXHIBIT 10.60
STOCK OPTION EXERCISE AND TERMINATION AGREEMENT
STOCK OPTION EXERCISE AND TERMINATION AGREEMENT, dated as of June 14,
1999 (this "Agreement"), among Physicians' Specialty Corp., a Delaware
corporation ("Target"), and each of the individuals listed on Exhibit A hereto
(the "Optionholders" and each an "Optionholder").
WHEREAS, Target and TA MergerCo, Inc., a Delaware corporation
("MergerCo"), are entering into an Agreement and Plan of Merger, dated as of the
date hereof (as the same may be amended from time to time, the "Merger
Agreement"), which provides, upon the terms and subject to the conditions
thereof, for the merger of MergerCo with and into Target (the "Merger"); and
WHEREAS, certain of the Optionholders own beneficially or of record
shares of common stock of Target, par value $.001 per share ("Target Common
Stock"); and
WHEREAS, the Optionholders hold options to purchase shares of Target
Common Stock, the number and exercise price of which are set forth on Exhibit A
hereto (the "Target Options"); and
WHEREAS, certain Optionholders and MergerCo are entering into a
Roll-over Agreement dated as of the date hereof (the "Roll-over Agreement") and
a Stock Purchase Agreement dated as of the date hereof (the "Stock Purchase
Agreement"), which provide for such Optionholders to sell certain shares of
Target Common Stock (including shares issuable upon the exercise of target
Options that have an exercise price of less than $10.50 per share ("In the Money
Options")) to MergerCo for cash consideration and to receive shares of MergerCo
common stock in the Merger in exchange for the remainder of the shares of Target
Common Stock (including shares issuable upon the exercise of In the Money
Options) held by such Optionholders; and
WHEREAS, as a condition to the willingness of MergerCo to enter into
the Merger Agreement, MergerCo has requested that each Optionholder agree, and,
in order to induce MergerCo to enter into the Merger Agreement each Optionholder
is willing to agree, to exercise all In the Money Options held by such
Optionholder, and to terminate and cancel all Target Options held by such
Optionholder to the extent that such options have an exercise price greater than
or equal to $10.50 per share ("Out of the Money Options").
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements and covenants set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
<PAGE> 2
1. Ownership. Each Optionholder hereby represents and warrants
that all options to acquire Target Common Stock that are held by such
Optionholder are set forth on Exhibit A hereto and that the information set
forth with respect to the Target Options held by such Optionholder on Exhibit A
is complete and correct.
2. Exercisability. Each Optionholder and Target acknowledge and
agree that prior to the consummation of the transactions contemplated by the
Stock Purchase Agreement all Target Options shall become fully exercisable,
either as a result of the operation of the option plans and agreements under
which such Target Options were issued or as a result of appropriate action of
the board of directors of Target.
3. Exercise; Termination. Each Optionholder hereby exercises all
of the In the Money Options set forth opposite such Optionholder's name on
Exhibit A hereto, effective simultaneously with the consummation of the
transactions contemplated by the Stock Purchase Agreement, and Target and such
Optionholder agree that Target shall effect such exercise by issuing to such
Optionholder for no cash consideration a number of shares of Target Common Stock
equal to (A) the number of shares of Target Common Stock issuable upon the
exercise of such In the Money Options as set forth on Exhibit A minus (B) the
aggregate exercise price of such In the Money Options as set forth on Exhibit A
divided by $10.50. Each Optionholder agrees that all Out of the Money Options
held by such Optionholder shall be canceled and terminated and become null, void
and of no further effect simultaneously with the consummation of the
transactions contemplated by the Stock Purchase Agreement and such Optionholder
shall not be entitled to receive any shares of Target Common Stock with respect
to such terminated and canceled Out of the Money Options.
4. No Additional Rights. Each Optionholder agrees that upon the
exercise or cancellation of the Target Options pursuant to Section 3 hereof,
such Optionholder shall not have any further rights with respect to the Target
Options or any further rights under any option plan, or option agreement of
Target or to which Target and such Optionholder are parties, including without
limitation the Target's 1996 Stock Option Plan and the Target's 1996 HealthCare
Professionals Stock Option Plan.
5. Investment Representation. Such Stockholder acknowledges that
it has been provided access to all information requested by it in order to
evaluate the merits and risks of the transactions contemplated by this
Agreement. Such Stockholder has relied solely upon the advice of his, her or its
own counsel, accountant and other advisors, with regard to the legal,
investment, tax and other considerations regarding this Agreement and the
transactions contemplated hereby.
6. General Provisions.
a. Successors and Assigns. All covenants and agreements
in this Agreement by or on behalf of any of the parties hereto
will bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so
expressed or not.
2
<PAGE> 3
b. Further Assurance. After the consummation of the
transactions contemplated hereby, as and when requested by
MergerCo, the Optionholders shall, without further
consideration, execute and deliver all such documents and
instruments and shall take such further actions as MergerCo
may deem reasonably necessary or desirable in order to carry
out fully the provisions and purposes of this Agreement.
c. Survival of Representations and Warranties. All
representations and warranties contained herein or made in
writing by any party in connection herewith shall survive the
execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby.
d. Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision
of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule
in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any
other jurisdiction, but this Agreement shall be reformed,
construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been
contained herein.
e. Complete Agreement. This Agreement, those documents
expressly referred to herein and other documents of even date
herewith embody the complete agreement and understanding among
the parties and supersede and preempt any prior
understandings, agreements or representations by or among the
parties, written or oral, which may have related to the
subject matter hereof in any way.
f. Counterparts. This Agreement may be executed in
separate counterparts each of which shall be an original and
all of which taken together shall constitute one and the same
agreement.
g. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of
this Agreement was not performed in accordance with the terms
hereof or was otherwise breached. It is accordingly agreed
that the parties shall be entitled to specific relief
hereunder, including, without limitation, an injunction or
injunctions to prevent and enjoin breaches of the provisions
of this Agreement and to enforce specifically the terms and
provisions hereof, in any state or federal court in the State
of Delaware, in addition to any other remedy to which they may
be entitled at law or in equity. Any requirements for the
securing or posting of any bond with respect to any such
remedy are hereby waived.
h. Governing Law. Choice of Law/Consent to Jurisdiction.
All disputes,
3
<PAGE> 4
claims or controversies arising out of or relating to this
Agreement, or the negotiation, validity or performance of this
Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware without regard to its
rules of conflict of laws. Each Optionholder, the Company and
MergerCo hereby irrevocably and unconditionally consents to
submit to the sole and exclusive jurisdiction of the courts of
the State of Delaware and of the United States located in the
State of Delaware (the "Delaware Courts") for any litigation
arising out of or relating to this Agreement, or the
negotiation, validity or performance of this Agreement (and
agrees not to commence any litigation relating thereto except
in such courts), waives any objection to the laying of venue
of any such litigation in the Delaware Courts and agrees not
to plead or claim in any Delaware Court that such litigation
brought therein has been brought in any inconvenient forum.
Each of the parties hereto agrees, (a) to the extent such
party is not otherwise subject to service of process in the
State of Delaware, to appoint and maintain an agent in the
State of Delaware as such party's agent for acceptance of
legal process, and (b) that service of process may also be
made on such party by prepaid certified mail with a proof of
mailing receipt validated by the United States Postal Service
constituting evidence of valid service. Service made pursuant
to (a) or (b) above shall have the same legal force and effect
as if served upon such party personally within the State of
Delaware. For purposes of implementing the parties' agreement
to appoint and maintain an agent for service of process in the
State of Delaware, each such party does hereby appoint CT
Corporation, Corporation Trust Center, 1209 Orange Street,
Wilmington, DE 19801, as such agent.
i. Construction. Whenever the context requires, each
term stated in either the singular or the plural shall include
the singular and the plural and pronouns stated in either the
masculine, the feminine or the neuter gender shall include the
masculine, feminine and neuter. All references to Sections and
Paragraphs refer to sections and paragraphs of this Agreement.
The use of the word "including" in this Agreement shall be by
way of example rather than limitation.
j. Amendment and Waiver. The provisions of this
Agreement may be amended and waived only with the prior
written consent of each of the parties hereto, provided,
however, that the Company and MergerCo may together in writing
waive or consent to a modification of any provision of this
Agreement with respect to any Stockholder without the
agreement of any other party hereto. Notwithstanding anything
to the contrary herein, the provisions of this Agreement may
not be amended or waived in a manner that would adversely
affect the rights of MergerCo hereunder without the prior
written consent of MergerCo.
k. Third Party Beneficiary. MergerCo is a third-party
beneficiary of this Agreement and shall be entitled to enforce
this Agreement against each of the Optionholders in the same
manner as if it were a party hereto.
4
<PAGE> 5
l. No Agreement Until Executed. Irrespective of
negotiations among the parties or the exchanging of drafts of
this Agreement, this Agreement shall not constitute or be
deemed to evidence a contract, agreement, arrangement or
understanding among the parties hereto unless and until this
Agreement is executed by the parties hereto.
m. Exculpation. No Optionholder shall have any liability
or obligation whatsoever under or by reason of this Agreement
because of a breach by any other Optionholder of its
obligations, representations or warranties hereunder.
n. Termination. Notwithstanding anything in this
Agreement to the contrary, this Agreement shall terminate upon
the termination of the Merger Agreement pursuant to Section
9.1 thereof.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Stock Option
Exercise Agreement on the date first written above.
PHYSICIANS' SPECIALTY CORP.
By: /s/ Ramie A. Tritt, M.D.
-----------------------------------------
Name: Ramie A. Tritt, M.D.
Title: Chairman and President
6
<PAGE> 7
EXHIBIT A
_________
TARGET OPTION INFORMATION
_________________________
In the Money Options
<TABLE>
<CAPTION>
Out of the Money
Name No. Target Shares Issuable Exercise Price Options to be Terminated
- ------------------- -------------------------- -------------- ------------------------
<S> <C> <C> <C>
Richard Ballard 179,968 $ 6.80
Richard Ballard 40,000 $10.00
Richard Ballard 150,000 $ 7.75
Gerald R. Benjamin 40,000 $10.00
Gerald R. Benjamin 150,000 $ 7.75
Robert DiProva 119,980 $ 6.80
Robert DiProva 30,000 $10.00
Robert DiProva 50,000 $ 7.75
Larry Kraska 59,992 $ 6.80
Larry Kraska 50,000 $10.00
Larry Kraska 125,000 $ 7.75
Ramie Tritt, M.D 200,000 $8.525
Ramie Tritt, M.D 50,000
</TABLE>
7
<PAGE> 8
[OPTIONHOLDER SIGNATURE PAGES OMITTED]
8
<PAGE> 1
Exhibit 10.61
EXECUTION COPY
VOTING AGREEMENT
VOTING AGREEMENT, dated as of June 14, 1999 (this "AGREEMENT"), among
TA MergerCo, Inc., a Delaware corporation ("MERGERCO"), the persons listed on
EXHIBIT A hereto (the "STOCKHOLDERS" and each a "STOCKHOLDER", which term shall
include certain of the undersigned only in the event they exercise any Target
Options (hereinafter defined) held by them prior to the consummation of the
transactions contemplated by the Merger Agreement (as hereinafter defined)), and
Physicians' Specialty Corp., a Delaware corporation ("TARGET").
WHEREAS, as of the date hereof each Stockholder owns (either
beneficially or of record) the number of shares of common stock, par value $.01
per share (the "TARGET STOCK"), of Target set forth on EXHIBIT A hereto (all
such shares and any shares of Target hereafter acquired by the Stockholders
prior to the termination of this Agreement, including any shares of Target Stock
set forth on EXHIBIT A hereto that are issued upon the exercise of options to
purchase Target Stock at an exercise price of less than $10.50 per share (the
"Target Options") held by such Stockholder, being referred to herein as the
"SHARES"); and
WHEREAS, MergerCo and Target are entering into an Agreement and Plan of
Merger, dated as of the date hereof (as the same may be amended from time to
time, the "MERGER AGREEMENT"), which provides, upon the terms and subject to the
conditions thereof, for the merger of MergerCo with and into Target (the
"MERGER"); and
WHEREAS, certain of the Stockholders and MergerCo are entering into a
Roll-over Agreement and a Stock Purchase Agreement dated as of the date hereof
(the "ROLL-OVER AND STOCK PURCHASE AGREEMENTS"), which provide for such
Stockholders to sell certain of the Shares to MergerCo for cash consideration
and to receive shares of MergerCo common stock in the Merger in exchange for the
remainder of the Shares; and
WHEREAS, as a condition to the willingness of MergerCo to enter into
the Merger Agreement, MergerCo has requested that each Stockholder agree, and,
in order to induce MergerCo to enter into the Merger Agreement each such
Stockholder is willing to agree, to grant MergerCo an irrevocable proxy to vote
the Shares pursuant to the terms and conditions hereof;
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements and covenants set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
Each Stockholder hereby represents and warrants to MergerCo as follows:
<PAGE> 2
SECTION 1.01. DUE AUTHORITY. (a) Such Stockholder has full power,
corporate or otherwise, and authority to execute and deliver this Agreement and
to perform its obligations hereunder. This Agreement has been duly executed and
delivered by or on behalf of such Stockholder and, assuming its due
authorization, execution and delivery by MergerCo, constitutes a legal, valid
and binding obligation of such Stockholder, enforceable against such Stockholder
in accordance with its terms, except to the extent that enforceability may be
limited by bankruptcy, insolvency, moratorium, reorganization and other laws
affecting the enforcement of creditors' rights generally and by general
principles of equity.
(b) There is no beneficiary or holder of a voting trust certificate or
other interest of any trust of which such Stockholder is trustee whose consent
is required for the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby.
SECTION 1.02. NO CONFLICT; CONSENTS. (a) The execution and delivery of
this Agreement by such Stockholder do not, and the performance by such
Stockholder of the obligations under this Agreement and the compliance by such
Stockholder with any provisions hereof do not and will not, (i) conflict with or
violate any law, statute, rule, regulation, order, writ, judgment or decree
applicable to such Stockholder or such Stockholder's Shares, (ii) conflict with
or violate the Stockholder's charter, bylaws, partnership agreement or other
organizational documents, if applicable, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of such Stockholder's Shares pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which such Stockholder is a party or by which
such Stockholder or such Stockholder's Shares are bound.
(b) The execution and delivery of this Agreement by such
Stockholder do not, and the performance of this Agreement by such Stockholder
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority except for
applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended, and except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, could not
prevent or delay the performance by such Stockholder of his or her obligations
under this Agreement in any material respect.
SECTION 1.03. TITLE TO SHARES. (a) Such Stockholder is the record or
beneficial owner of such Stockholder's Shares free and clear of any proxy or
voting restriction. The Shares set forth opposite such Stockholder's name on
EXHIBIT A hereto constitute all of the shares of Target Stock owned of record or
beneficially by such Stockholder or are issuable upon the exercise of Target
Options held by such Stockholder.
(b) Such Stockholder has, and during the Proxy Term will have
(except as a result of transfers permitted by Section 2.01), the sole voting
power with respect to the matters set forth in Article II hereof with respect to
all of the Shares, with no restrictions on such rights, subject to applicable
laws and the terms of this Agreement.
2
<PAGE> 3
SECTION 1.04. NO ENCUMBRANCES. Such Stockholder's Shares and the
certificates representing such Shares are now and at all times during the Proxy
Term hereof (except as a result of transfers permitted by Section 2.01) will be
held by such Stockholder, or by a nominee or custodian for the benefit of such
Stockholder, (i) free and clear of all proxies, voting trusts and voting
agreements, understandings or arrangements providing for any right on the part
of any person other than such Stockholder to vote such Shares except any such
encumbrances or proxies arising under this Agreement.
SECTION 1.05. ACKNOWLEDGMENT OF RELIANCE. Such Stockholder understands
and acknowledges that MergerCo is entering into the Merger Agreement in reliance
upon such Stockholder's execution and delivery of this Agreement.
SECTION 1.06. BROKERS. Neither Target nor MergerCo shall be obligated
or otherwise liable for any broker's, finder's, financial adviser's or other
similar fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of any Stockholder
(excluding fees payable in connection with the Company's arrangements with
Premier HealthCare and The Robinson-Humphrey Company LLC).
ARTICLE II
CERTAIN COVENANTS OF STOCKHOLDERS
Each Stockholder hereby covenants and agrees with MergerCo as follows:
SECTION 2.01. TRANSFER OF SHARES. Other than pursuant to the terms of
the Roll-over and Stock Purchase Agreements and as otherwise provided herein,
during the Proxy Term each Stockholder shall not hereafter (a) sell, tender,
transfer, pledge, encumber, assign or otherwise dispose of any of such
Stockholder's Shares, (b) deposit such Stockholder's Shares into a voting trust
or enter into a voting agreement or arrangement with respect to such Shares or
grant any proxy or power of attorney with respect thereto, (c) enter into any
contract, option or other arrangement or undertaking with respect to the direct
or indirect sale, transfer, pledge, encumbrance, assignment or other disposition
of any Target Stock, or (d) take any action that would make any representation
or warranty of such Stockholder contained herein untrue or incorrect in any
material respect or have the effect of preventing or disabling such Stockholder
from performing such Stockholder's obligations under this Agreement.
SECTION 2.02. VOTING OF SHARES; FURTHER ASSURANCES. (a) Each
Stockholder, by this Agreement, with respect to those Shares that such
Stockholder owns of record, does hereby constitute and appoint MergerCo, or any
nominee of MergerCo, with full power of substitution, during and for the Proxy
Term, as such Stockholder's true and lawful attorney and irrevocable proxy, for
and in such Stockholder's name, place and stead, to vote each of such Shares as
such Stockholder's proxy, at every meeting of the stockholders of Target or any
adjournment thereof or in connection with any written consent of Target's
stockholders, (i) in favor of the adoption of the Merger Agreement and approval
of the Merger and the other transactions contemplated by the Merger Agreement,
(ii) against (x) any Acquisition Proposal, as that term is defined in the Merger
Agreement, and any proposal for any action or agreement that would result in a
breach of
3
<PAGE> 4
any covenant, representation or warranty or any other obligation or agreement of
Target under the Merger Agreement or which could result in any of the conditions
of Target's obligations under the Merger Agreement not being fulfilled and (y)
any change in the directors of Target, any change in the present capitalization
of Target or any amendment to Target's certificate of incorporation or bylaws,
any other material change in Target's corporate structure or business, or any
other action which in the case of each of the matters referred to in this clause
(y) could reasonably be expected to impede, interfere with, delay, postpone or
materially adversely affect the transactions contemplated by the Merger
Agreement or the Roll-over and Stock Purchase Agreements or the likelihood of
such transactions being consummated, and (iii) in favor of any other matter
necessary for consummation of the transactions contemplated by the Merger
Agreement which is considered at any such meeting of stockholders or in such
consent, and in connection therewith to execute any documents which are
necessary or appropriate in order to effectuate the foregoing or, at the request
of MergerCo, to permit MergerCo to vote such Shares directly. Each Stockholder
further agrees to cause the Shares owned by such Stockholder beneficially to be
voted in accordance with the foregoing. Each Stockholder intends this proxy to
be irrevocable and coupled with an interest during the Proxy Term and hereby
revokes any proxy previously granted by such Stockholder with respect to such
Stockholder's Shares.
(b) Each Stockholder hereby further agrees, with respect to
any Shares not voted pursuant to paragraph (a) above, that during the Proxy
Term, at any meeting of stockholders of Target, however called, or in connection
with any written consent of Target's stockholders, such Stockholder shall vote
(or cause to be voted) the Shares held of record or beneficially by such
Stockholder, except as specifically requested in writing by MergerCo in advance,
(i) in favor of the adoption of the Merger Agreement and approval of the Merger
and the other transactions contemplated by the Merger Agreement, (ii) against
(x) any Acquisition Proposal, as that term is defined in the Merger Agreement,
and any proposal for any action or agreement that would result in a breach of
any covenant, representation or warranty or any other obligation or agreement of
Target under the Merger Agreement or which could result in any of the conditions
of Target's obligations under the Merger Agreement not being fulfilled or (y)
any change in the directors of Target, any change in the present capitalization
of Target or any amendment to Target's certificate of incorporation or bylaws,
any other material change in Target's corporate structure or business, or any
other action which in the case of each of the matters referred to in this clause
(y) could reasonably be expected to, impede, interfere with, delay, postpone or
materially adversely affect the transactions contemplated by the Merger
Agreement or the Roll-over and Stock Purchase Agreements or the likelihood of
such transactions being consummated, and (iii) in favor of any other matter
necessary for consummation of the transactions contemplated by the Merger
Agreement which is considered at any such meeting of stockholders or in such
consent, and in connection therewith to execute any documents which are
necessary or appropriate in order to effectuate the foregoing.
(c) For the purposes of this Agreement, "PROXY TERM" shall
mean the period from the execution of this Agreement until the earlier of (i)
the date of any termination of the Merger Agreement or (ii) the Effective Time.
(d) Each Stockholder agrees that such Stockholder will not
enter into any agreement or understanding with any person or entity or take any
action during the Proxy Term
4
<PAGE> 5
which will permit any person or entity to vote or give instructions to vote the
Shares in any manner inconsistent with the terms of this Section 2.02. Each
Stockholder further agrees to take such further action and execute such other
instruments as may be reasonably necessary to effectuate the intent of this
Agreement, including without limitation, any number of proxies and other
documents permitting MergerCo to vote the Shares or to direct the record owners
thereof to vote the Shares in accordance with this Agreement.
SECTION 2.03. CERTAIN EVENTS. Each Stockholder agrees that, during the
Proxy Term, this Agreement and the obligations hereunder shall attach to such
Stockholder's Shares and shall be binding upon any person or entity to which
legal or beneficial ownership of such Shares shall pass, whether by operation of
law or otherwise, including without limitation, if applicable, such
Stockholder's heirs, guardians, administrators or successors.
SECTION 2.04. NO SOLICITATION. Except as explicitly permitted by
Section 7.5 of the Merger Agreement, during the Proxy Term no Stockholder shall,
nor, to the extent applicable to such Stockholder, shall it permit any of its
affiliates hereunder (other than Target to the extent permitted by Section 7.5
of the Merger Agreement) to, nor shall it authorize any partner, officer,
director, advisor or representative of, such Stockholder or any of its
affiliates (other than Target to the extent permitted by Section 7.5 of the
Merger Agreement) to, directly or indirectly, (i) solicit, initiate or encourage
(including by way of furnishing non-public information), or take any other
action to facilitate, any inquiries or the making of any proposal that
constitutes an Acquisition Proposal (as defined in the Merger Agreement), (ii)
participate in any discussions or negotiations regarding an Acquisition Proposal
or (iii) enter into any agreements, definitive or otherwise, regarding an
Acquisition Proposal.
SECTION 2.05. STOP TRANSFER. (a) Each Stockholder agrees with, and
covenants to, MergerCo that such Stockholder may not request that Target
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of such Stockholder's Shares, unless
such transfer is made in compliance with this Agreement. Each Stockholder
agrees, with respect to any Shares in certificated form, that such Stockholder
will tender to Suntrust, within fifteen business days after the date hereof, the
certificates representing such Shares, to be held in accordance with the terms
of a Custody Agreement among Suntrust, Target and MergerCo. Each Stockholder
agrees that, within ten business days after the date hereof, such Stockholder
will no longer hold any Shares, whether certificated or uncertificated, in
"street name" or in the name of any nominee. Target shall notify its transfer
agent of the provisions set forth in this Section and instruct its transfer
agent not to permit any transfer of Shares except in compliance with the terms
hereof and each Stockholder agrees to provide such documentation and to do such
other things as may be required to give effect to such provisions with respect
to such Shares.
5
<PAGE> 6
ARTICLE III
GENERAL PROVISIONS
SECTION 3.01. SEVERABILITY. If any term or other provision of this
Agreement is determined to be invalid, illegal or incapable of being enforced by
any rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible to the fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to the
extent possible.
SECTION 3.02. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties and supersedes all prior agreements and undertakings,
both written and oral, between the parties, or any of them, with respect to the
subject matter hereof.
SECTION 3.03. AMENDMENTS. This Agreement may not be modified, amended,
waived, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto; provided, however, that
MergerCo may in writing waive or consent to a modification of any provision of
this Agreement with respect to any Stockholder without the agreement of any
other party hereto.
SECTION 3.04. ASSIGNMENT. This Agreement shall not be assigned by
operation of law or otherwise, except in accordance with Section 2.01.
SECTION 3.05. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its heirs and assigns
and nothing in this Agreement, express or implied, is intended to or shall
confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
SECTION 3.06. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof or was otherwise breached. It
is accordingly agreed that the parties shall be entitled to specific relief
hereunder, including, without limitation, an injunction or injunctions to
prevent and enjoin breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, in any state or federal court in
the State of Delaware, in addition to any other remedy to which they may be
entitled at law or in equity. Any requirements for the securing or posting of
any bond with respect to any such remedy are hereby waived.
SECTION 3.07. CHOICE OF LAW/CONSENT TO JURISDICTION. All disputes,
claims or controversies arising out of or relating to this Agreement, or the
negotiation, validity or performance of this Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
its rules of conflict of laws. Each Stockholder and each of Target and MergerCo
hereby irrevocably and unconditionally consents to submit to the
6
<PAGE> 7
sole and exclusive jurisdiction of the courts of the State of Delaware and of
the United States located in the State of Delaware (the "DELAWARE COURTS") for
any litigation arising out of or relating to this Agreement, or the negotiation,
validity or performance of this Agreement (and agrees not to commence any
litigation relating thereto except in such courts), waives any objection to the
laying of venue of any such litigation in the Delaware Courts and agrees not to
plead or claim in any Delaware Court that such litigation brought therein has
been brought in any inconvenient forum. Each of the parties hereto agrees, (a)
to the extent such party is not otherwise subject to service of process in the
State of Delaware, to appoint and maintain an agent in the State of Delaware as
such party's agent for acceptance of legal process, and (b) that service of
process may also be made on such party by prepaid certified mail with a proof of
mailing receipt validated by the United States Postal Service constituting
evidence of valid service. Service made pursuant to (a) or (b) above shall have
the same legal force and effect as if served upon such party personally within
the State of Delaware. For purposes of implementing the parties' agreement to
appoint and maintain an agent for service of process in the State of Delaware,
each such party does hereby appoint CT Corporation, Corporation Trust Center,
1209 Orange Street, Wilmington, DE 19801, as such agent.
SECTION 3.08. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 3.09. DEFINITIONS. Terms used in this Agreement and not
otherwise defined herein shall have the meanings set forth in the Merger
Agreement.
SECTION 3.10. NO AGREEMENT UNTIL EXECUTED. Irrespective of negotiations
among the parties or the exchanging of drafts of this Agreement, this Agreement
shall not constitute or be deemed to evidence a contract, agreement, arrangement
or understanding among the parties hereto unless and until this Agreement is
executed by the parties hereto.
SECTION 3.11. EXCULPATION. No Stockholder shall have any liability or
obligation whatsoever under or by reason of this Agreement because of a breach
by any other Stockholder of its obligations, representations or warranties
hereunder or thereunder.
SECTION 3.12. DIRECTORS AND OFFICERS. Notwithstanding anything herein
to the contrary, the covenants and agreements set forth herein shall not prevent
any of the Stockholders who are serving on Target's board of directors or who
are officers of Target from taking any action, subject to the applicable
provisions of the Merger Agreement, while acting in such capacity as a director
or officer of Target.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties have duly executed this Voting
Agreement as of the date first written above.
TA MERGERCO, INC.
By: /s/ Richard Tadler
-----------------------------------
Name: Richard Tadler
Title: President and Chief Executive Officer
PHYSICIANS' SPECIALTY CORP.
By: /s/ E.R. Casas
-----------------------------------
Name: E. R. Casas
Title: Director
<PAGE> 9
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Ramie A. Tritt
------------------------------------
Ramie A. Tritt, M.D.
<PAGE> 10
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Daniel M. Adams
------------------------------------
Daniel M. Adams, M.D.
<PAGE> 11
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
ATLANTA HEAD & NECK, P.C.
By: /s/ Albert A. Clairmont
------------------------------------
Name: Albert A. Clairmont, M.D.
Title:
<PAGE> 12
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Michael A. Avidano
------------------------------------
Michael A. Avidano, M.D.
<PAGE> 13
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Sanjay Bhansali
------------------------------------
Sanjay Bhansali, M.D.
<PAGE> 14
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Deborah M. Burton
------------------------------------
Deborah M. Burton, M.D.
<PAGE> 15
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Willie J. Cornay
------------------------------------
Willie J. Cornay, M.D.
<PAGE> 16
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Andrew J. Diamond
------------------------------------
Andrew J. Diamond, M.D.
<PAGE> 17
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
EAR, NOSE & THROAT SPECIALISTS, P.C.
By: /s/ Ronald A. Van Tuyl
------------------------------------
Name: Ronald A. Van Tuyl, M.D.
Title:
<PAGE> 18
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Andrew R. Golde
------------------------------------
Andrew R. Golde, M.D.
<PAGE> 19
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ David A. Goodman
------------------------------------
David A. Goodman, M.D.
<PAGE> 20
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Nancy R. Griner
------------------------------------
Nancy R. Griner, M.D.
<PAGE> 21
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Christopher B. Holloway
------------------------------------
Christopher B. Holloway
<PAGE> 22
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Keith R. Jackson
------------------------------------
Keith R. Jackson, M.D.
<PAGE> 23
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Keith A. Kowal
------------------------------------
Keith A. Kowal, M.D.
<PAGE> 24
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Drew Locandro
------------------------------------
Drew Locandro, M.D.
<PAGE> 25
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Samuel A. Mickelson
------------------------------------
Samuel A. Mickelson, M.D.
<PAGE> 26
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Harold W. Moss
------------------------------------
Harold W. Moss, M.D.
<PAGE> 27
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Thomas U. Muller
------------------------------------
Thomas U. Muller, M.D.
<PAGE> 28
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Michael J. Pickford
------------------------------------
Michael J. Pickford, M.D.
<PAGE> 29
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Michael F. Pratt
------------------------------------
Michael F. Pratt, M.D.
<PAGE> 30
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Richard Rinehart
------------------------------------
Richard Rinehart, M.D.
<PAGE> 31
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Burke P. Robinson
------------------------------------
Burke P. Robinson, M.D.
<PAGE> 32
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Ted L. Rolander
------------------------------------
Ted L. Rolander, M.D.
<PAGE> 33
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Marc H. Routman
------------------------------------
Marc H. Routman, M.D.
<PAGE> 34
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ William S. Smith
------------------------------------
William S. Smith, M.D.
<PAGE> 35
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Arthur J. Torsiglieri
------------------------------------
Arthur J. Torsiglieri, M.D.
<PAGE> 36
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Ann K. White
------------------------------------
Ann K. White, M.D.
<PAGE> 37
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Gerald R. Benjamin
------------------------------------
Gerald R. Benjamin
<PAGE> 38
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Richard D. Ballard
------------------------------------
Richard D. Ballard
<PAGE> 39
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Lawrence P. Kraska
------------------------------------
Lawrence P. Kraska
<PAGE> 40
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Robert A. Diprova
------------------------------------
Robert A. Diprova
<PAGE> 41
[Voting Agreement]
STOCKHOLDER SIGNATURE PAGE
- --------------------------
BOCK, BENJAMIN & CO. PARTNERS, L.P.
By: Bock, Benjamin & Co., its General Partner
By: /s/ Gerald R. Benjamin
------------------------------------
Gerald R. Benjamin
Chief Executive Officer
<PAGE> 42
EXHIBIT A
---------
<TABLE>
<CAPTION>
Number of Shares of Number of Shares of
Name & Address Target Stock Owned Target Stock Issuable
of Stockholder* by Stockholder upon Exercise of Options
- -------------- -------------- ------------------------
<S> <C> <C>
Daniel Adams, M.D. 139,766
Atlanta Head & Neck-Clairmont 21,250
Michael Avidano, M.D. 20,686
Sanjay Bhansali, M.D. 37, 702
Deborah Burton, M.D. 7,017
William Cornay, M.D. (A) 51,444
Andrew Diamond, M.D. 12,500
Ear, Nose & Throat Specialists- Van Tuyl 15,081
Andrew Golde, M.D. 22,555
David Goodman, M.D. (B) 40,888
Nancy Griner, M.D. 58,000
Christopher Holloway 2,962
Keith Jackson, M.D. 256,862
Keith Kowal, M.D. 122,222
Drew Locandro, M.D. 10,000
Sam Mickelson, M.D. 12,591
Harold Moss, M.D. 16,908
Thomas Muller, M.D. 47,695
Michael Pickford, M.D. 263,050
Michael Pratt, M.D. 7,573
Richard Rinehart, M.D. (B) 10,411
Burke Robinson, M.D. 12,693
Ted Rolander, M.D. (B) 72,234
Marc Routman, M.D. (A) 55,311
William Smith, M.D. 25,000
Arthur Torsiglieri, M.D. 91,825
Ramie Tritt, M.D. 1,761,257 37,619
Ann White, M.D. 135,320
Bock, Benjamin & Co. Partners, L.P. (C) 293,948
Richard Ballard 104,608
Gerald Benjamin 41,190
Robert Diprova 56,802
Larry Kraska 56,259
--------- -------
Subtotals 3,624,751 296,478
TOTAL 3,921,229
</TABLE>
* All c/o Atlanta Ear, Nose& Throat Associates, P.C., 555 Peachtree Dunwoody
Road, Suite 235, Atlanta, Georgia 30342, with the exception of the following:
(A) c/o ENT & Allergy Associates, P.C.
2018 Brookwood Medical Center Drive
Suite 100
Birmingham, Alabama 35209
(B) c/o Otolaryngology Medical & Surgical Associates, Ltd.
730 East Terra Cotta
Crystal Lake, Illinois 60014
(C) c/o Bock, Benjamin & Co.
3414 Peachtree Road, NE
238 Monarch Plaza
Atlanta, Georgia 30326
Attention: G.R. Benjamin
<PAGE> 1
EXHIBIT 10.62
EXECUTION COPY
ROLL-OVER AGREEMENT
THIS ROLL-OVER AGREEMENT (this "Agreement") is made as of June 14,
1999, by and among TA MERGERCO, INC., a Delaware corporation (the "Company") and
each of the persons and entities listed on the signature pages attached hereto
(collectively the "Stockholders").
WHEREAS, the Stockholders own, or will own as of the Closing Date (as
hereinafter defined), beneficially and of record, the shares of common stock,
par value $.01 per share set forth on Exhibit A attached hereto (the "Target
Shares"), of PHYSICIANS' SPECIALTY CORP., a Delaware corporation ("Target");
WHEREAS, Target and the Company have entered into an Agreement and Plan
of Merger, dated as of the date hereof (as the same may be amended from time to
time, the "Merger Agreement"), which provides, upon the terms and subject to the
conditions thereof, for the merger of the Company with and into Target (the
"Merger"), with Target being the surviving corporation (the "Surviving
Corporation");
WHEREAS, the Stockholders desire that in connection with the Merger the
Target Shares be converted into shares of the common stock, par value $.01 per
share, of the Surviving Corporation ("New Common"), as provided in the Merger
Agreement; and
WHEREAS, the Stockholders have entered into a Stock Purchase Agreement,
dated as of the date hereof, which provides, upon the terms and subject to the
conditions thereof, for the sale by the Stockholders and the purchase by
TA/Advent VIII, L.P., TA/Atlantic and Pacific IV, L.P., TA Executives Fund LLC
and TA Investors LLC of certain shares of common stock of Target that are not
set forth on Exhibit A hereto.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. Conversion of the Target Shares. Each Stockholder acknowledges
and agrees that, pursuant to the Merger Agreement, upon the Closing (as defined
in the Merger Agreement) the Target Shares set forth opposite such Stockholder's
name on the Exhibit A attached hereto will be converted into shares of New
Common upon the terms set forth in the Merger Agreement. Each Stockholder
acknowledges and agrees that such Stockholder shall not receive cash in exchange
for such Stockholder's Target Shares in the Merger and such Stockholder agrees
not to elect, or assert a claim that such Stockholder has a right, to receive
any cash or any securities other than New Common with respect to the Target
Shares in the Merger.
<PAGE> 2
2. Representations and Warranties of the Stockholders. As a
material inducement to the Company to enter into this Agreement and the Merger
Agreement, each Stockholder hereby represents and warrants as to himself or
itself that, as of the date hereof and the Closing Date:
(a) Ownership. All of the Target Shares set forth
opposite such Stockholder's name on Exhibit A attached hereto are owned of
record and beneficially by such Stockholder as of the date hereof except as set
forth on Exhibit A, and will be owned of record and beneficially by such
Stockholder as of the Closing Date. Such Stockholder has, except as set forth on
Exhibit A, and such Stockholder will have as of the Closing Date, good and
marketable title to such Target Shares, free and clear of all security
interests, claims, liens, pledges, options, encumbrances, charges, agreements,
voting trusts, proxies and other arrangements or restrictions whatsoever
("Encumbrances").
(b) Enforceability. This Agreement has been duly
authorized, executed and delivered by such Stockholder and constitutes a valid
and legally binding obligation of such Stockholder, enforceable in accordance
with its terms, except to the extent that enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization and other laws affecting the
enforcement of creditors' rights generally and by general principles of equity.
(c) No Conflicts. The execution, delivery and performance
of this Agreement by such Stockholder does not conflict with, violate or result
in the breach of, or create any lien or encumbrance on his Shares of Target
Common Stock pursuant to, any agreement, instrument, order, judgment, decree,
law or governmental regulation to which such Stockholder is a party or is
subject or by which his Target Shares are bound.
(d) Accredited Investor. Such Stockholder is an
"Accredited Investor" as that term is defined in Rule 501 under the Securities
Act of 1933, as amended (the "Act") (see the attached Exhibit B), and has the
capacity to evaluate the merits and risks of an investment in the New Common and
is able to bear the economic risk of this investment. Such Stockholder
acknowledges that it has been provided access to all information requested by it
in order to evaluate the merits and risks of an investment in the New Common.
Such stockholder understands that the shares of New Common will not be
registered under the Act or any other applicable securities laws. Such
Stockholder has relied solely upon the advice of his, her or its own counsel,
accountant and other advisors, with regard to the legal, investment, tax and
other considerations regarding this investment.
3. Representations and Warranties of the Company. As a material
inducement to the Stockholders to enter into this Agreement and the Merger
Agreement, the Company hereby represents and warrant that, as of the date hereof
and the Closing Date:
2
<PAGE> 3
(a) Enforceability. This Agreement has been duly
authorized, executed and delivered by the Company and constitutes a valid and
legally binding obligation of the Company, enforceable in accordance with its
terms, except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization and other laws affecting the enforcement
of creditors' rights generally and by general principles of equity.
(b) No Conflicts. The execution, delivery and
performances of this Agreement by the Company does not conflict with, violate or
result in a breach of any agreement, instrument, order, judgement, decree, law
or governmental regulation to which the Company is a party or is subject.
4. General Provisions.
(a) Successors and Assigns. All covenants and agreements
in this Agreement by or on behalf of any of the parties hereto will bind and
inure to the benefit of the respective successors and assigns of the parties
hereto whether so expressed or not.
(b) Further Assurance. After the Closing, as and when
requested by the Company, the Stockholders shall, without further consideration,
execute and deliver all such documents and instruments and shall take such
further actions as the Company may deem reasonably necessary or desirable in
order to carry out fully the provisions and purposes of this Agreement.
(c) Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
(d) Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
(e) Complete Agreement. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(f) Counterparts. This Agreement may be executed in
separate counterparts each of which shall be an original and all of which taken
together shall constitute one and the same agreement.
3
<PAGE> 4
(g) Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof or was otherwise breached. It
is accordingly agreed that the parties shall be entitled to specific relief
hereunder, including, without limitation, an injunction or injunctions to
prevent and enjoin breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, in any state or federal court in
the State of Delaware, in addition to any other remedy to which they may be
entitled at law or in equity. Any requirements for the securing or posting of
any bond with respect to any such remedy are hereby waived.
(h) Governing Law. Choice of Law/Consent to Jurisdiction.
All disputes, claims or controversies arising out of or relating to this
Agreement, or the negotiation, validity or performance of this Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware without regard to its rules of conflict of laws. Each Stockholder and
the Company hereby irrevocably and unconditionally consents to submit to the
sole and exclusive jurisdiction of the courts of the State of Delaware and of
the United States located in the State of Delaware (the "Delaware Courts") for
any litigation arising out of or relating to this Agreement, or the negotiation,
validity or performance of this Agreement (and agrees not to commence any
litigation relating thereto except in such courts), waives any objection to the
laying of venue of any such litigation in the Delaware Courts and agrees not to
plead or claim in any Delaware Court that such litigation brought therein has
been brought in any inconvenient forum. Each of the parties hereto agrees, (a)
to the extent such party is not otherwise subject to service of process in the
State of Delaware, to appoint and maintain an agent in the State of Delaware as
such party's agent for acceptance of legal process, and (b) that service of
process may also be made on such party by prepaid certified mail with a proof of
mailing receipt validated by the United States Postal Service constituting
evidence of valid service. Service made pursuant to (a) or (b) above shall have
the same legal force and effect as if served upon such party personally within
the State of Delaware. For purposes of implementing the parties' agreement to
appoint and maintain an agent for service of process in the State of Delaware,
each such party does hereby appoint CT Corporation, Corporation Trust Center,
1209 Orange Street, Wilmington, DE 19801, as such agent.
(i) Construction. Whenever the context requires, each
term stated in either the singular or the plural shall include the singular and
the plural and pronouns stated in either the masculine, the feminine or the
neuter gender shall include the masculine, feminine and neuter. All references
to Sections and Paragraphs refer to sections and paragraphs of this Agreement.
The use of the word "including" in this Agreement shall be by way of example
rather than limitation.
(j) Amendment and Waiver. The provisions of this
Agreement may be amended and waived only with the prior written consent of each
of the parties hereto. This Agreement may not be amended in a manner that would
adversely affect the rights of Target hereunder without the prior written
consent of Target.
4
<PAGE> 5
(k) Third Party Beneficiary. Target is a third-party
beneficiary of this Agreement and shall be entitled to enforce this Agreement
against each of the Stockholders in the same manner as if it were a party
hereto.
(l) No Agreement Until Executed. Irrespective of
negotiations among the parties or the exchanging of drafts of this Agreement,
this Agreement shall not constitute or be deemed to evidence a contract,
agreement, arrangement or understanding among the parties hereto unless and
until (i) the Board of Directors of Target has approved, for purposes of Section
203 of the Delaware General Corporation Law and any applicable provision of
Target's Certificate of Incorporation, the terms of this Agreement, and (ii)
this Agreement is executed by the parties hereto.
(m) Exculpation. No Stockholder shall have any liability or
obligation whatsoever under or by reason of this Agreement because of a breach
by any other Stockholder of its obligations, representations or warranties
hereunder.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Roll-over
Agreement on the date first written above.
TA MERGERCO, INC.
By: /s/ Richard Tadler
---------------------------------------------
Name: Richard Tadler
Title: President and Chief Executive Officer
6
<PAGE> 7
[STOCKHOLDER SIGNATURE PAGES OMITTED]
7
<PAGE> 8
EXHIBIT A
<TABLE>
<CAPTION>
Target Shares
-------------
Name Beneficially Owned Owned of Record
- --------------------------- ------------------ ---------------
<S> <C> <C>
Daniel Adams, M.D. 33,278 33,278
Atlanta Head & Neck-Clairmont 5,060 5,060
Michael Avidano, M.D. 4,925 4,925
Sanjay Bhansali, M.D. 8,977 8,977
Deborah Burton, M.D. 2,017 2,017
William Cornay, M.D. 12,249 12,249
Andrew Diamond, M.D. 2,976 2,976
Ear, Nose & Throat Specialists- Van Tuyl 3,591 3,591
Andrew Golde, M.D. 5,370 5,370
David Goodman, M.D. 9,735 9,735
Nancy Griner, M.D. 13,810 13,810
Christopher Holloway 705 705
Keith Jackson, M.D. 128,431 128,431
Keith Kowal, M.D. 29,101 29,101
Drew Locandro, M.D. 10,000 10,000
Sam Mickelson, M.D. 7,000 7,000
Harold Moss, M.D. 4,026 4,026
Thomas Muller, M.D. 11,356 11,356
Michael Pickford, M.D. 62,632 62,632
Michael Pratt, M.D. 1,803 1,803
Richard Rinehart, M.D. 2,479 2,479
Burke Robinson, M.D. 3,022 3,022
Ted Rolander, M.D. 37,234 37,234
Marc Routman, M.D. 13,169 13,169
William Smith, M.D. 5,952 5,952
Arthur Torsiglieri, M.D. 21,863 21,863
Ramie Tritt, M.D. 1,402,875 1,380,304
Ann White, M.D. 32,219 32,219
Bock, Benjamin & Co. Partners, L.P. 27,500 27,500
Richard Ballard 62,765 0
Gerald Benjamin 24,714 0
Robert Diprova 22,721 0
Larry Kraska 33,755 0
----------- ----------------
TOTAL 2,047,310 1,880,784
</TABLE>
8
<PAGE> 9
EXHIBIT B
A Stockholder is an "accredited investor" as defined by Rule 501 of Regulation D
promulgated under the Securities Act of 1933, as amended, if:
(a) the Stockholder, or the Stockholder and his or her spouse jointly, have
a net worth in excess of U.S. $1,000,000;
(b) the Stockholder's income for each of the past two years has been in
excess of U.S. $200,000 (or joint income with the Stockholder's spouse
has been in excess of U.S. $300,000) and the Stockholder has a
reasonable expectation (alone or with his or her spouse, as the case
may be) of reaching the same level of income this year;
(c) the Stockholder is a bank as defined in Section 3(a)(2) of the Act or a
savings and loan institution or other institution as defined in Section
3(a)(5)(A) of the Act whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934; an insurance company as defined in
Section 2(13) of the Act; an investment company registered under the
Investment Company Act of 1940 or a business development company as
defined in Section 2(a)(48) of that Act; a Small Business Investment
Company licensed by the U.S. Small Business Administration under
Section 301(c) or (d) of the Small Business Investment Act of 1958; a
plan established and maintained by a state, its political subdivisions,
or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; an employee benefit plan within the
meaning of the Employee Retirement Income Security Act of 1974, if the
investment decision is made by a plan fiduciary, as defined in Section
3(21) of such Act, which is either a bank, savings and loan
association, insurance company, or registered investment adviser, or if
the employee benefit plan has total assets in excess of $5,000,000, or,
if a self-directed plan, with investment decisions made solely by
persons that are accredited stockholders;
(d) the Stockholder is a private business development company as defined in
Section 202(a)(22) of the Investment Advisers Act of 1940;
(e) the Stockholder is an organization described in Section 501(c)(3) of
the Internal Revenue Code, a corporation, a Massachusetts or similar
business trust, or a partnership, not formed for the specific purpose
of acquiring the Securities, with total assets in excess of $5,000,000;
(f) the Stockholder is a director or an executive officer of the Company;
9
<PAGE> 10
(g) the Stockholder is a trust with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the Securities, whose
purchase is directed by a sophisticated person as described in Rule
506(b)(2)(ii) of Regulation D; or
(h) the Stockholder is an entity in which all of the equity owners are
accredited investors.
10
<PAGE> 1
Exhibit 10.63
EXECUTION COPY
STOCK PURCHASE AGREEMENT
AGREEMENT entered into as of June 14, 1999 by and among TA/Advent VIII,
L.P., TA/Atlantic and Pacific IV, L.P., TA Executives Fund LLC and TA Investors
LLC (each a "TA Investor," and collectively, as the "Buyer"), and the holders of
the capital stock of Physicians' Specialty Corp., a Delaware corporation (the
"Company"), listed on EXHIBIT A (the "Stockholders" and individually a
"Stockholder").
W I T N E S S E T H
-------------------
WHEREAS, the Stockholders own of record and beneficially, or will own
as of the Closing (as hereinafter defined) the number of shares of common stock
of the Company, par value $.001 per share, set forth on EXHIBIT A (said shares
being referred to herein as the "Company Shares"); and
WHEREAS, the Company and TA MergerCo, Inc., a Delaware corporation
("MergerCo"), have entered into an Agreement and Plan of Merger, dated as of the
date hereof (as the same may be amended from time to time, the "Merger
Agreement"), which provides, upon the terms and subject to the conditions
thereof, for the merger of MergerCo with and into the Company (the "Merger"),
with the Company being the surviving corporation;
WHEREAS, the Stockholders have entered into a Roll-over Agreement,
dated as of the date hereof, which provides, upon the terms and subject to the
conditions thereof, for the Stockholders to receive shares of common stock of
the surviving corporation in the Merger in exchange for certain shares of
Company common stock held by the Stockholders that are not set forth on EXHIBIT
A hereto.
WHEREAS, the Stockholders desire to sell all of the Company Shares to
Buyer, and Buyer desires to acquire all of the Company Shares.
NOW, THEREFORE, in order to consummate said purchase and sale and in
consideration of the mutual agreements set forth herein, the parties hereto
agree as follows:
SECTION 1. SALE OF SHARES AND PURCHASE PRICE.
- -----------------------------------------------
1.1 SALE AND TRANSFER OF COMPANY SHARES. In consideration of and in
reliance upon the representations and warranties contained herein and subject to
the terms and conditions of this Agreement, the Stockholders agree to sell, and
Buyer agrees to purchase, at the Closing, the Company Shares, which purchase
shall be allocated among the TA Investors as set forth in EXHIBIT
<PAGE> 2
B attached hereto, as amended from time to time by agreement of each TA
Investor. At the Closing, each Stockholder shall deliver or cause to be
delivered to Buyer certificates representing all of the Company Shares owned by
such Stockholder, as set forth in EXHIBIT A. Such stock certificates shall be
duly endorsed in blank for transfer or shall be presented with stock powers duly
executed in blank, with such signature guarantees and such other documents as
may be reasonably required by Buyer to effect a valid transfer of such Company
Shares by such Stockholder, free and clear of any and all liens, encumbrances,
charges or claims. Each Stockholder by execution of this Agreement hereby
appoints Buyer as his attorney-in-fact to effectuate transfer of the Company
Shares at the Closing (as hereinafter defined).
1.2 PURCHASE PRICE AND PAYMENT. In consideration of the sale by
Stockholders to Buyer of the Company Shares and in reliance upon the
representations and warranties of the Company and the Stockholders herein
contained and made at the Closing and subject to the satisfaction of all of the
conditions contained herein, Buyer agrees that at the Closing it will deliver to
each Stockholder the amount specified in EXHIBIT A hereto by bank cashier check
in Boston Clearing House Funds or by wire transfer of immediately available
funds in accordance with the instructions set forth on EXHIBIT C hereto.
1.3 THE CLOSING. Subject to the terms and conditions contained in this
Agreement, the sale and purchase of the Company Shares hereunder (the "Closing")
shall take place at the offices of Troutman Sanders LLP, NationsBank Plaza, 600
Peachtree Street, NE, Suite 5200, Atlanta, GA 30308-2216, at such time and on a
date (the "Closing Date") to be specified by Buyer, which shall be no later than
the second business day after satisfaction or waiver of all of the conditions
set forth in Section 3 hereof, or at such other place or on such other date as
is mutually agreeable to Buyer and the Stockholders.
1.4 TRANSFER TAXES. All transfer taxes, fees and duties under
applicable law incurred in connection with the sale and transfer of the Company
Shares under this Agreement will be borne and paid by the Stockholders, and the
Stockholders shall promptly reimburse the Company and Buyer for any such tax,
fee or duty which any of them is required to pay under applicable law.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
- --------------------------------------------
2.1 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. As a material
inducement to Buyer to enter into this Agreement and acquire the Company Shares,
each Stockholder hereby represents and warrants as to himself or itself that, as
of the date hereof and the Closing Date:
(a) OWNERSHIP. All of the Company Shares set forth opposite
such Stockholder's name on EXHIBIT A attached hereto are owned of record and
beneficially by such Stockholder as of the date hereof except as set forth on
EXHIBIT A, or will be owned of record and beneficially by such Stockholder as of
the Closing Date. Such Stockholder has, except as set forth on EXHIBIT A, and
such Stockholder will have as of the Closing Date, good and marketable title to
such Company Shares, free and clear of all security interests, claims, liens,
pledges, options,
2
<PAGE> 3
encumbrances, charges, agreements, voting trusts, proxies and other arrangements
or restrictions whatsoever ("ENCUMBRANCES"). At the Closing, such Stockholder
shall transfer to Buyer good and marketable title to such Company Shares, free
and clear of all Encumbrances.
(b) ENFORCEABILITY. This Agreement has been duly authorized,
executed and delivered by such Stockholder and constitutes a valid and legally
binding obligation of such Stockholder, enforceable in accordance with its
terms, except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization and other laws affecting the enforcement
of creditors' rights generally and by general principles of equity.
(c) NO CONFLICTS. The execution, delivery and performance of
this Agreement by such Stockholder does not conflict with, violate or result in
the breach of, or create any lien or encumbrance on his Company Shares pursuant
to, any agreement, instrument, order, judgment, decree, law or governmental
regulation to which such Stockholder is a party or is subject or by which his
Company Shares are bound.
(d) INVESTMENT REPRESENTATION. Such Stockholder acknowledges
that it has been provided access to all information requested by it in order to
evaluate the merits and risks of the transactions contemplated by this
Agreement. Such Stockholder has relied solely upon the advice of his, her or its
own counsel, accountant and other advisors, with regard to the legal,
investment, tax and other considerations regarding this Agreement and the
transactions contemplated hereby.
2.2 REPRESENTATIONS AND WARRANTIES OF BUYER. As a material inducement
to the Stockholders to enter into this Agreement and contribute the Company
Shares, Buyer hereby represents and warrants that, as of the date hereof and the
Closing Date:
(a) ENFORCEABILITY. This Agreement has been duly authorized,
executed and delivered by Buyer and constitutes a valid and legally binding
obligation of Buyer, enforceable in accordance with its terms, except to the
extent that enforceability may be limited by bankruptcy, insolvency, moratorium,
reorganization and other laws affecting the enforcement of creditors' rights
generally and by general principles of equity.
(b) NO CONFLICTS. The execution, delivery and performances of
this Agreement by Buyer does not conflict with, violate or result in a breach of
any agreement, instrument, order, judgement, decree, law or governmental
regulation to which Buyer is a party or is subject.
(c) NO UNREGISTERED DISTRIBUTION. Buyer is purchasing the
Company Shares for investment for Buyer's own account, without any view to the
unregistered public distribution or public resale thereof, all without
prejudice, however, to the right of Buyer at any time lawfully to sell or
otherwise to dispose of all or any part of the Company Shares pursuant to
registration, or an exemption therefrom, under the Act and applicable state
securities laws.
(d) RESTRICTED SECURITIES. Buyer understands that the Company
Shares it is purchasing are characterized as "restricted securities" under the
federal securities laws and that
3
<PAGE> 4
under such laws and applicable regulations such securities may be resold without
registration under the Act only in certain limited circumstances.
(e) INVESTOR SUITABILITY. Buyer represents and warrants that
it is an accredited investor as defined in Rule 501 under the Securities Act of
1933, as amended, and has the capacity to evaluate the merits and risks of an
investment in the Company Shares and is able to bear the economic risk of this
investment. Buyer acknowledges that it has been provided access to all
information requested by it in order to evaluate the merits and risks of an
investment in the Company Shares.
(f) LEGENDS. It is understood that the certificates evidencing
the Company Shares may bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT."
(b) Any legend required by applicable state laws.
SECTION 3. CONDITIONS.
- ------------------------
3.1 CONDITIONS TO STOCKHOLDERS' OBLIGATIONS. The obligation of the
Stockholders to consummate the transactions contemplated hereby shall be subject
to fulfillment or waiver, at or prior to the Closing Date, of the following
conditions:
(a) the Stockholders shall have received from Buyer a
certificate of Buyer, dated as of the Closing Date, to the effect that each
condition to Buyer's obligation to consummate the Merger, as set forth in the
Merger Agreement, has been satisfied and Buyer knows of no reason why the Merger
will not be consummated immediately following the Closing; and
(b) the representations and warranties of Buyer herein shall
be true and correct in all material respects as of the Closing Date.
3.2 CONDITIONS TO BUYER'S OBLIGATIONS. The obligation of Buyer to
consummate the transactions contemplated hereby shall be subject to fulfillment
or waiver, at or prior to the Closing Date, of the following conditions:
(a) Buyer shall have received from Target a certificate of
Target, dated as of the Closing Date, to the effect that each condition to
Target's obligation to consummate the Merger, as set forth in the Merger
Agreement, has been satisfied and Target knows of no reason why the Merger will
not be consummated immediately following the Closing; and
4
<PAGE> 5
(b) the representations and warranties of the Stockholders
herein shall be true and correct in all material respects as of the Closing
Date.
SECTION 4. GENERAL PROVISIONS.
- --------------------------------
4.1 TRANSFEROR'S CERTIFICATE OF NON-FOREIGN STATUS. Prior to the
Closing Date each Stockholder shall deliver to Buyer a "transferor's certificate
of non-foreign status" as provided in the Treasury Regulations under Section
1445 of the Code in the form attached hereto as Exhibit D attached hereto.
4.2 SUCCESSORS AND ASSIGNS. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not.
4.3 FURTHER ASSURANCE. After the Closing, as and when requested by
Buyer, the Stockholders shall, without further consideration, execute and
deliver all such instruments of conveyance and transfer and shall take such
further actions as Buyer may deem reasonably necessary or desirable in order to
transfer the Company Shares to Buyer and to carry out fully the provisions and
purposes of this Agreement.
4.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby.
4.5 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
4.6 COMPLETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
4.7 COUNTERPARTS. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
5
<PAGE> 6
4.8 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof or was otherwise breached. It is
accordingly agreed that the parties shall be entitled to specific relief
hereunder, including, without limitation, an injunction or injunctions to
prevent and enjoin breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof, in any state or federal court in
the State of Delaware, in addition to any other remedy to which they may be
entitled at law or in equity. Any requirements for the securing or posting of
any bond with respect to any such remedy are hereby waived.
4.9 CHOICE OF LAW/CONSENT TO JURISDICTION. All disputes, claims or
controversies arising out of or relating to this Agreement, or the negotiation,
validity or performance of this Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules of
conflict of laws. Each Stockholder and Buyer hereby irrevocably and
unconditionally consents to submit to the sole and exclusive jurisdiction of the
courts of the State of Delaware and of the United States located in the State of
Delaware (the "DELAWARE COURTS") for any litigation arising out of or relating
to this Agreement, or the negotiation, validity or performance of this Agreement
(and agrees not to commence any litigation relating thereto except in such
courts), waives any objection to the laying of venue of any such litigation in
the Delaware Courts and agrees not to plead or claim in any Delaware Court that
such litigation brought therein has been brought in any inconvenient forum. Each
of the parties hereto agrees, (a) to the extent such party is not otherwise
subject to service of process in the State of Delaware, to appoint and maintain
an agent in the State of Delaware as such party's agent for acceptance of legal
process, and (b) that service of process may also be made on such party by
prepaid certified mail with a proof of mailing receipt validated by the United
States Postal Service constituting evidence of valid service. Service made
pursuant to (a) or (b) above shall have the same legal force and effect as if
served upon such party personally within the State of Delaware. For purposes of
implementing the parties' agreement to appoint and maintain an agent for service
of process in the State of Delaware, each such party does hereby appoint CT
Corporation, Corporation Trust Center, 1209 Orange Street, Wilmington, DE 19801,
as such agent.
4.10 CONSTRUCTION. Whenever the context requires, each term stated in
either the singular or the plural shall include the singular and the plural and
pronouns stated in either the masculine, the feminine or the neuter gender shall
include the masculine, feminine and neuter. All references to Sections and
Paragraphs refer to sections and paragraphs of this Agreement. The use of the
word "including" in this Agreement shall be by way of example rather than
limitation.
4.11 AMENDMENT AND WAIVER. The provisions of this Agreement may be
amended and waived only with the prior written consent of each of the parties
hereto provided, however, that Buyer may in writing waive or consent to a
modification of any provision of this Agreement with respect to any Stockholder
without the agreement of any other party hereto, and provided, further, that
EXHIBIT B may be amended by agreement of each TA Investor. Notwithstanding the
foregoing sentence, the provisions of this Agreement may not be amended or
waived in a manner that would adversely affect the rights of the Company
hereunder without the prior written consent of the Company.
6
<PAGE> 7
4.12 THIRD PARTY BENEFICIARY. The Company is a third-party beneficiary
of this Agreement and shall be entitled to enforce this Agreement against each
of the Stockholders in the same manner as if it were a party hereto.
4.13 NO AGREEMENT UNTIL EXECUTED. Irrespective of negotiations among
the parties or the exchanging of drafts of this Agreement, this Agreement shall
not constitute or be deemed to evidence a contract, agreement, arrangement or
understanding among the parties hereto unless and until (i) the Board of
Directors of the Company has approved, for purposes of Section 203 of the
Delaware General Corporation Law and any applicable provision of the Company's
Certificate of Incorporation, the terms of the Merger, and (ii) this Agreement
is executed by the parties hereto.
4.14 EXCULPATION. No Stockholder shall have any liability or obligation
whatsoever under or by reason of this Agreement because of a breach by any other
Stockholder of its obligations, representations or warranties hereunder.
4.15 TERMINATION. Notwithstanding anything in this Agreement to the
contrary, this Agreement shall terminate upon the termination of the Merger
Agreement pursuant to Section 9.1 thereof.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement on the date first written above.
BUYER:
-----
TA/ADVENT VIII, L.P.
By: TA Associates VIII LLC, its General Partner
By: TA Associates, Inc., its General Partner
By: /s/ Richard Tadler
-----------------------------------
Richard Tadler
Managing Director
TA/ATLANTIC AND PACIFIC IV, L.P.
By: TA Associates AP IV, L.P., its General Partner
By: TA Associates, Inc., its General Partner
By: /s/ Richard Tadler
-----------------------------------
Richard Tadler
Managing Director
TA INVESTORS, LLC
By: TA Associates, Inc., its Manager
By: /s/ Richard Tadler
-----------------------------------
Richard Tadler
Managing Director
TA EXECUTIVES FUND, LLC
By: TA Associates, Inc., its Manager
By: /s/ Richard Tadler
-----------------------------------
Richard Tadler
Managing Director
<PAGE> 9
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Ramie A. Tritt
-----------------------------------
Ramie A. Tritt, M.D.
<PAGE> 10
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Daniel M. Adams
-----------------------------------
Daniel M. Adams, M.D.
<PAGE> 11
STOCKHOLDER SIGNATURE PAGE
- --------------------------
ATLANTA HEAD & NECK, P.C.
By: /s/ Albert A. Clairmont
-----------------------------------
Name: Albert A. Clairmont, M.D
Title:
<PAGE> 12
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Michael A. Avidano
-----------------------------------
Michael A. Avidano, M.D.
<PAGE> 13
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Sanjay Bhansali
-----------------------------------
Sanjay Bhansali, M.D.
<PAGE> 14
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Deborah M. Burton
-----------------------------------
Deborah M. Burton, M.D.
<PAGE> 15
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Willie J. Cornay
-----------------------------------
Willie J. Cornay, M.D.
<PAGE> 16
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Andrew J. Diamond
-----------------------------------
Andrew J. Diamond, M.D.
<PAGE> 17
STOCKHOLDER SIGNATURE PAGE
- --------------------------
EAR, NOSE & THROAT SPECIALISTS, P.C.
By: /s/ Ronald A. Van Tuyl
-----------------------------------
Name: Ronald A. Van Tuyl, M.D.
Title:
<PAGE> 18
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Andrew R. Golde
-----------------------------------
Andrew R. Golde, M.D.
<PAGE> 19
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ David A. Goodman
-----------------------------------
David A. Goodman, M.D.
<PAGE> 20
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Nancy R. Griner
-----------------------------------
Nancy R. Griner, M.D.
<PAGE> 21
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Christopher B. Holloway
-----------------------------------
Christopher B. Holloway
<PAGE> 22
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Keith R. Jackson
-----------------------------------
Keith R. Jackson, M.D.
<PAGE> 23
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Keith A. Kowal
-----------------------------------
Keith A. Kowal, M.D.
<PAGE> 24
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Samuel A. Mickelson
-----------------------------------
Samuel A. Mickelson, M.D.
<PAGE> 25
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Harold W. Moss
-----------------------------------
Harold W. Moss, M.D.
<PAGE> 26
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Thomas U. Muller
-----------------------------------
Thomas U. Muller, M.D.
<PAGE> 27
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Michael J. Pickford
-----------------------------------
Michael J. Pickford, M.D.
<PAGE> 28
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Michael F. Pratt
-----------------------------------
Michael F. Pratt, M.D.
<PAGE> 29
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Richard Rinehart
-----------------------------------
Richard Rinehart, M.D.
<PAGE> 30
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Burke P. Robinson
-----------------------------------
Burke P. Robinson, M.D.
<PAGE> 31
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Ted L. Rolander
-----------------------------------
Ted L. Rolander, M.D.
<PAGE> 32
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Marc H. Routman
-----------------------------------
Marc H. Routman, M.D.
<PAGE> 33
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ William S. Smith
-----------------------------------
William S. Smith, M.D.
<PAGE> 34
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Arthur J. Torsiglieri
-----------------------------------
Arthur J. Torsiglieri, M.D.
<PAGE> 35
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Ann K. White
-----------------------------------
Ann K. White, M.D.
<PAGE> 36
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Gerald R. Benjamin
-----------------------------------
Gerald R. Benjamin
<PAGE> 37
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Richard D. Ballard
-----------------------------------
Richard D. Ballard
<PAGE> 38
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Lawrence P. Kraska
-----------------------------------
Lawrence P. Kraska
<PAGE> 39
STOCKHOLDER SIGNATURE PAGE
- --------------------------
/s/ Robert A. Diprova
-----------------------------------
Robert A. Diprova
<PAGE> 40
STOCKHOLDER SIGNATURE PAGE
- --------------------------
BOCK, BENJAMIN & CO. PARTNERS, L.P.
By: Bock, Benjamin & Co., its General Partner
By: /s/ Gerald R. Benjamin
-----------------------------------
Gerald R. Benjamin
Chief Executive Officer
<PAGE> 41
EXHIBIT A
<TABLE>
<CAPTION>
Company Shares
--------------
Stockholder Beneficially Owned/purchased Owned of Record Purchase Price
- ----------- ---------------------------- --------------- --------------
<S> <C> <C> <C>
Daniel Adams, M.D 106,488 106,488 $ 1,118,124.00
Atlanta Head & Neck-Clairmont 16,190 16,190 $ 169,995.00
Michael Avidano, M.D 15,761 15,761 $ 165,490.50
Sanjay Bhansali, M.D 28,725 28,725 $ 301,612.50
Deborah Burton, M.D 5,000 5,000 $ 52,500.00
William Cornay, M.D 39,195 39,195 $ 411,547.50
Andrew Diamond, M.D 9,524 9,524 $ 100,002.00
ENT Specialists- Van Tuyl 11,490 11,490 $ 120,645.00
Andrew Golde, M.D 17,185 17,185 $ 180,442.50
David Goodman, M.D 31,153 31,153 $ 327,106.50
Nancy Griner, M.D 44,190 44,190 $ 463,995.00
Christopher Holloway 2,257 2,257 $ 23,698.50
Keith Jackson, M.D 128,431 128,431 $ 1,348,525.50
Keith Kowal, M.D 93,121 93,121 $ 977,770.50
Sam Mickelson, M.D 5,591 5,591 $ 58,705.50
Harold Moss, M.D 12,882 12,882 $ 135,261.00
Thomas Muller, M.D 36,339 36,339 $ 381,559.50
Michael Pickford, M.D 200,418 200,418 $ 2,104,389.00
Michael Pratt, M.D 5,770 5,770 $ 60,585.00
Richard Rinehart, M.D 7,932 7,932 $ 83,286.00
Burke Robinson, M.D 9,671 9,671 $ 101,545.50
Ted Rolander, M.D 35,000 35,000 $ 367,500.00
Marc Routman, M.D 42,142 42,142 $ 442,491.00
William Smith, M.D 19,048 19,048 $ 200,004.00
Arthur Torsiglieri, M.D 69,962 69,962 $ 734,601.00
Ramie Tritt, M.D 396,001 380,953 $ 4,158,010.50
Ann White, M.D 103,101 103,101 $ 1,082,560.50
Bock, Benjamin & Co. Partners, L.P. 266,448 266,448 $ 2,797,704.00
Richard Ballard 41,843 0 $ 439,351.50
Gerald Benjamin 16,476 0 $ 172,998.00
Robert Diprova 34,081 0 $ 357,850.50
Larry Kraska 22,504 0 $ 236,292.00
--------- --------- --------------
TOTALS 1,873,919 1,743,967 $19,676,149.50
</TABLE>
<PAGE> 42
EXHIBIT B
<TABLE>
<CAPTION>
TA Investor Percentage of Total Company Shares Purchased
- ----------- --------------------------------------------
<S> <C>
TA/Advent VIII, L.P. 60%
TA/Atlantic and Pacific IV, L.P. 38%
TA Executives Fund LLC 1%
TA Investors LLC 1%
</TABLE>
<PAGE> 43
EXHIBIT C
_________
WIRE INSTRUCTIONS
NAME:_________________________________________________________________________
BANK:_________________________________________________________________________
ACCOUNT NO.:__________________________________________________________________
ABA NO.:______________________________________________________________________
DDA NO.:______________________________________________________________________
REFERENCE:____________________________________________________________________
<PAGE> 44
EXHIBIT D
_______________________
TRANSFEROR'S CERTIFICATE OF NON-FOREIGN STATUS
Individual Transferor
_______________________
Section 1445 of the Internal Revenue Code provides that a transferee (Buyer)
of a U.S. real property interest must withhold tax if the transferor (seller)
is a foreign person. To inform the TA Investors that withholding of tax is not
required upon my disposition of a U.S. real property interest, the undersigned
hereby certifies the following:
1. I am not a nonresident alien for purposes of U.S. income taxation;
2. My U.S. taxpayer identifying number (Social Security number) is:
__________________________; and
3. My home address is:
_______________________________________
_______________________________________
I understand that this certification may be disclosed to the Internal
Revenue Service by the TA Investors and that any false statement I have made
here could be punished by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined this
certification and to the best of my knowledge and belief it is true, correct,
and complete.
Date:________________ Signed: ______________________________________
Print Name: ______________________________________
<PAGE> 1
EXHIBIT 10.64
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of this 14th day of June,
1999 by and among TA MergerCo, Inc., a Delaware corporation ("MergerCo" or the
"Company"), each of the Persons listed on the signature pages attached hereto,
and each of the other Persons who hereafter agree to become party to and bound
by this Agreement (collectively the "Stockholders").
WHEREAS, MergerCo has been formed for the purpose of merging (the
"Merger") with and into Physicians' Specialty Corp., a Delaware corporation
("Target") pursuant to the terms and subject to the conditions set forth in the
Agreement and Plan of Merger, dated as of the date hereof, by and among MergerCo
and Target, as amended from time to time (the "Merger Agreement").
WHEREAS, by virtue of the Merger, Target will become the successor to
all of the rights, interests, duties and obligations of MergerCo, including,
without limitation, those arising under this Agreement, and after the Merger,
Target shall be deemed to be a party to this Agreement and all references in
this Agreement to MergerCo or the "Company" shall be deemed to be references to
Target.
WHEREAS, the parties hereto desire to enter into this Agreement for the
purpose of establishing the registration rights of the Stockholders.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"COMMISSION" shall mean the United States Securities and
Exchange Commission, or any other federal agency at the time administering the
Securities Act and the Exchange Act.
"COMMON STOCK" shall mean the Company's Common Stock, par
value $.001 per share, and any capital stock of any class of the Company
hereafter authorized which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to participate in
dividends or in the distribution of assets upon any liquidation, dissolution or
winding up of the Company.
<PAGE> 2
"COMMON STOCKHOLDER SHARES" shall mean Stockholder Shares
which are (i) Common Stock, (ii) warrants, options or other rights to subscribe
for or to acquire, directly or indirectly, Common Stock, whether or not then
exercisable or convertible, and (iii) stock or other securities which are
convertible into or exchangeable for, directly or indirectly, Common Stock,
whether or not then convertible or exchangeable (including, without limitation,
the Convertible Preferred Stock). As to any particular Common Stockholder
Shares, such shares shall cease to be Common Stockholder Shares when they have
been disposed of in a Public Sale or repurchased by the Company or any
Subsidiary. References in this Agreement to a majority of, or a certain
percentage of, the Common Stockholder Shares, shall be deemed to be references
to a majority of the Common Stock represented by the Common Stockholder Shares
or a certain percentage of the Common Stock represented by the Common
Stockholder Shares, calculated on a fully-diluted basis, as applicable.
"CONVERTIBLE PREFERRED STOCK" shall mean the Company's
Convertible Participating Preferred Stock, par value $.001 per share.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, or any similar successor federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
"INITIAL PUBLIC OFFERING" means the consummation of the
Company's first underwritten, firm commitment public offering pursuant to an
effective registration statement under the Securities Act, other than on Forms
S-4 or S-8 of their then equivalents, covering the offer and sale by the Company
of its equity securities, or such other event as a result of or following which
the Common Stock shall be publicly held.
"PERSON" shall mean an individual, a corporation, a
partnership, a joint venture, a trust, an unincorporated organization, a limited
liability company or partnership, a government and any agency or political
subdivision thereof.
"PRINCIPAL MANAGEMENT STOCKHOLDERS" shall mean all
Stockholders who are not TA Investors and who beneficially own at least 2.5% of
the outstanding Stockholder Shares (as reflected in the stock record books of
the Company) after the effective date of the Merger.
"PUBLIC SALE" shall mean any sale of Stockholder Shares to the
public pursuant to an offering registered under the Securities Act or to the
public through a broker, dealer or market maker pursuant to the provisions of
Rule 144 adopted under the Securities Act.
"QUALIFIED PUBLIC OFFERING" shall have the meaning set forth
in the Company's Amended and Restated Certificate of Incorporation (the
"Charter").
"REGISTRABLE SECURITIES" shall mean any shares of Common Stock
held by a Stockholder or subject to acquisition by a Stockholder upon conversion
of Common Stockholder Shares, as applicable, including any shares issued by way
of a stock dividend or stock split or in
2
<PAGE> 3
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization; provided, however, that if a TA Investor owns
Convertible Preferred Stock, the TA Investor may exercise its registration
rights hereunder by converting the shares to be sold publicly into Common Stock
as of the closing of the relevant offering and shall not be required to cause
such Convertible Preferred Stock to be converted to Common Stock until and
unless such closing occurs, it being understood that the Company shall at the
request of the relevant TA Investor effect the reconversion of Common Stock to
Convertible Preferred Stock if such a conversion occurs notwithstanding the
foregoing and a public offering does not close; and provided, further, that any
Common Stock that is sold in a registered sale pursuant to an effective
registration statement under the Securities Act or pursuant to Rule 144
thereunder, or that may be sold without restriction as to volume or otherwise
pursuant to Rule 144 under the Securities Act (as confirmed by an opinion of
counsel to the Company), shall not be deemed Registrable Securities.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.
"STOCKHOLDER SHARES" shall mean (i) any capital stock of the
Company purchased or otherwise acquired by any Stockholder, (ii) any warrants,
options or other rights to subscribe for or to acquire, directly or indirectly,
any capital stock of the Company, purchased or otherwise acquired by any
Stockholder, whether or not then exercisable or convertible, and (iii) any stock
or other securities which are convertible into or exchangeable for, directly or
indirectly, any capital stock of the Company, purchased or otherwise acquired by
any Stockholder, whether or not then convertible or exchangeable, (iv) any
securities or rights issued or issuable directly or indirectly with respect to
the securities and rights referred to in clauses (i), (ii) and (iii) above by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular Stockholder Shares, such shares shall cease to be Stockholder
Shares when they have been disposed of in a Public Sale or repurchased by the
Company or any Subsidiary.
"SUBSIDIARY" OR "SUBSIDIARIES" means, with respect to any
Person, any corporation, limited liability company, partnership, association, or
other business entity of which (i) if a corporation, a majority of the total
voting power of shares of stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers, or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of such Person or a combination
thereof, or (ii) if a limited liability company, partnership, association, or
other business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of such Person or entity or a combination
thereof. For purposes hereof, a Person or Persons shall be deemed to have a
majority ownership interest in a limited liability company, partnership,
association, or other business entity if such Person or Persons shall be
allocated a majority of limited liability company, partnership, association, or
other business entity gains or losses or shall be or control any managing
director or general partner of such limited liability company, partnership,
association, or other business entity.
3
<PAGE> 4
"TA INVESTORS" means the Stockholders identified as such on
the signature pages hereto and their Affiliates.
2. OPTIONAL REGISTRATIONS. If at any time or times after an
Initial Public Offering and for a period of six (6) years thereafter, the
Company shall seek to register any shares of its capital stock or securities
convertible into capital stock under the Securities Act (whether in connection
with a public offering of securities by the Company (a "primary offering"), a
public offering of securities by stockholders of the Company (a "secondary
offering"), or both (together an "underwritten public offering"), the Company
will promptly give written notice thereof to each Stockholder (including any
Permitted Transferee thereof as defined in that certain Stockholders Agreement,
dated as of the date hereof, by and among the parties hereto) holding
Registrable Securities (individually, a "Holder" and collectively, the
"Holders"). If within ten (10) days after receipt of such notice one or more
Holders request the inclusion of some or all of the Registrable Securities owned
by them in such registration, the Company will use its commercially reasonable
efforts to effect the registration under the Securities Act of all Registrable
Securities which such Holders may request in a writing delivered to the Company
within ten (10) days after their receipt of the notice given by the Company;
provided, however, that if the Company determines at any time not to pursue an
underwritten public offering of its securities, then it shall give prompt
written notice of such determination to each Holder requesting registration
hereunder, and the Company shall thereafter be relieved of its obligation to
register any Registrable Securities pursuant to this Section 2 until such time
as it shall again decide to pursue an underwritten public offering. In the case
of the registration of shares of capital stock by the Company in connection with
any underwritten public offering, if the underwriter(s) determines that
marketing factors require a limitation on the number of Registrable Securities
to be offered, the Company shall not be required to register Registrable
Securities of the Holders in excess of the amount, if any, of shares of which
the principal underwriter of such underwritten offering shall reasonably and in
good faith agree to include in such offering in excess of any amount to be
registered for the Company. If any limitation of the number of shares of
Registrable Securities to be registered by the Holders is required pursuant to
this Section 2, the number of shares that may be included in the registration on
behalf of the Holders shall be allocated among the Holders or the holders of any
other registration rights in proportion, as nearly as practicable, to the
respective holdings of Registrable Securities of all Holders requesting
registration. The provisions of this Section 2 will not apply to a registration
statement on Form S-8 or Form S-4 (or any successor forms) or a registration
effected solely to implement (i) an employee benefit plan, or (ii) a transaction
to which Rule 145 or any other similar rule of the Commission under the
Securities Act is applicable.
3. REQUIRED REGISTRATIONS.
(A) DEMAND REGISTRATION. On one occasion beginning at any time
after the Company's Initial Public Offering, or in the case of a Principal
Management Stockholder beginning after (i) a Qualified Public Offering; (ii) the
redemption for cash of all of the Redeemable Preferred Stock (as defined in the
Charter) then outstanding in accordance with the terms of the Charter and (iii)
the sale, transfer or other disposition of at least 50% of the Convertible
Preferred Stock held by the TA Investors as of the effective date of the Merger
4
<PAGE> 5
(clauses (i), (ii) and (iii) collectively, the "Management Stockholders Demand
Right Trigger"), and within a period of six (6) years thereafter, a TA Investor
or the TA Investors, or a Principal Management Stockholder or the Principal
Management Stockholders (such TA Investors and Principal Management Stockholders
shall hereafter be sometimes referred to individually as a "Demand Holder," and
collectively as the "Demand Holders"), holding at least 50% of the Registrable
Securities held by the TA Investors or Principal Management Stockholders,
respectively, may require the Company to register under the Securities Act all
or a portion of the Registrable Securities held by such requesting Demand
Holder; provided, however, that the Company shall have no obligation to effect a
registration of its securities pursuant to this Section 3(a) unless the shares
to be included therein shall in the aggregate consist of at least 150,000
Registrable Securities (as adjusted for stock splits, stock dividends or other
similar events).
(B) FORM S-3. Commencing one (1) year after an Initial Public
Offering (or such shorter period as Form S-3 may otherwise permit), or in the
case of a Principal Management Stockholder one (1) year after the Management
Stockholders Demand Right Trigger, and for a period of six (6) years thereafter,
the Company shall use its commercially reasonable efforts to qualify and remain
qualified to register securities on Form S-3 (or any successor form) under the
Securities Act. Subject to the conditions set forth in Section 3(a) above, a TA
Investor or the TA Investors or a Principal Management Stockholder or the
Principal Management Stockholders holding at least 50% of the Registrable
Securities held by the TA Investors or Principal Management Stockholders,
respectively, may request not more than three (3) registrations on Form S-3 (or
any successor form) per year for the Registrable Securities held by such
requesting Demand Holder, including registrations for the sale of such
Registrable Securities on a delayed or continuous basis pursuant to Rule 415
under the Securities Act. Such requests shall be in writing and shall state the
number of shares of Registrable Securities to be disposed of and the intended
method of disposition of such shares by such Demand Holder.
(C) REGISTRATION REQUIREMENTS. Following a request pursuant to
Sections 3(a) or 3(b) above, the Company will notify all of the Holders who
would be entitled to notice of a proposed registration under Section 2 above and
any other holder of piggyback registration rights of its receipt of such request
from such Demand Holder. Upon the written request of any such Holder or other
holder of the Company's securities delivered to the Company within twenty (20)
days after receipt from the Company of such notification, the Company will
either (i) elect to make a primary offering, in which case the rights of such
Holders shall be as set forth in Section 2 above, or (ii) use its commercially
reasonable efforts to cause such of the Registrable Securities as may be
requested by any Holders and any other holders of piggyback registration rights
to be registered under the Securities Act in accordance with the terms of this
Section 3.
(D) LIMITATIONS ON REGISTRATION OBLIGATIONS. The Company shall
not be obligated to effect more than one (1) registration statement pursuant to
Section 3(a) or more than three (3) registration statements per year pursuant to
Section 3(b) for each of the TA Investors and Principal Management Stockholders
as a group. The Company shall not be obligated to effect any registration on
Form S-3 pursuant to Section 3(b) if Form S-3 is not available for such offering
by the Holders; provided, however, that in this event the Company shall be
obligated to effect
5
<PAGE> 6
such registration on either Form S-1 or S-2, and such registration shall not be
counted as a registration pursuant to Section 3(a) for purposes of the
limitations set forth in Section 3(a) or in the first sentence of this Section
3(d). The Company may postpone the filing or the effectiveness of any
registration statement pursuant to Sections 3(a) or 3(b) for a reasonable period
of time, provided that such postponements shall not exceed one hundred twenty
(120) days in the aggregate during any twelve (12) month period, if (i) the
Company has been advised by legal counsel that such filing or effectiveness
would require disclosure of a material financing, acquisition or other corporate
transaction, and the Board of Directors of the Company determines in good faith
that such disclosure is not in the best interests of the Company and its
stockholders or the Company would be required to include in such registration
statement financial statements and/or other information concerning the business
of any other party to such financing, acquisition or other corporate transaction
that is not yet then available or (ii) the Board of Directors determines in good
faith that there is a valid business purpose or reason for delaying filing or
effectiveness.
4. FURTHER OBLIGATIONS OF THE COMPANY. Whenever the Company is
required hereunder to register any Registrable Securities, it agrees that it
shall also do the following:
(A) Pay all expenses of such registrations and offerings
(exclusive of underwriting discounts and commissions) and the reasonable fees
and expenses of not more than one independent counsel for the Holders reasonably
satisfactory to the TA Investors in connection with any registrations pursuant
to Section 2 or reasonably satisfactory to the requesting Demand Holder in
connection with any registration pursuant to Section 3;
(B) Use its commercially reasonable efforts (with due regard
to management of the ongoing business of the Company and the allocation of
managerial resources) diligently to prepare and file with the SEC a registration
statement and such amendments and supplements to said registration statement and
the prospectus used in connection therewith as may be necessary to keep said
registration statement effective for at least 120 days or until the Holder or
Holders have completed the distribution described in the registration statement
relating thereto, or until there are no longer any Registrable Securities issued
and outstanding, whichever first occurs, and to comply in all material respects
with the provisions of the Securities Act with respect to the sale of securities
covered by said registration statement for the period necessary to complete the
proposed public offering;
(C) Furnish to each selling Holder such copies of each
preliminary and final prospectus and such other documents as such Holder may
reasonably request to facilitate the public offering of its Registrable
Securities;
(D) Enter into any reasonable underwriting agreement required
by the proposed underwriter (which underwriter shall be selected by the Company
and shall be reasonably satisfactory to the selling Demand Holders in connection
with any registration requested pursuant to Section 3), if any, in such form and
containing such terms as are customary; provided, however, that no Holder shall
be required to make any representations or warranties other than (i) with
respect to its title to the Registrable Securities; (ii) with respect to any
written information
6
<PAGE> 7
provided by such Holder to the Company and (iii) representations and warranties
of selling stockholders customarily contained in agreements of this type, and if
the underwriter requires that representations or warranties be made and that
indemnification be provided, the Company shall make all such representations and
warranties and provide all such indemnities, including, without limitation, in
respect of the Company's business, operations and financial information and the
disclosures relating thereto in the prospectus, customarily contained in
agreements of this type;
(E) Use its commercially reasonable efforts (with due regard
to management of the ongoing business of the Company and the allocation of
managerial resources) to register or qualify the securities covered by said
registration statement under the securities or "blue sky" laws of such
jurisdictions as any selling Holder may reasonably request, provided that the
Company shall not be required to register or qualify the securities in any
jurisdictions which require it to qualify to do business therein;
(F) Immediately notify each selling Holder, at any time when a
prospectus relating to his Registrable Securities is required to be delivered
under the Securities Act, of the happening of any event as a result of which
such prospectus contains an untrue statement of a material fact or omits any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and, at the request of
any such selling Holder, prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading;
(G) Use its commercially reasonable efforts to cause all such
Registrable Securities to be listed on each securities exchange or quotation
system on which similar securities issued by the Company are then listed or
quoted;
(H) Use its commercially reasonable efforts to comply with the
securities laws of the United States and other applicable jurisdictions and all
applicable rules and regulations of the SEC and comparable governmental agencies
in other applicable jurisdictions and make generally available to its Holders,
in each case as soon as practicable, an earnings statement of the Company which
will satisfy the provisions of Section 11(a) of the Securities Act;
(I) In the event of an underwritten public offering, use its
commercially reasonable efforts to obtain and furnish to each selling Holder,
immediately prior to the effectiveness of the registration statement and at the
time of delivery of any Registrable Securities sold pursuant thereto, a cold
comfort letter from the Company's independent public accountants in customary
form and covering such matters of the type customarily covered by cold comfort
letters delivered in connection with underwritten public offerings; and
(J) Otherwise cooperate with the underwriter or underwriters,
the Commission and other regulatory agencies and take all actions and execute
and deliver or cause to be executed
7
<PAGE> 8
and delivered all documents reasonably necessary to effect the registration of
any Registrable Securities under this Agreement.
5. INDEMNIFICATION; CONTRIBUTION.
(A) Incident to any registration statement referred to in this
Agreement, the Company will indemnify and hold harmless each underwriter, each
Holder who offers or sells any such Registrable Securities in connection with
such registration statement (including its partners (including partners of
partners and stockholders of any such partners), and directors, officers,
employees and agents of any of them (a "Selling Holder"), and each person who
controls any of them within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act (a "Controlling Person")), from and against any
and all losses, claims, damages, expenses and liabilities, joint or several
(including any investigation, reasonable attorney's fees and other expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted, as the same are incurred), to which
they, or any of them, may become subject under the Securities Act, the Exchange
Act or other federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities arise out of
or are based on (x) any untrue statement or alleged untrue statement of a
material fact contained in such registration statement (including any related
preliminary or definitive prospectus, or any amendment or supplement to such
registration statement or prospectus), (y) any omission or alleged omission to
state in such document a material fact required to be stated in it, in light of
the circumstances under which it was made, or necessary to make the statements
in it not misleading, or (z) any violation by the Company of the Securities Act,
any state securities or "blue sky" laws or any rule or regulation thereunder in
connection with such registration; provided, however, that the Company will not
be liable to the extent that such loss, claim, damage, expense or liability
arises from and is based on an untrue statement or omission or alleged untrue
statement or omission made in reliance on and in conformity with information
furnished in writing to the Company by such underwriter, Selling Holder or
Controlling Person expressly for use in such registration statement. With
respect to an untrue statement or omission or alleged untrue statement or
omission made in reliance upon the information furnished in writing to the
Company by such Selling Holder expressly for use in such registration statement,
such Selling Holder will indemnify and hold harmless each underwriter, the
Company (including its directors, officers, employees and agents), each other
Holder (including its partners (including partners of partners and stockholders
of such partners) and directors, officers, employees and agents of any of them,
and each person who controls any of them within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act), from and against any and all
losses, claims, damages, expenses and liabilities, joint or several, to which
they, or any of them, may become subject under the Securities Act, the Exchange
Act or other federal or state statutory law or regulation, at common law or
otherwise to the same extent provided in the immediately preceding sentence. The
Company shall not be obligated hereunder to indemnify any Holder for any amount
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld). In no event, however, shall the liability of a
Selling Holder for indemnification under this Section 5 exceed the lesser of (x)
that proportion of the total of such
8
<PAGE> 9
losses, claims, damages or liabilities indemnified against equal to the
proportion of the total securities sold under such registration statement which
is being sold by such Selling Holder or (y) the proceeds received by such
Selling Holder from its sale of Registrable Securities under such registration
statement.
(B) If the indemnification provided for in Section 5(a) above
for any reason is held by a court of competent jurisdiction to be unavailable to
an indemnified party in respect of any losses, claims, damages, expenses or
liabilities referred to therein, then each indemnifying party under this Section
5, in lieu of indemnifying such indemnified party thereunder, shall contribute
to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, expenses or liabilities (x) in such proportion as is
appropriate to reflect the relative benefits received by the Company, the other
Selling Holders and the underwriters from the offering of the Registrable
Securities or (y) if the allocation provided by clause (x) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (x) above but also the relative
fault of the Company, the other Selling Holders and the underwriters in
connection with the statements or omissions which resulted in such losses,
claims, damages, expenses or liabilities, as well as any other relevant
equitable considerations. The relative benefits received by the Company, the
Selling Holders and the underwriters shall be deemed to be in the same
respective proportions that the net proceeds from the offering (before deducting
expenses) received by the Company and the Selling Holders and the underwriting
discount received by the underwriters, in each case as set forth in the table on
the cover page of the applicable prospectus, bear to the aggregate public
offering price of the Registrable Securities. The relative fault of the Company,
the Selling Holders and the underwriters shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company, the Selling Holders or the underwriters and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission.
The Company, the Selling Holders, and the underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 5(b)
were determined by pro rata or per capita allocation or by any other method of
allocation which does not take account the equitable considerations referred to
in the immediately preceding paragraph. In no event, however, shall a Selling
Holder be required to contribute any amount under this Section 5(b) in excess of
the lesser of (x) that proportion of the total of such losses, claims, damages
or liabilities indemnified against equal to the proportion of the total
Registrable Securities sold under such registration statement which are being
sold by such Selling Holder or (y) the proceeds received by such Selling Holder
from its sale of Registrable Securities under such registration statement. No
person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not found guilty of such fraudulent misrepresentation.
(C) The amount paid by an indemnifying party or payable to an
indemnified party as a result of the losses, claims, damages and liabilities
referred to in this Section 5 shall be
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<PAGE> 10
deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim, payable as
the same are incurred. The indemnification and contribution provided for in this
Section 5 will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified parties or any officer, director,
employee, agent or controlling person of the indemnified parties.
(D) NOTICE; DEFENSE OF CLAIMS. Promptly after receipt by an
indemnified party of notice of any claim, liability or expense to which the
indemnification obligations set forth in this Section 5 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 (x) it would be liable under the provisions hereof for indemnity in
the amount of such claim if such claim were successful and (y) 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 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. The indemnifying party shall keep the indemnified party
apprised 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 reasonable expense of one (1) separate
counsel for the indemnified party shall be paid by the indemnifying party. 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. If such claim, liability or expense is one
that by its nature cannot
10
<PAGE> 11
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.
(E) PROSPECTUS DELIVERY. The foregoing indemnity agreements of
the Company and Selling Holders are subject to the condition that, insofar as
they relate to any misstatement or omission in a preliminary prospectus that was
eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or the amended
prospectus filed with the SEC pursuant to Rule 424(b) (the "Final Prospectus"),
such indemnity agreement shall not inure to the benefit of any person if a copy
of the Final Prospectus was furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act.
6. RULE 144 AND RULE 144A REQUIREMENTS. In the event that the
Company becomes subject to Section 13 or Section 15(d) of the Exchange Act, the
Company shall use its best efforts to take all action as may be required as a
condition to the availability of Rule 144 or Rule 144A under the Securities Act
(or any successor or similar exemptive rules hereafter in effect). The Company
shall furnish to any Holder, within 15 days of a written request, a written
statement executed by the Company as to the steps it has taken to comply with
the current public information requirement of Rule 144 or Rule 144A or such
successor rules.
7. "MARKET STAND-OFF" AGREEMENT. In connection with any
underwritten public offering by the Company, the Stockholders, if requested in
good faith by the Company and the managing underwriter of the Company's
securities, shall agree not to sell or otherwise transfer or dispose of any
securities of the Company held by them (except for any securities sold pursuant
to such registration statement) for a period following the effective date of the
applicable registration statement; provided, however that in no event shall such
period exceed 180 days; and provided further that such agreement shall not be
required unless all officers and directors and two percent (2%) or greater
stockholders of the Company and all other persons with registration rights enter
into similar agreements. In order to enforce the foregoing, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Stockholder (and the shares of securities of every other person subject to
the foregoing restriction) until the end of such period.
8. WAIVER; AMENDMENTS. For purposes of this Agreement and all
agreements executed pursuant hereto, no course of dealing between or among any
of the parties hereto and no delay on the part of any party hereto in exercising
any rights hereunder or thereunder shall operate as a waiver of the rights
hereof and thereof. This Agreement may not be amended or modified or any
provision hereof waived without the written consent of the Company and the
holders of not less than a majority of the outstanding Common Stockholder
Shares; provided, however, that any party may waive any provision hereof
intended for its benefit by written consent; and provided further, however, that
any amendment that would adversely effect any Stockholder that is not a TA
Investor shall require the consent of Principal Management
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<PAGE> 12
Stockholders holding a majority of the Stockholder Shares held by the Principal
Management Stockholders.
9. MISCELLANEOUS.
(A) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(B) ENTIRE AGREEMENT. Except as otherwise expressly set forth
herein, this document embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(C) SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided herein, this Agreement shall bind and inure to the benefit of and be
enforceable by the Company and its successors and assigns and the Stockholders
and any subsequent holders of Stockholder Shares and the respective successors
and assigns of each of them.
(D) COUNTERPARTS. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken together
shall constitute one and the same agreement.
(E) REMEDIES. The parties hereto shall be entitled to enforce
their rights under this Agreement specifically to recover damages by reason of
any breach of any provision of this Agreement and to exercise all other rights
existing in their favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that any party hereto may in its sole discretion apply to any
court of law or equity of competent jurisdiction for specific performance and/or
injunctive relief (without posting a bond or other security) in order to enforce
or prevent any violation of the provisions of this Agreement.
(F) NOTICES. Any notice provided for in this Agreement shall
be in writing and shall be either (i) personally delivered, (ii) sent by
registered or certified mail (return receipt requested and postage prepaid),
(iii) sent by reputable overnight courier service (charges prepaid), or (iv)
sent by facsimile, in each case, to the Company at the address set forth below
and to any other recipient at the address indicated on the Notices Schedule
attached hereto, or if such recipient is not listed on the Notices Schedule
attached hereto, at the address indicated by the Company's records. Any Person
may change its address for purposes of this Agreement by
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<PAGE> 13
providing prior notice of such change to the other parties hereto in accordance
with this Section. Notices will be deemed to have been given hereunder (i) when
delivered personally, (ii) three days after being mailed, (iii) one day after
deposit with a reputable overnight courier service, or (iv) in the cases of
notices sent by facsimile, when receipt is acknowledged. The Company's address
is:
Physicians' Specialty Group
The Pavilion at Lake Hearn
1150 Lake Horn Drive, Suite 640
Suite 64D
Atlanta, GA 30342
Attention: Ramie A. Tritt
President and Chairman
Facsimile: (404) 250-0162
The TA Investors' address is:
c/o TA Associates, Inc.
High Street Tower, Suite 2500
125 High Street
Boston, MA 02110
Attention: Richard Tadler
David S.B. Lang
Facsimile: (617) 574-6728
With a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attn: Kevin M. Dennis, Esq.
Joseph L. Johnson III, P.C.
Facsimile: (617) 523-1231
(G) GOVERNING LAW. All questions concerning the construction,
validity and interpretation of this Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware, without giving
effect to any choice of law or other conflict of law provision or rule (whether
of the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Delaware.
(H) DISPUTE RESOLUTION. All disputes, claims, or controversies
arising out of or relating to this Agreement or the negotiation, validity or
performance hereof that are not resolved by mutual agreement shall be resolved
solely and exclusively by binding arbitration to be conducted before
JAMS/Endispute, Inc. or its successor. The arbitration shall be held in
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<PAGE> 14
Boston, Massachusetts before a single arbitrator, acceptable to the holders of a
majority of the Common Stockholder Shares, and shall be conducted in accordance
with the rules and regulations promulgated by JAMS/Endispute, Inc. unless
specifically modified herein.
Whenever a party shall decide to initiate arbitration proceedings it
shall first give written notice of its intent to do so to all other parties
hereto. The parties covenant and agree that during the sixty (60) day period
following such notice, they shall make good faith efforts to resolve the dispute
without arbitration; provided, that if such dispute cannot be resolved within
such sixty (60) day period, then the arbitration shall commence upon termination
of such sixty (60) day period.
(I) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or legal
holiday in the state in which the Company's chief executive office is located,
the time period shall automatically be extended to the business day immediately
following such Saturday, Sunday or legal holiday.
(J) CONSTRUCTION. Whenever the context requires, each term
stated in either the singular or the plural shall include the singular and the
plural, and pronouns stated in either the masculine, the feminine or the neuter
gender shall include the masculine, feminine and neuter. All references to
Sections and Paragraphs refer to sections and paragraphs of this Agreement. The
use of the word "including" in this Agreement shall be by way of example rather
than limitation.
(K) DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
(L) TERMINATION. This Agreement becomes effective upon the
Effective Time of the Merger (as defined in the Merger Agreement) and shall
terminate and be of no further force and effect upon the termination of the
Merger Agreement pursuant to Section 9.1 thereof.
[SIGNATURE PAGES FOLLOW]
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<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Registration
Rights Agreement to be duly executed as of the date first set forth above.
COMPANY:
TA MERGERCO, INC.
By: /s/ Richard Tadler
--------------------------------------------
Name: Richard Tadler
Title: President and Chief Executive Officer
TA INVESTORS:
TA/ADVENT VIII, L.P.
By: TA Associates VIII LLC, its General Partner
By: TA Associates, Inc., its General Partner
By: /s/ Richard Tadler
----------------------------------------
Richard Tadler
Managing Director
TA/ATLANTIC AND PACIFIC IV, L.P.
By: TA Associates AP IV, L.P. its General
Partner
By: TA Associates, Inc., its General Partner
By: /s/ Richard Tadler
------------------------------------
Richard Tadler
Managing Director
<PAGE> 16
TA INVESTORS, LLC
By: TA Associates, Inc., its Manager
By: /s/ Richard Tadler
-----------------------------------------
Richard Tadler
Managing Director
TA EXECUTIVES FUND, LLC
By: TA Associates, Inc., its Manager
By: /s/ Richard Tadler
-----------------------------------------
Richard Tadler
Managing Director
<PAGE> 17
[STOCKHOLDER SIGNATURE PAGES OMITTED]
<PAGE> 18
NOTICE SCHEDULE
<PAGE> 1
EXHIBIT 10.65
EXECUTION COPY
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement") is made as of June 14,
1999 by and among TA MergerCo, Inc., a Delaware corporation ("MergerCo"), each
of the Persons listed on the signature pages attached hereto, and each of the
other Persons who hereafter agree to become party to and bound by this Agreement
(collectively, the "Stockholders"). Capitalized terms used but not otherwise
defined herein are defined in Section 9 hereof or, in the case of Section
1(a)(vi) herein, in the form of Amended and Restated Certificate of
Incorporation of the Company (the "Charter") attached to the Merger Agreement
(as defined below).
WHEREAS, MergerCo has been formed for the purpose of merging (the
"Merger") with and into Physicians' Specialty Corp., a Delaware corporation
("Target") pursuant to the terms, and subject to the conditions, set forth in
the Agreement and Plan of Merger, dated as of the date hereof, by and among
MergerCo and Target, as amended from time to time (the "Merger Agreement").
WHEREAS, by virtue of the Merger, Target will become the successor to
all of the rights, interests, duties and obligations of MergerCo, including,
without limitation, those arising under this Agreement, and after the Merger,
Target shall be deemed to be a party to this Agreement and all references in
this Agreement to MergerCo or the "Company" shall be deemed to be references to
Target.
WHEREAS, the Company and the Stockholders desire to enter into this
Agreement for the purposes, among others, of (i) establishing the composition of
the Company's board of directors (the "Board"), (ii) assuring continuity in the
management and ownership of the Company and (iii) limiting the manner and terms
by which certain securities of the Company may be transferred.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. Board of Directors.
(a) From and after the date hereof and until the provisions of
this Section 1 cease to be effective, each Stockholder shall vote all of his or
its Stockholder Shares and any other voting securities of the Company over which
such Stockholder has voting control and shall take all other necessary or
desirable actions within his or its control (whether in his or its capacity as a
stockholder, director, member of a board committee or officer of the Company or
otherwise, and including, without limitation, attendance at meetings in person
or by proxy for purposes of obtaining a quorum and execution of written consents
in lieu of meetings), and the Company shall take all necessary and desirable
actions within its control (including, without limitation, calling special board
and stockholder meetings), in order to cause:
<PAGE> 2
(i) the authorized number of directors on the
Board to be the amount necessary to allow for the designations provided
for pursuant to Section 1(a)(ii) below;
(ii) the following persons to be elected to the
Board (each a "Director"):
(A) up to two representatives to be
designated by the holders of a majority of the TA Shares from
time to time (the "TA Directors"), with Richard Tadler and
David Lang serving as the initial TA Directors;
(B) Subject to the proviso set forth in
Section 1(a)(viii), up to two representatives who are to be
initially jointly designated by, and mutually acceptable to,
the holders of a majority of each of the TA Shares and the
Management Shares (the "Independent Directors"), with the
initial Independent Directors to be determined prior to the
Effective Time of the Merger (as defined in the Merger
Agreement) by agreement of the persons who will serve as the
initial TA Directors and the initial Management Directors (as
hereinafter defined); and
(C) up to three representatives designated
by the holders of a majority of the Management Shares from
time to time (the "Management Stock Directors"), with Ramie A.
Tritt, M.D., Gerald R. Benjamin, and Richard D. Ballard
serving as the initial Management Directors;
(iii) the Chairman of the Board of Directors (the
"Chairman") to be one of the Directors designated pursuant to Section
1(a)(ii) above and who is designated by a majority of the Board of
Directors to serve in such capacity, with Ramie A. Tritt, M.D., serving
as the initial Chairman;
(iv) the establishment of a compensation
committee (the "Compensation Committee") comprised of one TA Director
(to be selected by unanimous vote of the TA Directors), one Management
Director (to be selected by majority vote of the Management Directors)
and one Independent Director (to be selected by unanimous vote of the
TA Directors); with the Compensation Committee being empowered with, to
the fullest extent permitted by law, but subject to any specific
limitations imposed by the Charter or the By-laws of the Company or a
resolution of the Board, all of the authority granted to the Board in
determining policies, practices and procedures relating to the
compensation of executive officers and other managerial and key
employees of the Company and its Subsidiaries and the establishment and
administration of employee benefit plans and stock option plans;
(v) the removal from the Board (with or without
cause) of any TA Director(s) upon the written request of the holders of
a majority of the TA Shares (it being explicitly understood by the
parties hereto that the TA Directors constitute the "Convertible Stock
Director Designees" (as defined in the Charter));
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<PAGE> 3
(vi) the removal from the Board (with or without
cause) of any Independent Director(s) upon the written request of the
holders of a majority of each of the TA Shares and Management Shares;
provided, however, that in the event the Company: (A) breaches in any
material respect a covenant under Section A.8 or Section B.6 of its
Charter, which breach shall not have been cured within 30 days after
receipt of notice in writing by the Company specifying such breach; (B)
fails, for any reason other than (i) due to any action or inaction of a
holder or representative of a holder of Convertible Preferred Stock or
Redeemable Preferred Stock or (ii) as a result of restrictions on
redemption set forth in the Charter, to effect a redemption of the
Convertible Preferred Stock or Redeemable Preferred Stock on a
Convertible Redemption Date or Redeemable Redemption Date, as the case
may be; or (C) any "material event of default" (which term shall be
defined prior to the closing of the Merger in a schedule to be attached
hereto based upon the mutual agreement of the TA Investors and
Management Stockholders holding a majority of the Management Shares)
under the Company's loan agreements governing the Senior and
Subordinated Debt to be issued in connection with the Merger
(collectively, an "Event of Default"), then in each such case the
removal from the Board (with or without cause) of any Independent
Director(s) shall then and thereafter occur upon the written request of
the holders of a majority of the TA Shares (and shall not require the
request or consent of any holders of Management Shares);
(vii) the removal from the Board (with or without
cause) of any Management Director upon the written request of the
holders of a majority of the Management Shares; and
(viii) in the event that any representative
designated hereunder resigns or for any other reason ceases to serve as
a member of the Board during his term of office, the filling of the
resulting vacancy by a representative designated by the Person or
Persons originally entitled to designate such director pursuant to
Section l(a)(ii) above; provided, however, that if an Event of Default
has occurred and an Independent Director is removed from the Board
following a written request of the holders of a majority of the TA
Shares pursuant to Section 1(a)(vi) above, the resulting vacancy shall
instead be filled by a representative designated by holders of a
majority of the TA Shares, after which time the holders of a majority
of the TA Shares shall have the sole right to designate the Independent
Directors pursuant to Section 1(a)(ii)(B) above.
(b) There shall be at least four meetings of the Board
during every fiscal year, at least one of which shall be held in each 120-day
period during the Company's fiscal year. The Company shall pay all reasonable
out-of-pocket expenses incurred by each Director in connection with attending
regular and special meetings of the Board, the board of directors of any
Subsidiary of the Company and any committee thereof upon submission of
appropriate documentation of such expenses. So long as any Director designated
hereunder serves on the Board and for at least three years thereafter, the
Company shall use commercially reasonable efforts to maintain directors and
officers indemnity insurance coverage satisfactory to the holders of a majority
of the TA Shares,
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<PAGE> 4
and the Company's certificate of incorporation and bylaws shall provide for
indemnification and exculpation of Directors to the fullest extent permitted
under applicable law.
2. Representations and Warranties of Stockholders. Each
Stockholder represents and warrants that (i) this Agreement has been duly
authorized, executed and delivered by such Stockholder and constitutes the valid
and binding obligation of such Stockholder, enforceable in accordance with its
terms, except to the extent that enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization, and other laws affecting the enforcement
of creditor's rights generally and by general principles of equity, (ii) such
Stockholder has not granted and is not a party to any proxy, voting trust or
other agreement which is inconsistent with, conflicts with or violates any
provision of this Agreement, (iii) all Stockholder Shares have been acquired by
such Stockholder for investment and not with a view to the sale or distribution
thereof within the meaning of the Securities Act, (iv) such Stockholder has no
present intention of selling or otherwise disposing of any of the Stockholder
Shares for his or its own account, and (v) such Stockholder has been advised
that the Stockholder Shares have not been registered with the Securities and
Exchange Commission and may not be offered, sold or otherwise transferred except
in compliance with the Securities Act. No holder of Stockholder Shares shall
grant any proxy or become party to any voting trust or other agreement which is
inconsistent with, conflicts with or violates any provision of this Agreement.
3. Restrictions on Transfer of Stockholder Shares.
(a) First Refusal Rights. At least 20 days prior to any
sale, transfer, assignment, pledge or other disposal (a "Transfer") of
Stockholder Shares by any Management Stockholder other than (i) pursuant to a
Public Sale, (ii) a Transfer to the Company or (iii) a Transfer pursuant to
Section 3(c) or Section 4, the Management Stockholder desiring such Transfer
(the "Transferor") shall deliver a written notice (the "Transfer Notice") to the
Company of its desire to Transfer Stockholder Shares of such class, specifying
in reasonable detail the identity of the prospective transferee(s), the number
of shares to be transferred and the terms and conditions of the Transfer,
including the proposed price per Stockholder Share of such class (which price
shall be payable solely in cash at the closing of the transaction or in
installments over time). The Transferor's Transfer Notice shall constitute an
irrevocable offer to sell all, but not less than all, of the Stockholder Shares
subject to such Transfer Notice (the "Offered Shares") to the Company or its
assigns on the basis described below, at a purchase price equal to the price
contained in the Transfer Notice. The Company or its assigns may elect to
purchase all, but not less than all, of the Offered Shares, upon the same terms
and conditions as those set forth in the Transfer Notice (the "Right of First
Refusal"), by delivering a written notice (the "Acceptance Notice") of such
election to the Transferor within 10 days (the "Right of First Refusal Election
Period") after the Transfer Notice has been received by the Company. The closing
of the purchase of any Offered Shares pursuant to this Section 3(a) shall take
place within 30 days after the date on which the Transferor receives the
Acceptance Notice. Subject to the provisions of Section 3(b) below, if the
Company or its assigns does not elect to purchase all of the Offered Shares,
then the Transferor may transfer all, but not less than all, of the Offered
Shares to the
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<PAGE> 5
transferee(s) identified in the Transfer Notice for (i) a price no less than the
price specified in the Transfer Notice and (ii) other terms no more favorable to
the transferee(s) thereof than as specified in the Transfer Notice; provided,
however, that such Transfer must be completed within the 120-day period
immediately following the date on which the Transfer Notice has been received by
the Company. Any Offered Shares not transferred within such 120-day period will
be again subject to the provisions of this Section 3(a) upon subsequent
transfer.
(b) Participation Rights.
(i) In the event that a Management Stockholder
desires to Transfer any Stockholder Shares (other than (i) pursuant to a Public
Sale or (ii) a Transfer pursuant to Section 3(c) or Section 4), and the Right of
First Refusal is not exercised by the Company or its assigns with respect to all
of the Offered Shares, then such Management Stockholder (hereinafter, the
"Transferor") may Transfer such Stockholder Shares only pursuant to and in
accordance with the terms of this Section 3(b)(i). Within 5 days of the
expiration of the Right of First Refusal Election Period, the Transferor shall
deliver a written notice (the "Sale Notice") to the Company, the TA Investors
and such other Management Stockholders who at the time of receipt of such Sale
Notice beneficially own at least 2.5% of the outstanding Stockholder Shares (as
reflected in the stock record books of the Company) (the "Principal Management
Stockholders"), with such Sale Notice specifying in reasonable detail the
identity of the prospective transferee(s), the Stockholder Shares to be sold and
the terms and conditions of the Transfer. In the event that either a TA Investor
or Principal Management Stockholder holds (x) the class of Stockholder Shares
which are to be transferred, (y) securities convertible, exchangeable or
exercisable for the class of Stockholder Shares which are to be transferred, or
(z) securities into which the class of Stockholder Shares which are to be
transferred are convertible, exchangeable or exercisable, then such TA
Investor(s) and/or Principal Management Stockholder(s), as the case may be, may
elect to participate in the contemplated Transfer by delivering written notice
of such election to the Transferor within 15 days after its receipt of the Sale
Notice. If any TA Investor or Principal Management Stockholder has elected to
participate in such Transfer (a "Participating Stockholder"), the Transferor and
each Participating Stockholder will be entitled to sell in the contemplated
Transfer, at the same price and on the same terms, a number of Stockholder
Shares of such class, or securities convertible, exchangeable or exercisable for
Stockholder Shares of such class (or securities into which such class of
Stockholder Shares are convertible, exchangeable or exercisable), equal to the
product of (i) the quotient determined by dividing the number of Stockholder
Shares of such class and securities convertible, exchangeable or exercisable for
Stockholder Shares of such class held by such Transferor or Participating
Stockholder by the aggregate number of Stockholder Shares of such class and
securities convertible, exchangeable or exercisable for Stockholder Shares of
such class owned by the Transferor and all Participating Stockholders and (ii)
the number of Stockholder Shares of such class and securities convertible,
exchangeable or exercisable for Stockholder Shares of such class to be sold in
the contemplated Transfer; provided, that Stockholder Shares which have not
vested (and will not vest as a result of such transaction) or are subject to
repurchase by the Company for less than fair market value shall not be counted
as Stockholder Shares for purposes of the above calculation. The Transferor
shall use its best efforts to obtain the agreement of the prospective
transferee(s) to the participation of the Participating
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<PAGE> 6
Stockholder(s) in any contemplated Transfer, and the Transferor shall not
Transfer any of its Stockholder Shares to the prospective transferee(s) unless
(1) the prospective transferee(s) agrees to allow the participation of the
Participating Stockholder(s) or (2) the Transferor agrees to purchase the number
of such class of Stockholder Shares from any Participating Stockholder which the
Participating Stockholder would have been entitled to sell pursuant to this
Section 3(b)(i). If any securities convertible, exchangeable or exercisable for
Stockholder Shares are included in any Transfer under this Section 3(b)(i), the
purchase price for such securities shall be equal to the full purchase price
determined hereunder for the Stockholder Shares covered by the portion of such
securities to be transferred, adjusted by the aggregate exercise price for such
shares. Each Stockholder transferring Stockholder Shares pursuant to this
Section 3(b)(i) shall be obligated to join on a pro rata basis (based on the
number of Stockholder Shares to be sold) in any indemnification or other
obligations that are part of the terms and conditions of the Transfer (other
than any such obligations that relate specifically to a particular Stockholder,
such as indemnification with respect to representations and warranties regarding
a Stockholder's title to and ownership of Stockholder Shares); provided, that no
Stockholder shall be obligated in connection with any Transfer to agree to any
indemnification in an amount in excess of the net proceeds received by such
Stockholder in such Transfer.
(ii) In the event that a TA Investor or TA
Investors desire to Transfer in excess of 50% of the Stockholder Shares held by
such TA Investor or TA Investors (other than (i) pursuant to a Public Sale or
(ii) a Transfer pursuant to Section 3(d) or Section 4), then such TA Investor or
TA Investors (hereinafter, the "TA Transferor") may Transfer such Stockholder
Shares only pursuant to and in accordance with the terms of this Section
3(b)(ii). The TA Transferor shall deliver a written notice (the "TA Sale
Notice") to the Company and each Principal Management Stockholder, with such TA
Sale Notice specifying in reasonable detail the identity of the prospective
transferee(s), the Stockholder Shares to be sold and the terms and conditions of
the Transfer. In the event that a Principal Management Stockholder holds (x) the
class of Stockholder Shares which are to be transferred, (y) securities
convertible, exchangeable or exercisable for the class of Stockholder Shares
which are to be transferred, or (z) securities into which the class of
Stockholder Shares which are to be transferred are convertible, exchangeable or
exercisable, then such Principal Management Stockholder may elect to participate
in the contemplated Transfer by delivering written notice of such election to
the TA Transferor within 15 days after its receipt of the TA Sale Notice. If any
Principal Management Stockholder has elected to participate in such Transfer (a
"Management Participating Stockholder"), the TA Transferor and each Management
Participating Stockholder will be entitled to sell in the contemplated Transfer,
at the same price and on the same terms, a number of Stockholder Shares of such
class, or securities convertible, exchangeable or exercisable for Stockholder
Shares of such class (or securities into which such class of Stockholder Shares
are convertible, exchangeable or exercisable), equal to the product of (i) the
quotient determined by dividing the number of Stockholder Shares of such class
and securities convertible, exchangeable or exercisable for Stockholder Shares
of such class held by such TA Transferor or Management Participating Stockholder
by the aggregate number of Stockholder Shares of such class and securities
convertible, exchangeable or exercisable for Stockholder Shares of such class
owned by the TA Transferor and all Management Participating Stockholders and
(ii) the number of Stockholder
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Shares of such class and securities convertible, exchangeable or exercisable for
Stockholder Shares of such class to be sold in the contemplated Transfer;
provided, that Stockholder Shares which have not vested (and will not vest as a
result of such transaction) or are subject to repurchase by the Company for less
than fair market value shall not be counted as Stockholder Shares for purposes
of the above calculation. The TA Transferor shall use its best efforts to obtain
the agreement of the prospective transferee(s) to the participation of the
Management Participating Stockholder(s) in any contemplated Transfer, and the TA
Transferor shall not Transfer any of its Stockholder Shares to the prospective
transferee(s) unless (1) the prospective transferee(s) agrees to allow the
participation of the Management Participating Stockholder(s) or (2) the TA
Transferor agrees to purchase the number of such class of Stockholder Shares
from any Management Participating Stockholder which the Management Participating
Stockholder would have been entitled to sell pursuant to this Section 3(b)(ii).
If any securities convertible, exchangeable or exercisable for Stockholder
Shares are included in any Transfer under this Section 3(b)(ii), the purchase
price for such securities shall be equal to the full purchase price determined
hereunder for the Stockholder Shares covered by the portion of such securities
to be transferred, adjusted by the aggregate exercise price for such shares.
Each Stockholder transferring Stockholder Shares pursuant to this Section
3(b)(ii) shall pay his or its pro rata share (based on the number of Common
Stockholder Shares to be sold) of the expenses incurred by the Stockholders in
connection with such transfer. Each Management Participating Stockholder
transferring Stockholder Shares pursuant to this Section 3(b)(ii) shall be
obligated to join on a pro rata basis (based on the number of Stockholder Shares
to be sold) in any indemnification or other obligations that are part of the
terms and conditions of the Transfer (other than any such obligations that
relate specifically to a particular Stockholder, such as indemnification with
respect to representations and warranties given by a Stockholder regarding such
Stockholder's title to and ownership of Stockholder Shares); provided, that no
Stockholder shall be obligated in connection with any Transfer to agree to
indemnification in an amount in excess of the net proceeds received by such
Stockholder in such Transfer.
(c) Permitted Management Transfers. The restrictions
contained in this Section 3 shall not apply with respect to (i) any Transfer of
Stockholder Shares by any Management Stockholder pursuant to applicable laws of
descent and distribution or (ii) any Transfer of Stockholder Shares by any
Management Stockholder of up to 50% of the Stockholder Shares held by such
Management Stockholder (as of the effective date of the Merger) made to either
the members of such Management Stockholder's Family Group or to other Management
Stockholders; provided, that the restrictions contained in this Section 3 shall
continue to be applicable to the Stockholder Shares after any of the foregoing
Transfers; and provided, further, that the transferees of such Stockholder
Shares shall have agreed in writing to be bound by the provisions of this
Agreement, to the extent that they are not already bound, which affect the
Stockholder Shares so transferred. All transferees permitted under this Section
3(c) are collectively referred to herein as "Permitted Management Transferees."
Each Permitted Management Transferee shall be deemed a Management Stockholder
for purposes of this Agreement.
(d) Permitted TA Transfers. The restrictions contained in
this Section 3 shall not apply with respect to any Transfer of Stockholder
Shares by any TA Investor to any other TA Investor; provided,
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that the restrictions contained in this Section 3 shall continue to be
applicable to the Stockholder Shares after any of the foregoing Transfers; and
provided, further, that the transferees of such Stockholder Shares shall have
agreed in writing to be bound by the provisions of this Agreement, to the extent
that they are not already bound, which affect the Stockholder Shares so
transferred. All transferees permitted under this Section 3(d) are collectively
referred to herein as "Permitted TA Transferees." Each Permitted TA Transferee
shall be deemed a TA Investor for purposes of this Agreement.
(e) Other Agreements. Notwithstanding anything herein to
the contrary, the rights of any Management Stockholder or TA Investor to
Transfer any Stockholder Shares pursuant to the terms of this Agreement shall be
subject to all such other limitations and restrictions, if any, to which such
Stockholder or such Stockholder Shares are subject.
(f) Transfers in Violation of Agreement; Termination of
Restrictions. Any transfer or attempted transfer of any Stockholder Shares in
violation of any provision of this Section 3 shall be void, and the Company
shall not record such transfer on its books or treat any purported transferee of
such Stockholder Shares as the owner of such shares for any purpose. The
restrictions set forth in this Section 3 shall continue with respect to each
Stockholder Share until the earlier of (i) the transfer of such Stockholder
Share in a Public Sale, or (ii) the consummation of a Sale of the Company or a
Qualified Public Offering.
4. Sale of the Company.
(a) Subject to Section 4(b) below, if the Board and the
holders of a majority of the TA Shares approve a Sale of the Company to any
non-Affiliates of the Company or the TA Investors (an "Approved Sale"), each
holder of Stockholder Shares shall vote for, consent to and raise no objections
against such Approved Sale. If the Approved Sale is structured as a (i) merger
or consolidation, each holder of Stockholder Shares shall waive any dissenters'
rights, appraisal rights or similar rights in connection with such merger or
consolidation or (ii) sale of stock, each holder of Stockholder Shares shall
agree to sell all of his Stockholder Shares and rights to acquire Stockholder
Shares on the terms and conditions approved by the Board and the holders of a
majority of the TA Shares. Each holder of Stockholder Shares shall take all
necessary or desirable actions in connection with the consummation of the
Approved Sale as reasonably requested by the Company and the TA Investors.
(b) The obligations of the holders of Stockholder Shares
set forth in Section 4(a) above with respect to an Approved Sale of the Company
are subject to the satisfaction of the following conditions: (i) upon the
consummation of the Approved Sale, all of the holders of each class of
Stockholder Shares shall receive the same form and amount of consideration per
share of Stockholder Shares as the other holders of such class, or if any
holders of a class of Stockholder Shares are given an option as to the form and
amount of consideration to be received, all holders of such class shall be given
the same option; and (ii) all holders of then currently exercisable rights to
acquire Stockholder Shares shall be given an opportunity to either (A) exercise
such rights prior to the consummation of the Approved Sale and participate in
such sale as holders of
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Stockholder Shares or (B) upon the consummation of the Approved Sale, receive in
exchange for such rights consideration equal to the amount determined by
multiplying (1) the same amount of consideration per share of a class of
Stockholder Shares received by holders of such class of Stockholder Shares in
connection with the Approved Sale less the exercise price per share of such
class of Stockholder Shares of such rights to acquire such class of Stockholder
Shares by (2) the number of shares of such class of Stockholder Shares
represented by such rights.
(c) If the Company or the holders of the Company's
securities enter into any negotiation or transaction for which Rule 506 (or any
similar rule then in effect) promulgated by the Securities and Exchange
Commission may be available with respect to such negotiation or transaction
(including a merger, consolidation or other reorganization), the holders of
Stockholder Shares shall, at the request of the Company, appoint a "purchaser
representative" (as such term is defined in Rule 501) reasonably acceptable to
the Company and the Company shall pay the fees of such purchaser representative.
(d) Each Stockholder transferring Stockholder Shares
pursuant to this Section 4 will bear his or its pro rata share (based upon the
number of Common Stockholder Shares to be sold) of the costs of any sale of
Stockholder Shares pursuant to an Approved Sale to the extent such costs are
incurred for the benefit of all such holders of Stockholder Shares and are not
otherwise paid by the Company or the acquiring party. Each Stockholder
transferring Stockholder Shares pursuant to this Section 4 shall be obligated to
join on a pro rata basis (based on the number of Common Stockholder Shares to be
sold) in any indemnification or other obligations that are part of the terms and
conditions of the Approved Sale (other than any such obligations that relate
specifically to a particular Stockholder, such as indemnification with respect
to representations and warranties given by a Stockholder regarding such
Stockholder's title to and ownership of Stockholder Shares); provided, that no
Stockholders shall be obligated in connection with any Approved Sale to agree to
indemnification in an amount in excess of the net proceeds received by such
Stockholder in such Approved Sale.
5. Right to Participate in Certain Sales of Additional
Securities.
(a) The Company agrees that it will not sell or issue (i)
any shares of capital stock of the Company, (ii) securities convertible into or
exchangeable for capital stock of the Company or (iii) options, warrants or
rights carrying any rights to purchase capital stock of the Company, unless the
Company first submits a written offer to each TA Investor and Principal
Management Stockholder who holds any shares of capital stock of the Company
(collectively, the "Offerees") identifying the terms of the proposed sale
(including price, number or aggregate principal amount of securities and all
other material terms), and offers to each Offeree the opportunity to purchase
its Pro Rata Allotment (as hereinafter defined) of the securities (subject to
increase for over-allotment if some Offerees do not fully exercise their rights)
on terms and conditions, including price, not less favorable than those on which
the Company proposes to sell such securities to a third party or parties. Each
Offeree's "Pro Rata Allotment" of such securities shall be based on the ratio
which the Common Stockholder Shares then owned by it bears, on an as-converted
basis, to all of the then issued and outstanding Common Stockholder Shares as of
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the date of such written offer. The Company's offer pursuant to this Section
5(a) shall remain open and irrevocable for a period of 15 days, and the
recipients of such offer shall elect to purchase by giving written notice
thereof to the Company within such 15-day period, including therein the maximum
number of securities which the Offeree would purchase if other Offerees do not
elect to purchase, with the rights of electing Offerees to purchase such
additional securities to be based upon the relative holdings of Common
Stockholder Shares of the electing Offerees in the case of over-subscription.
Any securities so offered which are not purchased pursuant to such offer may be
sold by the Company, but only on the terms and conditions set forth in the
initial offer, at any time within 120 days following the termination of the
above-referenced 15-day period but may not be sold to any other person or on
terms and conditions, including price, that are more favorable to the purchaser
than those set forth in such offer or after such 120-day period without renewed
compliance with this Section 5(a).
(b) Notwithstanding the foregoing, the right to purchase
granted under this Section 5 shall be inapplicable with respect to the sale or
issuance of (i) options to purchase shares of Common Stock granted or to be
granted pursuant to any employee or physician compensation plan approved by both
the Board and the Stockholders, (ii) securities issued as a result of any stock
split, stock dividend, reclassification or reorganization or similar event with
respect to the Common Stock, (iii) shares of Common Stock issued upon conversion
of the Convertible Preferred Stock or upon the exercise of the warrants to
purchase Common Stock issued to the underwriters of Target's initial Public
Offering or warrants issued to the Company's lenders at the time of the closing
of the Merger, (iv) shares of Common Stock, or securities convertible into or
exchangeable for Common Stock, issued in connection with acquisitions or other
business ventures that are approved by the Board, or (v) a maximum of 10,000
shares of Common Stock per year (as adjusted appropriately for stock splits,
stock dividends and other similar events).
6. Public Disclosures. The Company shall not, nor shall it permit
any Subsidiary to, disclose any TA Investor's name or identity as an investor in
the Company in any press release or other public announcement or in any document
or material filed with any governmental entity, without the prior written
consent of such TA Investor, unless such disclosure is required (or reasonably
believed to be required) by applicable law or governmental regulations or by
order of a court of competent jurisdiction, and in the event such disclosure is
required by applicable law or government regulations, then prior to making such
disclosure the Company shall give written notice to such TA Investor describing
in reasonable detail the proposed content of such disclosure and shall permit
such TA Investor to reasonably review and comment in a timely manner upon the
form and substance of such disclosure.
7. Securities Law Restrictions on Transfer of Stockholder Shares.
(a) General Provisions. Subject to the other limitations
contained in this Agreement, Stockholder Shares are transferable only pursuant
to (i) public offerings registered under the Securities Act, (ii) Rule 144 or
Rule 144A of the Securities and Exchange Commission ("SEC") (or any similar rule
or rules then in force) if such rule is available and (iii) subject to the
conditions specified in Section 7(b) below, any other legally available means of
transfer.
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(b) Opinion Delivery. In connection with the transfer of
any Stockholder Shares (other than a transfer described in clauses (i) or (ii)
of Section 7(a) above or a transfer to the Company pursuant to Section 3(a)
above), the holder thereof shall deliver written notice to the Company
describing in reasonable detail the transfer or proposed transfer, together with
an opinion of counsel which (to the Company's reasonable satisfaction) is
knowledgeable in securities law matters to the effect that such transfer of
Stockholder Shares may be effected without registration of such Stockholder
Shares under the Securities Act. In addition, if the holder of the Stockholder
Shares delivers to the Company an opinion of such counsel that no subsequent
transfer of such Stockholder Shares shall require registration under the
Securities Act, the Company shall promptly upon such contemplated transfer
deliver new certificates for such Stockholder Shares which do not bear the
Securities Act portion of the legend set forth in Section 7(d). If the Company
is not required to deliver new certificates for such Stockholder Shares not
bearing such legend, the holder thereof shall not transfer the same until the
prospective transferee has confirmed to the Company in writing its agreement to
be bound by the conditions contained in this Section.
(c) Rule 144A. Upon the request of any Stockholder, the
Company shall promptly supply to such Person or its prospective transferees all
information regarding the Company required to be delivered in connection with a
transfer pursuant to Rule 144A of the SEC.
(d) Legend. Each certificate or instrument representing
Stockholder Shares shall be imprinted with a legend in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON ____________, 1999, AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE. THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE STOCKHOLDERS AGREEMENT,
DATED AS OF JUNE 10, 1999, AND AS AMENDED AND MODIFIED FROM TIME TO
TIME, BETWEEN THE ISSUER (THE "COMPANY") AND CERTAIN INVESTORS, AND THE
COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES
UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH
TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY THE COMPANY
TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE."
(e) Legend Removal. If any Stockholder Shares become
eligible for sale pursuant to Rule 144(k), as confirmed by an opinion of
counsel, the Company shall, upon the request of the holder of such Stockholder
Shares, remove the Securities Act portion of the legend set forth in Section
7(d) from the certificates for such Stockholder Shares.
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8. Definitions.
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise, and if such Person is a partnership,
"Affiliate" shall also mean each general partner and limited partner of such
Person. Without limiting the generality of the foregoing, each investment fund
managed by TA Associates, Inc. or any successor thereto shall be deemed to be an
Affiliate of each of the initial holders of the TA Shares.
"Common Stock" means the Company's Common Stock, par value $.001 per
share, and any capital stock of any class of the Company hereafter authorized
which is not limited to a fixed sum or percentage of par or stated value in
respect to the rights of the holders thereof to participate in dividends or in
the distribution of assets upon any liquidation, dissolution or winding up of
the Company.
"Common Stockholder Shares" means Stockholder Shares which are (i)
Common Stock, (ii) warrants, options or other rights to subscribe for or to
acquire, directly or indirectly, Common Stock, whether or not then exercisable
or convertible, and (iii) stock or other securities which are convertible into
or exchangeable for, directly or indirectly, Common Stock, whether or not then
convertible or exchangeable (including, without limitation, the Convertible
Preferred Stock). As to any particular Common Stockholder Shares, such shares
shall cease to be Common Stockholder Shares when they have been disposed of in a
Public Sale or repurchased by the Company or any Subsidiary. References in this
Agreement to a majority of, or a certain percentage of, the Common Stockholder
Shares, shall be deemed to be references to a majority of the Common Stock
represented by the Common Stockholder Shares or a certain percentage of the
Common Stock represented by the Common Stockholder Shares, calculated on a
fully-diluted basis, as applicable.
"Convertible Preferred Stock" means the Company's Convertible
Participating Preferred Stock, par value $.001 per share.
"Family Group" means, in the case of any individual, his spouse and/or
descendants, and any trust, family limited partnership or other entity solely
for the benefit of such person and/or his spouse and/or descendants.
"Management Shares" means any capital stock, warrants, options or other
rights which constitute Stockholder Shares hereunder and which were initially
issued to Management Stockholders. References in this Agreement to "a majority
of the Management Shares" shall be deemed to be references to a majority of the
Management Shares that are Common Stockholder Shares, calculated on a
fully-diluted basis.
"Management Stockholders" means all Stockholders who are not TA
Investors.
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"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Offering" means the sale, in an underwritten public offering
registered under the Securities Act, of shares of the Company's Common Stock.
"Public Sale" means any sale of Stockholder Shares to the public
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
adopted under the Securities Act.
"Qualified Public Offering" has the meaning set forth in the Charter.
"Sale of the Company" means (i) any sale, transfer or issuance or
series of sales, transfers and/or issuances of capital stock of the Company by
the Company or any holders thereof which results in any Person or group of
Persons (as the term "group" is used under the Exchange Act of 1934, as
amended), other than Persons who are holders of Stockholder Shares as of
immediately after the Merger, owning capital stock of the Company possessing the
voting power (under ordinary circumstances) to elect a majority of the Board,
and (ii) any sale or transfer of all or substantially all of the assets of the
Company and its Subsidiaries.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Stockholder Shares" means (i) any capital stock of the Company
purchased or otherwise acquired by any Stockholder, (ii) any warrants, options
or other rights to subscribe for or to acquire, directly or indirectly, any
capital stock of the Company, purchased or otherwise acquired by any
Stockholder, whether or not then exercisable or convertible, and (iii) any stock
or other securities which are convertible into or exchangeable for, directly or
indirectly, any capital stock of the Company, purchased or otherwise acquired by
any Stockholder, whether or not then convertible or exchangeable, (iv) any
securities or rights issued or issuable directly or indirectly with respect to
the securities and rights referred to in clauses (i), (ii) and (iii) above by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular Stockholder Shares, such shares shall cease to be Stockholder
Shares when they have been disposed of in a Public Sale or repurchased by the
Company or any Subsidiary.
"Subsidiary" or "Subsidiaries" means, with respect to any Person, any
corporation, limited liability company, partnership, association, or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers, or trustees thereof
is at the time owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of such Person or a combination thereof,
or (ii) if a limited liability company, partnership, association, or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person
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or one or more Subsidiaries of such Person or entity or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association, or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association, or other business entity
gains or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association, or other business
entity.
"TA Investors" means TA/Advent VIII, L.P., TA/Atlantic and Pacific IV,
L.P., TA Investors LLC and TA Executives Fund, LLC, and their Affiliates.
"TA Shares" means any capital stock, warrants, options or other rights
which constitute Stockholder Shares hereunder and which were initially issued to
any TA Investor. References in this Agreement to "a majority of the TA Shares"
shall be deemed to be references to a majority of the TA Shares that are Common
Stockholder Shares, calculated on a fully-diluted basis.
9. Additional Stockholders. In connection with the issuance of
any additional equity securities of the Company to any Person, the Company may
permit such Person to become a party to this Agreement and succeed to all of the
rights and obligations of a "Stockholder" under this Agreement by obtaining the
consent of the holders of a majority of the Common Stockholder Shares and an
executed counterpart signature page to this Agreement, and, upon such execution,
such Person shall for all purposes be a "Stockholder" party to this Agreement.
10. Miscellaneous Provisions.
(a) Termination. This Agreement shall terminate and be of
no further force and effect upon the closing of a Qualified Public Offering or a
Sale of the Company. Notwithstanding anything herein to the contrary, this
Agreement shall become effective upon the Effective Time of the Merger and shall
terminate and be of no further force and effect upon the termination of the
Merger Agreement pursuant to Section 9.1 thereof.
(b) Amendment and Waiver. Except as otherwise provided
herein, no modification, amendment, or waiver of any provision of this Agreement
will be effective against the Company or the holders of Stockholder Shares,
unless such modification, amendment, or waiver is approved in writing by the
Company and the holders of at least a majority of each of the TA Shares and the
Management Shares; provided, however, that in the event that such amendment or
waiver (i) is with respect to any provision of this Agreement which contains
rights which are unique to a single holder or group of holders of Stockholder
Shares or (ii) would materially and adversely affect a single holder or group of
holders of Stockholder Shares in a manner substantially different than any other
holders of Stockholder Shares, then such amendment or waiver will require the
consent of such holder of Stockholder Shares or a majority of the Common
Stockholder Shares held by such group of holders materially and adversely
affected. Notwithstanding the foregoing, if an amendment or modification of this
Agreement serves merely to add a party hereto, then such amendment or
modification will be effective against the Company and the holders of
Stockholder Shares if such amendment or modification is approved in writing
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by the Company, the holders of a majority of the Common Stockholder Shares and
such new party hereto. The failure of any party to enforce any of the provisions
of this Agreement will in no way be construed as a waiver of such provisions and
will not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
(c) Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision or any other jurisdiction, but this Agreement
shall be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
(d) Entire Agreement. Except as otherwise expressly set
forth herein, this document embodies the complete agreement and understanding
among the parties hereto with respect to the subject matter hereof and
supersedes and preempts any prior understandings, agreements or representations
by or among the parties, written or oral, which may have related to the subject
matter hereof in any way.
(e) Successors and Assigns. Except as expressly otherwise
provided herein, this Agreement shall bind and inure to the benefit of and be
enforceable by the Company and its successors and assigns and the Stockholders
and any subsequent holders of Stockholder Shares and the respective successors
and assigns of each of them.
(f) Counterparts. This Agreement may be executed in
separate counterparts each of which shall be an original and all of which taken
together shall constitute one and the same agreement.
(g) Remedies. The parties hereto shall be entitled to
enforce their rights under this Agreement specifically to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in their favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party hereto may in its sole
discretion apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive relief (without posting a bond or other
security) in order to enforce or prevent any violation of the provisions of this
Agreement.
(h) Notices. Any notice provided for in this Agreement
shall be in writing and shall be either (i) personally delivered, (ii) sent by
registered or certified mail (return receipt requested and postage prepaid),
(iii) sent by reputable overnight courier service (charges prepaid), or (iv)
sent by facsimile, in each case, to the Company at the address set forth below
and to any other recipient at the address indicated on the Notices Schedule
attached hereto, or if such recipient is not listed on the Notices Schedule
attached hereto, at the address indicated by the Company's records. Any Person
may change its address for purposes of this Agreement by
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providing prior notice of such change to the other parties hereto in accordance
with this Section. Notices will be deemed to have been given hereunder (i) when
delivered personally, (ii) three days after being mailed, (iii) one day after
deposit with a reputable overnight courier service, or (iv) in the cases of
notices sent by facsimile, when receipt is acknowledged. The Company's address
is:
Physicians Specialty Corp
The Pavilion at Lake Hearn
1150 Lake Hearn Drive
Atlanta, GA 30342
Attention: Ramie A. Tritt, M.D.
President and Chairman
Facsimile: (404) 250-0162
The TA Investors' address is:
c/o TA Associates, Inc.
High Street Tower, Suite 2500
125 High Street
Boston, MA 02110
Attention: Richard Tadler
David S.B. Lang
Facsimile: (617) 574-6728
With a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
Attn: Kevin M. Dennis, Esq.
Joseph L. Johnson III, P.C.
Facsimile: (617) 523-1231
(i) Governing Law. All questions concerning the
construction, validity and interpretation of this Agreement shall be governed by
and construed in accordance with the internal laws of the State of Delaware,
without giving effect to any choice of law or other conflict of law provision or
rule (whether of the State of Delaware or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Delaware.
(j) Dispute Resolution. All disputes, claims, or
controversies arising out of or relating to this Agreement or the negotiation,
validity or performance hereof that are not resolved by mutual agreement shall
be resolved solely and exclusively by binding arbitration to be conducted before
JAMS/Endispute, Inc. or its successor. The arbitration shall be held in Boston,
Massachusetts before a single arbitrator, acceptable to the holders of a
majority of the
16
<PAGE> 17
Common Stockholder Shares, and shall be conducted in accordance with the rules
and regulations promulgated by JAMS/Endispute, Inc. unless specifically modified
herein.
Whenever a party shall decide to initiate arbitration proceedings it
shall first give written notice of its intent to do so to all other parties
hereto. The parties covenant and agree that during the sixty (60) day period
following such notice, they shall make good faith efforts to resolve the dispute
without arbitration; provided, that if such dispute cannot be resolved within
such sixty (60) day period, then the arbitration shall commence upon termination
of such sixty (60) day period.
(k) Business Days. If any time period for giving notice
or taking action hereunder expires on a day which is a Saturday, Sunday or legal
holiday in the state in which the Company's chief executive office is located,
the time period shall automatically be extended to the business day immediately
following such Saturday, Sunday or legal holiday.
(l) Construction. Whenever the context requires, each
term stated in either the singular or the plural shall include the singular and
the plural, and pronouns stated in either the masculine, the feminine or the
neuter gender shall include the masculine, feminine and neuter. All references
to Sections and Paragraphs refer to sections and paragraphs of this Agreement.
The use of the word "including" in this Agreement shall be by way of example
rather than limitation.
(m) Board Approval. Whenever this Agreement calls for or
refers to the consent or approval of any matter by any holder or holders of TA
Shares or Management Shares, such consent or approval shall be deemed given by
such holder if each of such holder's designees on the Board has, in his capacity
as a director of the Company, given his consent or approval with respect to such
matter at a duly convened meeting of the Board or pursuant to an effective
unanimous written consent of the Board, unless, with respect to any given
matter, such holder notifies the Company in writing that the consent or approval
at the Board level by such holder's designees on the Board does not constitute
the consent or approval by such holder itself.
(n) Descriptive Headings. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement on the day and year first above written.
TA MERGERCO, INC
By: /s/ Richard Tadler
-------------------------------------
Richard Tadler
President and Chief Executive Officer
<PAGE> 19
[Stockholders Agreement]
[STOCKHOLDER SIGNATURE PAGES OMITTED]
<PAGE> 1
EXHIBIT 10.66
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENTS
This Amendment dated as of June 14, 1999 supplements and amends the
Executive Employment Agreement dated as of November 26, 1996 (the "Employment
Agreement") by and between RICHARD D. BALLARD (the "Executive") and PHYSICIANS'
SPECIALTY CORP., a Delaware corporation (the "Company").
WITNESSETH
WHEREAS, the Company and TA MergerCo, Inc., a Delaware corporation
("MergerCo") are entering into an Agreement and Plan of Merger, dated as of the
date hereof (as the same may be amended from time to time, the "Merger
Agreement"), which provides, upon the terms and subject to the conditions
thereof, for the merger of MergerCo with and into the Company (the "Merger");
and
WHEREAS, as a condition to the willingness of MergerCo to enter into the
Merger Agreement, MergerCo and the Company have requested that the Executive
agree, and, in order to induce MergerCo and the Company to enter into the Merger
Agreement, the Executive is willing to agree, effective upon the closing of the
Merger, to amend the Employment Agreement as set forth herein.
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements and covenants set forth herein, in the Merger Agreement and in the
other documents related thereto, the parties hereto agree as follows:
1. The second paragraph (the first recital) of the Employment Agreement is
hereby deleted in its entirety and the following shall be inserted in lieu
thereof:
WHEREAS, Company is engaged in the business of providing management
and business services to, and acquiring assets of, ear, nose and throat
physician practices (the "Business");
2. Section 2.1 of the Employment Agreement is hereby deleted in its
entirety and the following shall be inserted in lieu thereof:
2.1 Term. The initial term of Executive's employment under this
Agreement (the "Initial Term") shall continue until March 26, 2002. After
the Initial Term, Executive's employment under this Agreement shall
automatically renew for successive additional one (1) year terms ("Renewal
Terms") (the Initial Term and any Renewal Terms being collectively referred
to as the "Term"). The Term shall be subject to termination in accordance
with Section 2.2.
3. Section 2.2(d)(ii) of the Employment Agreement is hereby deleted in its
entirety and the following shall be inserted in lieu thereof:
(ii) The Company shall have the right to terminate the Term and
Executive's employment hereunder without cause at any time upon notice to
Executive. In such event, Executive shall be entitled to the severance
benefit provided in Section 6(b).
4. Section 2.2(e) of the Employment Agreement is hereby deleted in its
entirety, and Section 2.2(f) of the Employment Agreement shall hereby be
redesignated Section 2.2(e).
5. The first sentence of Section 3.1 of the Employment Agreement is hereby
deleted in its entirety and the following shall be inserted in lieu thereof:
Executive shall be paid a base salary (the "Base Salary") from the
effective date of the Merger through the remainder of the Term at an
initial rate of Two Hundred Thousand Dollars ($200,000) per twelve (12)
month period. The Base Salary shall be (a) payable in equal installments on
the schedule that the Company may implement from time to time for general
payroll purposes, and (b) subject to any withholdings and deductions
required by applicable law.
<PAGE> 2
6. Section 6(b) of the Employment Agreement is hereby deleted in its
entirety and the following shall be inserted in lieu thereof:
(b) If Company terminates the Term pursuant to Section 2.2(d)(ii)
Executive shall be entitled to: (a) all salary and bonus amounts accrued
through the Termination Date, and (b) payment, for a period of twelve (12)
months following the Termination Date (the "Continuation Period"), of an
amount equal to: (i) Executive's base salary as of the Termination Date
(with such payments to be made at such times as they would be made if
executive's employment continued for an additional year) less (ii) any
salary or other amounts that Executive is paid by any other person during
that twelve month period (and Executive hereby agrees to take reasonably
diligent action to secure employment as soon as practicable after any such
termination from Company and to otherwise mitigate his losses resulting
from the loss of salary from Company). Notwithstanding the foregoing, in
the event the Company terminates the Term pursuant to Section 2.2(d)(ii)
within ninety (90) days following a Change of Control (as defined below),
the Continuation Period shall be eighteen (18) months instead of twelve
(12) months. For purposes of this Agreement, "Change of Control" shall mean
the acquisition by any single person or entity or related persons or
entities of more than fifty percent (50%) of the outstanding and issued
common stock of the Company after the date of the Merger. Executive's
rights to any of the compensation or benefits identified in the preceding
sentence shall be subject to Executive's compliance in all respects with
each of Executive's obligations under this Agreement.
7. Section 6(c) of the Employment Agreement is hereby deleted in its
entirety.
This Amendment shall be effective only upon the closing of the Merger, and
if the Merger Agreement is terminated pursuant to Section 9.1 thereof then this
Amendment shall terminate and be of no further force and effect. Except as
specifically set forth herein, the Employment Agreement shall not be amended by
this Amendment and shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned has executed this Amendment as of the
date first set forth above, and such Amendment shall be effective as of the
effective date of the Merger.
PHYSICIANS' SPECIALTY CORP.
/s/ Gerald R. Benjamin
--------------------------------------
Name: Gerald R. Benjamin
Title: Vice Chairman and Secretary
EXECUTIVE:
/s/ Richard D. Ballard
--------------------------------------
Name: Richard D. Ballard
<PAGE> 1
EXHIBIT 10.67
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENTS
This Amendment dated as of June 14, 1999 supplements and amends the
Executive Employment Agreement dated as of November 26, 1996, as amended March
25, 1998 (the "Employment Agreement") by and between GERALD R. BENJAMIN (the
"Executive") and PHYSICIANS' SPECIALTY CORP., a Delaware corporation (the
"Company").
WITNESSETH
WHEREAS, the Company and TA MergerCo, Inc., a Delaware corporation
("MergerCo") are entering into an Agreement and Plan of Merger, dated as of the
date hereof (as the same may be amended from time to time, the "Merger
Agreement"), which provides, upon the terms and subject to the conditions
thereof, for the merger of MergerCo with and into the Company (the "Merger");
and
WHEREAS, as a condition to the willingness of MergerCo to enter into the
Merger Agreement, MergerCo and the Company have requested that the Executive
agree, and, in order to induce MergerCo and the Company to enter into the Merger
Agreement, the Executive is willing to agree, effective upon the closing of the
Merger, to amend the Employment Agreement as set forth herein.
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements and covenants set forth herein, in the Merger Agreement and in the
other documents related thereto, the parties hereto agree as follows:
1. Section 2.1 of the Employment Agreement is hereby deleted in its
entirety and the following shall be inserted in lieu thereof:
2.1 Term. The initial term of Executive's employment under this
Agreement (the "Initial Term") shall continue until March 26, 2002. After
the Initial Term, Executive's employment under this Agreement shall
automatically renew for successive additional one (1) year terms ("Renewal
Terms") (the Initial Term and any Renewal Terms being collectively referred
to as the "Term"). The Term shall be subject to termination in accordance
with Section 2.2.
2. Section 2.2(d)(ii) of the Employment Agreement is hereby deleted in its
entirety and the following shall be inserted in lieu thereof:
(ii) The Company shall have the right to terminate the Term and
Executive's employment hereunder without cause at any time upon notice to
Executive. In such event, Executive shall be entitled to the severance
benefit provided in Section 6(b).
3. Section 2.2(e) of the Employment Agreement is hereby deleted in its
entirety, and Section 2.2(f) of the Employment Agreement shall hereby be
redesignated Section 2.2(e).
4. The first sentence of Section 3.1 of the Employment Agreement is hereby
deleted in its entirety and the following shall be inserted in lieu thereof:
Executive shall be paid a base salary (the "Base Salary") from the
effective date of the Merger through the remainder of the Term at an
initial rate of One Hundred Fifty Thousand Dollars ($150,000) per twelve
(12) month period. The Base Salary shall be (a) payable in equal
installments on the schedule that the Company may implement from time to
time for general payroll purposes, and (b) subject to any withholdings and
deductions required by applicable law.
5. Section 6(b) of the Employment Agreement is hereby deleted in its
entirety and the following shall be inserted in lieu thereof:
(b) If Company terminates the Term pursuant to Section 2.2(d)(ii)
Executive shall be entitled to: (a) all salary and bonus amounts accrued
through the Termination Date, and (b) payment, for a period of twelve (12)
months following the Termination Date (the "Continuation Period"), of an
amount equal to: (i) Executive's base salary as of the Termination Date
(with such payments to be made at such times as they would be made if
executive's employment continued for an additional year) less (ii) any
salary or other amounts that Executive is paid by any other person during
that twelve month period other than salary or amounts paid to Executive by
Bock, Benjamin & Co. (and in the event Executive does not
<PAGE> 2
increase his work time at Bock, Benjamin & Co., Executive hereby agrees to
take reasonably diligent action to secure employment as soon as practicable
after any such termination from Company and to otherwise mitigate his
losses resulting from the loss of salary from Company). Notwithstanding the
foregoing, in the event the Company terminates the Term pursuant to Section
2.2(d)(ii) within ninety (90) days following a Change of Control (as
defined below), the Continuation Period shall be eighteen (18) months
instead of twelve (12) months. For purposes of this Agreement, "Change of
Control" shall mean the acquisition by any single person or entity or
related persons or entities of more than fifty percent (50%) of the
outstanding and issued common stock of the Company after the date of the
Merger. Executive's rights to any of the compensation or benefits
identified in the preceding sentence shall be subject to Executive's
compliance in all respects with each of Executive's obligations under this
Agreement.
6. Section 6(c) of the Employment Agreement is hereby deleted in its
entirety.
This Amendment shall be effective only upon the closing of the Merger, and
if the Merger Agreement is terminated pursuant to Section 9.1 thereof then this
Amendment shall terminate and be of no further force and effect. Except as
specifically set forth herein, the Employment Agreement shall not be amended by
this Amendment and shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned has executed this Amendment as of the
date first set forth above, and such Amendment shall be effective as of the
effective date of the Merger.
PHYSICIANS' SPECIALTY CORP.
/s/ Ramie A. Tritt, M.D.
--------------------------------------
Name: Ramie A. Tritt, M.D.
Title: Chairman and President
EXECUTIVE:
/s/ Gerald R. Benjamin
--------------------------------------
Name: Gerald R. Benjamin
<PAGE> 1
EXHIBIT 10.68
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENTS
This Amendment dated as of June 14, 1999 supplements and amends the
Executive Employment Agreement dated as of February 11, 1997 (the "Employment
Agreement") by and between LAWRENCE P. KRASKA (the "Executive") and PHYSICIANS'
SPECIALTY CORP., a Delaware corporation (the "Company").
WITNESSETH
WHEREAS, the Company and TA MergerCo, Inc., a Delaware corporation
("MergerCo") are entering into an Agreement and Plan of Merger, dated as of the
date hereof (as the same may be amended from time to time, the "Merger
Agreement"), which provides, upon the terms and subject to the conditions
thereof, for the merger of MergerCo with and into the Company (the "Merger");
and
WHEREAS, as a condition to the willingness of MergerCo to enter into the
Merger Agreement, MergerCo and the Company have requested that the Executive
agree, and, in order to induce MergerCo and the Company to enter into the Merger
Agreement, the Executive is willing to agree, effective upon the closing of the
Merger, to amend the Employment Agreement as set forth herein.
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements and covenants set forth herein, in the Merger Agreement and in the
other documents related thereto, the parties hereto agree as follows:
1. Section 2.1 of the Employment Agreement is hereby deleted in its
entirety and the following shall be inserted in lieu thereof:
2.1 Term. The initial term of Executive's employment under this
Agreement (the "Initial Term") shall continue until March 26, 2002. After
the Initial Term, Executive's employment under this Agreement shall
automatically renew for successive additional one (1) year terms ("Renewal
Terms") (the Initial Term and any Renewal Terms being collectively referred
to as the "Term"). The Term shall be subject to termination in accordance
with Section 2.2.
2. Section 2.2(d)(ii) of the Employment Agreement is hereby deleted in its
entirety and the following shall be inserted in lieu thereof:
(ii) The Company shall have the right to terminate the Term and
Executive's employment hereunder without cause at any time upon notice to
Executive. In such event, Executive shall be entitled to the severance
benefit provided in Section 6(b).
3. Section 2.2(e) of the Employment Agreement is hereby deleted in its
entirety, and Section 2.2(f) of the Employment Agreement shall hereby be
redesignated Section 2.2(e).
4. The first sentence of Section 3.1 of the Employment Agreement is hereby
deleted in its entirety and the following shall be inserted in lieu thereof:
Executive shall be paid a base salary (the "Base Salary") from the
effective date of the Merger through the remainder of the Term at an
initial rate of One Hundred Sixty Thousand Dollars ($160,000) per twelve
(12) month period. The Base Salary shall be (a) payable in equal
installments on the schedule that the Company may implement from time to
time for general payroll purposes, and (b) subject to withholdings and
deductions required by applicable law.
5. Section 6(b) of the Employment Agreement is hereby deleted in its
entirety and the following shall be inserted in lieu thereof:
(b) If Company terminates the Term pursuant to Section 2.2(d)(ii)
Executive shall be entitled to: (a) all salary and bonus amounts accrued
through the Termination Date, and (b) payment, for a
<PAGE> 2
period of twelve (12) months following the Termination Date (the
"Continuation Period"), of an amount equal to: (i) Executive's base salary
as of the Termination Date (with such payments to be made at such times as
they would be made if executive's employment continued for an additional
year) less (ii) any salary or other amounts that Executive is paid by any
other person during that twelve month period (and Executive hereby agrees
to take reasonably diligent action to secure employment as soon as
practicable after any such termination from Company and to otherwise
mitigate his losses resulting from the loss of salary from Company).
Notwithstanding the foregoing, in the event the Company terminates the Term
pursuant to Section 2.2(d)(ii) within ninety (90) days following a Change
of Control (as defined below), the Continuation Period shall be eighteen
(18) months instead of twelve (12) months. For purposes of this Agreement,
"Change of Control" shall mean the acquisition by any single person or
entity or related persons or entities of more than fifty percent (50%) of
the outstanding and issued common stock of the Company after the date of
the Merger. Executive's rights to any of the compensation or benefits
identified in the preceding sentence shall be subject to Executive's
compliance in all respects with each of Executive's obligations under this
Agreement.
6. Section 6(c) of the Employment Agreement is hereby deleted in its
entirety.
This Amendment shall be effective only upon the closing of the Merger, and
if the Merger Agreement is terminated pursuant to Section 9.1 thereof then this
Amendment shall terminate and be of no further force and effect. Except as
specifically set forth herein, the Employment Agreement shall not be amended by
this Amendment and shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned has executed this Amendment as of the
date first set forth above, and such Amendment shall be effective as of the
effective date of the Merger.
PHYSICIANS' SPECIALTY CORP.
/s/ Gerald R. Benjamin
--------------------------------------
Name: Gerald R. Benjamin
Title: Vice Chairman and Secretary
EXECUTIVE:
/s/ Lawrence P. Kraska
--------------------------------------
Name: Lawrence P. Kraska
<PAGE> 1
EXHIBIT 10.69
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
This Amendment dated as of June 14, 1999 supplements and amends the Amended
and Restated Executive Employment Agreement dated as of November 26, 1996 (the
"Employment Agreement") by and between RAMIE A. TRITT, M.D. (the "Executive")
and PHYSICIANS' SPECIALTY CORP., a Delaware corporation (the "Company").
WITNESSETH
WHEREAS, the Company and TA MergerCo, Inc., a Delaware corporation
("MergerCo") are entering into an Agreement and Plan of Merger, dated as of the
date hereof (as the same may be amended from time to time, the "Merger
Agreement"), which provides, upon the terms and subject to the conditions
thereof, for the merger of MergerCo with and into the Company (the "Merger");
and
WHEREAS, as a condition to the willingness of MergerCo to enter into the
Merger Agreement, MergerCo and the Company have requested that the Executive
agree, and, in order to induce MergerCo and the Company to enter into the Merger
Agreement, the Executive is willing to agree, effective only upon the closing of
the Merger, to amend the Employment Agreement as set forth herein.
NOW, THEREFORE, in consideration of the promises and of the mutual
agreements and covenants set forth herein, in the Merger Agreement and in the
other documents related thereto, the parties hereto agree as follows:
1. Section 2.1 of the Employment Agreement is hereby deleted in its
entirety and the following shall be inserted in lieu thereof:
2.1 Term. The initial term of Executive's employment under this
Agreement (the "Initial Term") shall continue until March 26, 2002. After
the Initial Term, Executive's employment under this Agreement shall
automatically renew for successive additional one (1) year terms ("Renewal
Terms") (the Initial Term and any Renewal Terms being collectively referred
to as the "Term"). The Term shall be subject to termination in accordance
with Section 2.2.
2. Section 2.2(c) of the Employment Agreement is hereby deleted in its
entirety and the following shall be inserted in lieu thereof:
(c) Cause. In addition to any other rights or remedies available to
Company at law, in equity or pursuant hereto, Company may, in its sole
discretion, terminate Executive's employment for "Cause" (as hereinafter
defined) effective immediately upon delivery of written notice to
Executive. For purposes of this Agreement, "Cause" shall mean any of:
(i) the imposition by any governmental authority of any material
restriction or limitation on Executive's ability to perform his services
hereunder;
(ii) (A) Executive has committed an act of deceit or intentional
material misrepresentation with respect to Company or an act
constituting fraud; or (B) Executive has embezzled funds or assets from
Company or any client or customer of Company;
(iii) Executive's breach or default in the performance of any
material provision of this Agreement which Executive has not cured or
corrected to Company's reasonable satisfaction within thirty (30) days
after receiving notice of such breach or default (provided that any
breach by Executive of any obligation under Section 5.4 shall be grounds
for immediate termination "For Cause" without any notice or right to
cure or correct); or
(iv) (A) Executive has engaged in willful misconduct or gross
negligence; or (B) Executive's conduct is materially detrimental to the
reputation, character or standing of Company;
provided, however, that any termination for Cause pursuant to Sections
2.2(c)(iii) or 2.2(c)(iv) shall require prior action by unanimous consent of the
Board of Directors (excluding the Executive).
<PAGE> 2
3. Section 2.2(d)(ii) of the Employment Agreement is hereby deleted in its
entirety and the following shall be inserted in lieu thereof:
(ii) The Company shall have the right to terminate the Term and
Executive's employment hereunder without cause at any time upon prior
action by unanimous consent of the Board of Directors (excluding the
Executive) and after notice to Executive. In such event, Executive shall
be entitled to the severance benefit provided in Section 6(b).
4. Section 2.2(e) of the Employment Agreement is hereby deleted in its
entirety, and Section 2.2(f) of the Employment Agreement shall hereby be
redesignated Section 2.2(e).
5. Section 6(b) of the Employment Agreement is hereby deleted in its
entirety and the following shall be inserted in lieu thereof:
(b) If Company terminates the Term pursuant to Section 2.2(d)(ii)
Executive shall be entitled to: (a) all salary and bonus amounts accrued
through the Termination Date, and (b) payment, for a period of twelve (12)
months following the Termination Date (the "Continuation Period"), of an
amount equal to: (i) Executive's base salary as of the Termination Date
(with such payments to be made at such times as they would be made if
executive's employment continued for an additional year) less (ii) any
salary or other amounts that Executive is paid by any other person during
that twelve month period other than salary or amounts paid to Executive by
NAENT (and in the event Executive does not increase his work time at NAENT,
Executive hereby agrees to take reasonably diligent action to secure
employment as soon as practicable after any such termination from Company
and to otherwise mitigate his losses resulting from the loss of salary from
Company). Notwithstanding the foregoing, in the event the Company
terminates the Term pursuant to Section 2.2(d)(ii) within ninety (90) days
following a Change of Control (as defined below), the Continuation Period
shall be eighteen (18) months instead of twelve (12) months. For purposes
of this Agreement, "Change of Control" shall mean the acquisition by any
single person or entity or related persons or entities of more than fifty
percent (50%) of the outstanding and issued common stock of the Company
after the date of the Merger. Executive's rights to any of the compensation
or benefits identified in the preceding sentence shall be subject to
Executive's compliance in all respects with each of Executive's obligations
under this Agreement.
6. Section 6(c) of the Employment Agreement is hereby deleted in its
entirety.
This Amendment shall be effective only upon the closing of the Merger, and
if the Merger Agreement is terminated pursuant to Section 9.1 thereof then this
Amendment shall terminate and be of no further force and effect. Except as
specifically set forth herein, the Employment Agreement shall not be amended by
this Amendment and shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned has executed this Amendment as of the
date first set forth above, and such Amendment shall be effective as of the
effective date of the Merger.
PHYSICIANS' SPECIALTY CORP.
/s/ Gerald R. Benjamin
--------------------------------------
Name: Gerald R. Benjamin
Title: Vice Chairman and Secretary
EXECUTIVE:
/s/ Ramie A. Tritt, M.D.
--------------------------------------
Name: Ramie A. Tritt, M.D.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF PHYSICIAN'S SPECIALTY CORP. FOR THE SIX MONTHS ENDED
JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 1,407,338
<SECURITIES> 0
<RECEIVABLES> 21,728,261
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,399,559
<PP&E> 11,300,104
<DEPRECIATION> 0
<TOTAL-ASSETS> 74,358,474
<CURRENT-LIABILITIES> 8,598,428
<BONDS> 0
0
0
<COMMON> 9,172
<OTHER-SE> 51,140,840
<TOTAL-LIABILITY-AND-EQUITY> 74,358,474
<SALES> 44,642,326
<TOTAL-REVENUES> 44,642,326
<CGS> 0
<TOTAL-COSTS> 38,732,997
<OTHER-EXPENSES> (219,197)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,675,365
<INCOME-TAX> 2,213,155
<INCOME-CONTINUING> 3,462,210
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,462,210
<EPS-BASIC> 0.38
<EPS-DILUTED> 0.37
</TABLE>
